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What are the key distinctions between layoffs and furloughs?

As businesses across the country grapple with the economic fallout from the novel coronavirus (COVID-19) pandemic, many must decide whether to downsize their workforces to lower payroll costs and stabilize cash flow. If your company is contemplating such a move, you’ll likely want to consider the choice within the choice: that is, should you lay off workers or furlough them?

Basic difference

The basic difference between the two is simple. Layoffs are the ostensibly permanent termination of employees from their positions, though you can rehire some of these individuals when business improves. Meanwhile, a furlough is a mandatory or voluntary suspension from work without pay for a specified period. In most states, furloughed workers are still considered employees and, therefore, don’t receive a “final” paycheck. Check with an employment or labor attorney, however, to make sure your state’s furlough laws don’t trigger final pay requirements.

Employee benefits are another issue to explore. Reach out to your health insurance provider to see whether a furlough is a triggering event for COBRA health care coverage purposes. In addition, employees can sometimes be dropped from a group health plan if they don’t work enough hours. Ask about potential problems this might cause under the Affordable Care Act.

Applicable laws

If you’re a midsize business, and layoffs or furloughs begin to look unavoidable, it’s particularly important to coordinate the move with legal counsel. Under the Worker Adjustment and Retraining Notification (WARN) Act, employers with 100 or more employees must provide written notice at least 60 days before a plant closing or mass layoff. To have a mass layoff, at least 50 workers at a single site must be laid off for more than six months (or have their hours reduced by at least 50% in any six-month period). Because furloughs generally last for less than six months, a WARN notice wouldn’t likely be required. But you should still check with your employment attorney regarding applicable state laws and any other potential legal ramifications.

Unemployment benefits

To soften the blow, you can inform furloughed employees that they’re generally eligible for unemployment benefits — assuming their previous year’s wages are enough to qualify. Although a waiting period often applies before an employee can start receiving unemployment benefits, many states have waived these waiting periods because of the COVID-19 outbreak. Again, double-check with your attorney to fully understand the unemployment insurance rules before communicating with employees.

Formulate a strategy

Unprecedented unemployment numbers show that many businesses have had to downsize. It’s worth noting that, if you can hang on to your employees, recently passed tax relief created a refundable credit against payroll tax. (Rules and limits apply.) Our firm can help you assess your employment costs and formulate a strategy for optimally sizing your workforce.  Contact us at info@atacpa.net to schedule a call. © 2020

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IRS Outlines Procedures for Payroll Tax Credits & Rapid Refunds for Employers

FOR IMMEDIATE RELEASE
Mark Puckett, CPA
info@atacpa.net

 

IRS OUTLINES PROCEDURES FOR PAYROLL TAX CREDITS AND RAPID REFUNDS FOR EMPLOYERS MAKING FEDERALLY-MANDATED COVID-19 LEAVE PAYMENTS

 

The federal government is trying to get much-needed cash into the hands of employers and employees affected by COVID-19 as quickly as possible. To do so, it is utilizing employers’ existing payroll systems to minimize the employers’ cash flow hardship that might otherwise have occurred from having to pay new, mandatory federal paid sick and child care leave to certain employees. Specifically, the IRS has just clarified that employers can subtract the cost of the new mandated paid leave (plus the cost of keeping affected employees’ health care coverage in place during that leave) from any payroll taxes that are otherwise due to the IRS.

IRS Information Release (IR) 2020-57 (March 20, 2020) outlines the system that will promptly reimburse employers for the benefits required under the Act. IR 2020-57 also states that eligible employers are entitled to an additional tax credit based on costs to maintain health insurance coverage for the eligible employee during the mandated federal paid sick and child care leave period.

Background

Businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick and child care leave through December 31, 2020, under the Families First Coronavirus Response Act (Act) (H.R. 6201), can claim a refundable federal tax credit to recover 100% of those payments. Equivalent credits are available to self-employed individuals based on similar circumstances.

Mechanics of Tax Credit Refunds

Generally, employers are required to withhold federal income, Social Security and Medicare taxes from their employees’ paychecks. Normally, employers must timely remit to the IRS the withheld taxes, along with the employer’s share of Social Security and Medicare taxes. But the IRS will release guidance the week of March 23 allowing employers who pay mandated federal paid sick or child care leave to decrease their federal payroll tax deposit by the cost incurred. The IRS also said that the cost of providing such leave can include the cost of continuing health care coverage during the federally mandated sick and child care leave period.

Source of Tax Credit Refunds

Employers can deduct the cost of providing such leave from their total federal tax deposit amount from all employees (not just from those who take the federally mandated leave). Specifically, employers can deduct the cost of providing such leave from: (1) federal income taxes withheld from all employees’ pay; (2) the employees’ share of Social Security and Medicare taxes; and (3) the employer’s share of Social Security and Medicare taxes.

 

Self-Employed

Equivalent tax credits are available to self-employed individuals for federally mandated paid sick and child care leave. But self-employed individuals will deduct their tax credits from their estimated tax payments or can claim a refund on their federal income tax return (i.e., their 2020 Form 1040).

As a result, employers (including self-employed individuals) will have more cash in-hand (by not remitting taxes that are otherwise due) to cover the cost of providing the federal paid sick and child care leave.

Rapid Refunds

IR 2020-57 also said that if the payroll tax off-set is not sufficient to cover 100% of those costs, employers can request a refund of their tax credit for any remaining amount. The IRS expects to process such refunds within two weeks.

Examples. Here are two examples from IR 2020-57:

Example 1: If an eligible employer paid $5,000 in federally mandated paid sick or child care leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes that it was otherwise going to deposit to make the qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

Example 2: If an eligible employer paid $10,000 in federally mandated paid sick or child care leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes that it was otherwise going to deposit to make qualified leave payments and could file a request for an accelerated refund for the remaining $2,000.

New Small Business Exemption

According to IR 2020-57, small businesses with fewer than 50 employees will be eligible for an exemption from the federally mandated child care leave if complying with those requirements would jeopardize the ability of the business to continue as a going concern. The exemption will be available on the basis of simple and clear criteria, which the U.S. Department of Labor will provide in emergency guidance.

Non-Enforcement Period

IR 2020-57 says that the U.S. Department of Labor will issue a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. For at least the initial 30 days (i.e., through April 20), the Labor Department will not bring any enforcement action against any employer for violating the Act, so long as the employer acted reasonably and in good faith to comply with the Act.

 

Continue to monitor ATA’s Covid-19 resource page for more information.
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FEDERAL AID PACKAGE HELPS INDIVIDUALS AFFECTED BY COVID-19

FOR IMMEDIATE RELEASE
Mark Puckett, CPA
info@atacpa.net

 

FEDERAL AID PACKAGE HELPS INDIVIDUALS AFFECTED BY COVID-19

The Families First Coronavirus Response Act (H.R. 6201),  became law on March 18, 2020. The Act guarantees free testing for the novel coronavirus (COVID-19), establishes emergency paid sick leave, expands family and medical leave, enhances unemployment insurance, expands food security initiatives, and increases federal Medicaid funding.

The Act includes up to 80 hours of emergency paid sick leave for workers who are unable to work while they are sick or complying with COVID-19 restrictions or caring for school-age children due to the closure of schools or child care facilities, as well as paid family and medical leave that employees will be able to use to care for family members (not for personal illness) for up to 12 weeks. The first 10 days of emergency family and medical leave may be unpaid, unless employees opt to use accrued paid time off for those days.

The mandatory paid leave provisions apply to employers with fewer than 500 employees and government employers, with exceptions for health care workers and first responders. Self-employed individuals would be eligible for the new benefits provided under the Act. It is not clear if individuals who have self-employment income from their partnership or limited liability company would be eligible for the new self-employed benefits, as the Act does not specifically address those situations. Employers with 500 or more employees would not be subject to those rules.  Employers who are required to provide paid time off would need to initially bear the costs of paying their employees, but the federal government would provide payroll tax credits to help cover those costs.

Background. Currently, the federal Family Medical Leave Act of 1993 (FMLA) provides eligible employees up to 12 work weeks of unpaid leave a year and requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. Employees are also entitled to return to their same or an equivalent job at the end of their FMLA leave. Special rules apply to military personnel.

To be eligible for FMLA, an employee is required to have been employed by their employer for a year, worked for 1,250 hours, and worked in a location where there are 50 other employees within a 75-mile radius. The FMLA applies to all private-sector employers who employ 50 or more employees for at least 20 workweeks in the current or preceding calendar year (including joint employers and successors of covered employers). Many states have enacted laws that are similar to federal FMLA, which apply to smaller employers who may be exempt from federal FMLA. The FMLA also applies to federal, state and local employers. These current provisions remain available for qualifying employees.


Employer Mandates

Emergency Paid Sick Leave. Through December 31, 2020, the Act requires employers with fewer than 500 employees and government employers to provide all employees (including union employees and regardless of how long the individual worked for the employer, but excluding health care workers and first responders) with 80 hours (e.g, 10 business days) of emergency paid sick leave for full-time workers (pro-rated for part-time employees or employees with varying work schedules) for employees who are unable to work or telework because the employee:

  • Is subject to a federal, state, or local COVID-19 quarantine or isolation order;
  • Has been advised by a health care provider to self-quarantine because of COVID-19;
  • Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  • Is caring for an individual subject to or advised to quarantine or isolation;
  • Is caring for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions; or
  • Is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

Generally, employers would pay employees at their regular rate of pay for emergency sick leave, capped at $511 per day ($5,110 in the aggregate) if the leave is taken for an employee’s own illness or quarantine (i.e., for the first three bullets above). Employers would pay employees two-thirds of their regular rate of pay for emergency sick leave, capped at $200 per day ($2,000 in the aggregate) if the leave is taken to care for others or due to school closures (i.e., for the last three bullets above).

An employer cannot require an employee to use other paid leave before using this paid leave. Employers would not be able to require employees to find replacement workers to cover their shifts if employees use emergency paid sick leave. The federal government is supposed to provide a model notice within seven days after enactment, which employers would be required to post at their workplace, informing employees of their right to emergency paid sick leave. The U.S. Department of Labor is directed, within 15 days after enactment, to issue guidelines on how to calculate the amount of emergency paid sick leave. The Department of Labor also has the authority to issue regulations to exempt small businesses with fewer than 50 employees from having to provide emergency paid sick leave to employees who need to care for a son or daughter whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions if the imposition of such requirements would jeopardize the viability of the business as a going concern.

Employers would face penalties for failing to comply with the new emergency paid sick leave rules and are prohibited from discriminating against employees who take emergency paid sick leave. Eligible employees could use emergency paid sick leave before using new, emergency paid family and medical leave created by the Act.

FMLA Amendments. The Act would add provisions to the FMLA to provide employees (including union employees) who have been employed for at least 30 days by employers with fewer than 500 employees or government employers, with the right take up to 12 weeks of job-protected leave through December 31, 2020, if the employee is unable to work or telework due to having to care for a child under age 18 if the child’s school or place of child care has been closed (or the child care provider is unavailable), due to the COVID-19 public health emergency.  Employers may elect to exclude health care workers and first responders from taking this public health emergency FMLA.

The first 10 days of FMLA under these new provisions may be unpaid. Employees can use other paid time off such as vacation, sick days, sabbatical, or emergency paid sick leave to cover that gap, but employers cannot require employees to use their accrued paid time off before using these 12 weeks of extended FMLA leave. Employers would pay employees two-thirds of their regular rate of pay for this emergency FMLA leave, capped at $200 per day ($10,000 in the aggregate per employee). Adjustments would be made to the amount of paid time off for employees with varying schedules.

The Act gives the U.S. Department of Labor authority to issue regulations that would exclude certain health care providers and emergency responders from being able to take emergency family and medical leave. The Department of Labor also has the authority to issue regulations to exempt small businesses with fewer than 50 employees from the emergency family and medical leave requirements if the imposition of such requirements would jeopardize the viability of the business as a going concern. The Act would also exempt employers with fewer than 50 employees in a 75-mile radius from civil damages in an FMLA lawsuit.

Under the Act, covered employers (those with less than 500 employees) are required to hold an employee’s job open for them until the end of the leave period. However, an exception applies to employers with fewer than 25 employees if the employee’s position no longer exists due to economic conditions or other changes in the employer’s operations that affect employment and are caused by the COVID-19 crisis, and the employer made reasonable efforts to restore the employee’s job. And, if those efforts failed, the employer agrees to reinstate the employee if an equivalent position becomes available within a year.

The Act creates new, refundable payroll tax credits for employers to help cover the costs of this new paid sick and family leave.

Payroll Tax Credits

To assist employers who are required to provide emergency paid sick leave or FMLA leave under the programs described above, the Act provides for a refundable tax credit applicable against the employer’s portion of Social Security or Railroad Retirement Tax Act (RRTA) tax for amounts paid under those programs. The credit is equal to 100% of the compensation paid in each calendar quarter to employees who are not working for the reasons enumerated above, subject to the following limitations:

For payments to an employee who needs time off for self-isolation, diagnosis, or care of a COVID-19 diagnosis, or compliance with a health care provider’s recommendation or order, the credit is capped at $511 of eligible wages per employee per day. For payments to an employee who needs time off to care for a family member who has been exposed to or diagnosed with the COVID-19, or a child under age 18 whose school or place of care has been closed, the credit is capped at $200 of eligible wages per employee per day. The credit for emergency paid sick leave wages is only available for a maximum of 10 days per employee over the duration of the program. For expanded FMLA, the credit is capped at $200 of eligible wages per employee per day and $10,000 for all calendar quarters.

Both of the credits are increased by any amounts paid or incurred by the employer to maintain a group health plan, to the extent those expenses are (1) excluded from the employee’s gross income under the tax code and (2) “properly allocable” to the respective qualified sick or FMLA wages required to be paid under the Act. The exact method of allocation will be provided by regulation at a later date, but the Act provides that the allocation will be treated as properly made if done “on the basis of being pro rata among covered employees and pro rata on the basis of periods of coverage.”

If the credit exceeds the employer’s total liability for Social Security or RRTA tax for all employees for any calendar quarter, the excess is refundable to the employer. The employer may choose not to apply the credit. Further, to prevent a double benefit, the employer cannot obtain a deduction for the amount of the credit. In addition, employers may not receive the credit in connection with wages for which a credit is allowed under Section 45S (credit for paid family and medical leave).

Similar rules apply to a self-employed individual that allow a refundable tax credit against the individual’s self-employment tax. The credit is capped at the lesser of the amounts that apply to eligible wages per employee or the individual’s lost self-employment income. The House-passed version of the Act provides guidance on how to determine the individual’s lost income due to the corona virus.

Notably, required payments for emergency paid sick leave or FMLA under the Act will not be considered wages for purposes of calculating the employer’s portion of the Social Security or RRTA tax. In addition, the tax credits available to an employer are increased by the amount of the employer’s liability for Medicare tax on wages paid under the Act, effectively exempting the emergency sick leave and FMLA payments from that tax as well. In this way, the Act provides employers with two tax benefits: (1) refundable credits against the employer’s portion of Social Security or RRTA tax; and (2) an exemption from, or credit against, the employer’s portion of Social Security or RRTA and Medicare taxes on the wages required to be paid under the Act.

However, the law does not exempt these payments from the definition of wages for the purpose of other taxes (including the employee’s portion of Social Security, RRTA and Medicare taxes).

The Act ensures there is no negative impact to the Social Security program caused by the tax credit or the exemption of sick pay and family leave pay from Social Security tax by authorizing a transfer of funds from the General Fund to the Social Security and disability insurance trust funds to replace the lost employer contributions. The tax provisions discussed herein will apply beginning on a date to be determined by the Secretary of the Treasury after the enactment of the Act and ending on December 31, 2020.

Continue to monitor ATA’s Covid-19 resource page for more information.
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Paycheck Protection Program – CARES Act Small Business Administration Loans

FOR IMMEDIATE RELEASE
Mark Puckett, CPA
info@atacpa.net

 

Paycheck Protection Program – CARES Act Small Business Administration Loans (Update)
We are releasing an update to our previous email. Due to the changing nature of the loan initiative discussed below, please contact your lender for the most up-to-date information.  
(April 1, 2020 | 8:45 p.m.) 

 

 

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted March 27, 2020 and provides an unprecedented level of national emergency assistance for individuals, families and businesses impacted by the Coronavirus pandemic. The Act provides for a loan program that will be administered by the Small Business Administration (SBA) and provides up to $349 billion in loans to eligible borrowers with the express intention of motivating employers to retain and re-hire employees.
The Loan Program

Among the economic relief provisions of the CARES Act, the Paycheck Protection Loan Program establishes a loan regime that allows qualifying businesses negatively impacted by the Coronavirus pandemic to obtain loans through the SBA to fund a variety of qualified costs including:

  • Payroll costs
  • Continuation of health care benefits
  • Employee salaries and commissions for U.S. based employees (up to $100,000 per person)
  • Mortgage interest obligations (but not loan principal)
  • Rent
  • Utilities
  • Interest on any other debt obligations incurred before the covered period

Qualifying businesses can apply through banks that are already authorized to make loans under the SBA’s existing 7(a) loan program. The SBA and the Secretary of the Treasury will also extend eligibility to additional qualified lenders that do not currently participate in such program. Repayment of a Paycheck Protection loan may be fully or partially guaranteed by the SBA. Neither the SBA nor any participating lenders will charge fees to the borrowers.
Eligibility

Borrowers with 500 or fewer employees (or a greater number based on the size standard applicable to the industry) may be eligible:
  • For-profit businesses of all types, including self-employed individuals, independent contractors and sole proprietorships
  • Nonprofit organizations exempt under Section 501(c)(3)
  • Veterans organizations
  • Tribal businesses

The Act contains exceptions to standard SBA rules that relax eligibility restrictions for certain covered entities such as businesses in the accommodation and food service industry (NAICS 72) that have less than 500 employees per physical location. Other exceptions include franchises assigned a franchise identifier code and businesses licensed under Section 301 of the Small Business Investment Act.
Loan Amount & Terms

The maximum loan amount permitted for an eligible borrower is equal to the lesser of 2.5 times the average monthly payroll costs incurred in the one-year period before the loan is made (except for seasonal employers and employers not in business between February 15, 2019 and July 30, 2019), or $10,000,000.

Loans are available for an amortizing term of up to 2 years at 0.5 percent interest.  The SBA will direct lenders to defer payment of both principal and interest for a minimum of 6 months and up to a maximum of 12 months.  Borrowers will not be required to pledge any collateral or provide personal guarantees to secure the loans.
Loan Forgiveness

Borrowers will be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period following the loan disbursement actually spent on rent, payroll and benefit costs, utilities and mortgage interest.

The loan forgiveness amount is subject to reduction if the borrower terminates employees or reduces employee salaries and wages during the 8-week forgiveness period.  Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.

Borrowers who satisfy the requirements for loan forgiveness will be able to exclude the forgiveness amount from taxable income.
Continue to monitor ATA’s COVID-19 resource page for more information. Please know that we continue to be here to partner with you and amplify your business. 
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Alexander Thompson Arnold CPAs names Chief Information Officer

Alan Watson
FOR IMMEDIATE RELEASE
Alexander Thompson Arnold PLLC 
227 Oil Well Road
Jackson, TN 38305
731-427-8571
Contact: Alexis Long | along@atacpa.net
Twitter: @atacpa_1
Alexander Thompson Arnold CPAs names Chief Information Officer
Alexander Thompson Arnold CPAs created a chief information officer position and deemed award-winning executive, Alan Watson, as CIO. In today’s rapidly changing digital world, this leadership position was implemented to further guide ATA into the technology realm to achieve the goals of our firm and better our clients. 
When asked about his new role at ATA, Watson said, “I’m excited to be at ATA and bring a strategic technology vision to the firm. My previous experiences across multiple industries have helped prepare me for such an amazing opportunity.”
Watson has an extensive background in technology and leadership. Previously, he was Principal Consultant at Digital Simplicity, former Executive Vice President and Chief Information Officer of ChanceLight Behavioral Health, Therapy & Education, and was named a Citrix Innovation Award Winner. Watson’s excellence in collaborating, networking, and virtualization led him to create customized learning resources in a secure, regulatory compliant environment; this innovative work was awarded by Citrix. 
“As ATA continues to grow and evolve, we saw a need to position ourselves as an innovative accounting firm that uses technology to create a strategic advantage for our firm and our clients,” said, John Whybrew, managing partner of ATA, “We welcome Alan to the ATA team and know that he will be an essential part to our future.”
Watson received a master of business administration from Howard University. He’s an alum of Austin Peay State University with a bachelor of science degree in information technology. His technical skills include being a Microsoft Certified Systems Engineer.   
About ATA
ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting.  For example, Revolution Partners, ATA’s wealth management entity, provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and Center Point Business Solutions is a comprehensive human resource management agency.
ATA has 14 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations.  The firm was recognized by Forbes in 2020 as a top recommended tax firm in the country. ATA is also an alliance member of BDO USA LLP, a top-five global accounting firm. This alliance provides the highest level of resources and expertise for ATA’s clients.
 
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Six Key Cybersecurity Controls that are Critical to Banks

Cybersecurity risk heightened with bank wiring
The OCC and FDIC recently issued an interagency statement on heightened cybersecurity risks, prompted in part by a warning from the Department of Homeland Security of potential cyberattacks against U.S. targets because of increased geopolitical tension. The statement reminds banks not only to implement and maintain effective preventive controls, but also to prepare for a worst-case scenario by maintaining sufficient business continuity planning processes for the rapid recovery, resumption and maintenance of the institution’s operations.
The statement describes six key cybersecurity controls that are critical to protecting banks from malicious activity:
  1. Response, resilience and recovery capabilities,
  2. Identity and access management,
  3. Network configuration and system hardening (that is, modifying settings and eliminating unnecessary programs to minimize security risks),
  4. Employee training,
  5. Security tools and monitoring, and
  6. Data protection.
For a detailed discussion of these controls, you can read the statement at https://www.fdic.gov/news/news/financial/2020/fil20003.html.
OCC Annual Report emphasizes BSA/AML risk
The OCC recently issued its 2019 Annual Report. The report warned that compliance risk related to Bank Secrecy Act/anti-money laundering activities remained high last year. It encouraged banks to implement BSA/AML risk management systems commensurate with the risk associated with their products, services, customers and geographic footprint. Noting that BSA/AML compliance remains a priority, the OCC outlined recent guidance that embraces using innovative technologies to meet these compliance obligations. The agency also encourages community banks with lower BSA risk profiles to reduce costs and increase operational efficiency by sharing BSA compliance-related resources.
Debt collection: Handle with care
A recent federal court case, Hackler v. Tolteca Enterprises Inc., illustrates the importance of carefully following the Fair Debt Collection Practices Act (FDCPA). In that case, a collection agency sent a letter to a debtor attempting to collect a debt. It stated, “If you dispute the validity of this debt within 30 days, from receipt of this notice, we will mail verification of the debt to you. If you do not dispute the validity of this debt within 30 days, from receipt of this notice, we will assume it is valid. At your request, we will provide you with the name and address of the original creditor if different from the current creditor.”
Because the letter failed to specify that the debt must be disputed, and the request must be made “in writing,” as required under the statutory notice requirements, the U.S. District Court for the Western District of Texas found the defendant liable for violations of the FDCPA.
© 2020
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3 best practices for achieving organic sales growth

Most business owners would probably agree that, when it comes to sales, there’s always room for improvement. To this end, every company should strive for organic sales growth — that is, increases from existing operations unrelated to a merger or acquisition. That’s not to say a merger or acquisition is a bad idea, but you can’t rely on major moves like this to regularly boost your numbers. 
Let’s look at three best practices for achieving organic sales growth. 
  1. Attentive customer service: Premier customer service is more than just a smile and a handshake. Are your employees really hearing clients’ problems and concerns? Do their solutions not only fix the issue but also, whenever possible, exceed the customers’ expectations? The ability to conduct productive dialogues with your customers is a key to growing sales. Maintaining a positive, ongoing conversation starts with resolving any negative (or potentially negative) issues that arise as quickly as possible under strictly followed protocols. It also includes simply checking in with customers regularly to see what they may need. 
  2. Smart marketing: Do you often find yourself wondering why all your marketing channels aren’t generating new leads for your business? Visit our website here to see how we can serve you in this area. Most likely, it’s because some of those channels are no longer connecting with customers and prospects. Therefore, you might want to step back and reassess the nature and strengths of your company. If you work directly with the buying public, you may want to cast as wide a net as possible. But if you sell to a specific industry or certain types of customers, you may be able to grow sales organically by focusing on professional networking groups, social organizations and trade associations. 
  3. Great employees: Ultimately, people are what make or break a company. Even the best idea can fail if employees aren’t fully prepared and committed to designing, producing, marketing and selling that product or service. Of course, as you well know, employing talented, industrious staff requires much more than simply getting them to show up for work. First, you must train employees well. This means they need to know both: 
1) how to do their jobs, and 2) how to help grow sales. 
You might ask: Does every worker really contribute to sales? In a sense, yes, because quality work — from entry-level office staff to executives in corner offices — drives sales. 
Once an employee is trained, he or she must be periodically retrained. Happy workers are more productive and more likely to preach the excellence of your company’s products or services to friends and family. Sales may occur as a result.  
These best practices are, obviously, general in nature. The specific moves you need to make to boost your business’s sales numbers will depend on your size, industry, market and focus. Our firm can help you identify optimal strategies for organic sales growth and measure the results. 
Click here to consult with your long-term business partner.  © 2020
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The Tax Aspects of Selling Mutual Fund Shares

Perhaps you’re an investor in mutual funds or you’re interested in putting some money into them. You’re not alone. The Investment Company Institute estimates that 56.2 million households owned mutual funds in mid-2017. But despite their popularity, the tax rules involved in selling mutual fund shares can be complex.
Tax basics
If you sell appreciated mutual fund shares that you’ve owned for more than one year, the resulting profit will be a long-term capital gain. As such, the maximum federal income tax rate will be 20%, and you may also owe the 3.8% net investment income tax. When a mutual fund investor sells shares, gain or loss is measured by the difference between the amount realized from the sale and the investor’s basis in the shares. One difficulty is that certain mutual fund transactions are treated as sales even though they might not be thought of as such. Another problem may arise in determining your basis for shares sold.
What’s considered a sale
It’s obvious that a sale occurs when an investor redeems all shares in a mutual fund and receives the proceeds. Similarly, a sale occurs if an investor directs the fund to redeem the number of shares necessary for a specific dollar payout. It’s less obvious that a sale occurs if you’re swapping funds within a fund family. For example, you surrender shares of an Income Fund for an equal value of shares of the same company’s Growth Fund. No money changes hands but this is considered a sale of the Income Fund shares. Another example: Many mutual funds provide check-writing privileges to their investors. However, each time you write a check on your fund account, you’re making a sale of shares.
Determining the basis of shares
If an investor sells all shares in a mutual fund in a single transaction, determining basis is relatively easy. Simply add the basis of all the shares (the amount of actual cash investments) including commissions or sales charges. Then add distributions by the fund that were reinvested to acquire additional shares and subtract any distributions that represent a return of capital. The calculation is more complex if you dispose of only part of your interest in the fund and the shares were acquired at different times for different prices.
You can use one of several methods to identify the shares sold and determine your basis:
First-in first-out.
The basis of the earliest acquired shares is used as the basis for the shares sold. If the share price has been increasing over your ownership period, the older shares are likely to have a lower basis and result in more gain.
Specific identification.
At the time of sale, you specify the shares to sell. For example, “sell 100 of the 200 shares I purchased on June 1, 2015.” You must receive written confirmation of your request from the fund. This method may be used to lower the resulting tax bill by directing the sale of the shares with the highest basis.
Average basis.
The IRS permits you to use the average basis for shares that were acquired at various times and that were left on deposit with the fund or a custodian agent.
As you can see, mutual fund investing can result in complex tax situations. Contact us if you have any questions. We can explain in greater detail how the rules apply to you. © 2020
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Standard or Itemized?

What’s best for you, taking the standard deduction or claiming itemized deductions?

The standard deduction changes yearly and is based on age and filing status. The Tax Cuts and Jobs Act raised the standard deduction so that more people could benefit from its simplicity. Itemizing deductions requires more work, but taxpayers can save taxes if the total exceeds the standard deduction.

Eligible taxpayers may prefer to itemize if they: pay state and local income tax, mortgage interest, mortgage insurance, real estate or personal property tax; suffered a large eligible casualty loss; make significant charitable donations; and/or have high medical deductions. We can help choose your best path. Talk with your ATA business partner to know which is best for you. 

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New law helps businesses make their employees’ retirement secure

A significant law was recently passed that adds tax breaks and makes changes to employer-provided retirement plans. If your small business has a current plan for employees or if you’re thinking about adding one, you should familiarize yourself with the new rules.
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was signed into law on December 20, 2019, as part of a larger spending bill. Here are three provisions of interest to small businesses.
Employers that are unrelated will be able to join together to create one retirement plan. Beginning in 2021, new rules will make it easier to create and maintain a multiple employer plan (MEP). A MEP is a single plan operated by two or more unrelated employers. But there were barriers that made it difficult to setting up and running these plans.
Soon, there will be increased opportunities for small employers to join together to receive better investment results, while allowing for less expensive and more efficient management services. There’s an increased tax credit for small employer retirement plan startup costs. If you want to set up a retirement plan, but haven’t gotten around to it yet, new rules increase the tax credit for retirement plan start-up costs to make it more affordable for small businesses to set them up.
Starting in 2020, the credit is increased by changing the calculation of the flat dollar amount limit to:
The greater of $500, or the lesser of: a) $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan, or b) $5,000.
There’s a new small employer automatic plan enrollment tax credit. Not surprisingly, when employers automatically enroll employees in retirement plans, there is more participation and higher retirement savings. Beginning in 2020, there’s a new tax credit of up to $500 per year to employers to defray start-up costs for new 401(k) plans and SIMPLE IRA plans that include automatic enrollment. This credit is on top of an existing plan start-up credit described above and is available for three years. It is also available to employers who convert an existing plan to a plan with automatic enrollment.
These are only some of the retirement plan provisions in the SECURE Act. There have also been changes to the auto-enrollment safe harbor cap, nondiscrimination rules, new rules that allow certain part-timers to participate in 401(k) plans, increased penalties for failing to file retirement plan returns and more. Contact us to learn more about your situation at info@atacpa.net. © 2019