Friday, October 21, 2016

Close is Not Good Enough With New Reporting Rules

The old adage "close only counts in horseshoes" is an accurate reflection of the new IRS information reporting rules. Beginning with 2016 returns, due dates for Forms W-2 and certain Forms 1099 have been moved up, and the penalties for late or inaccurate forms have substantially increased.

Here are the new filing deadlines for 2016 returns.

  • Form W-2 is due to the Social Security Administration on January 31, 2017, instead of February 28, whether you file electronically or by paper. (If you file 250 or more forms, you must file electronically.)

  • Form 1099 must be submitted by January 31 if you're reporting non-employee compensation in Box 7. Otherwise, the forms are due to the IRS on February 28, the same as in prior years, or March 31 if you file electronically.
    In addition to making sure you file on time, you also need to make sure the forms are accurate. Penalties can be assessed for missing or wrong social security numbers, incorrect amounts, filing on paper when electronic forms are required, and failure to provide a copy of the return to the payee.
    How much are the penalties? If you fail to file by the required due date and your business has gross receipts of more than $5 million, penalties can range from $50 per return for being as much as 30 days late, to $260 per return for filing after August 1. The maximum dollar penalty can range from $532,000 to $3,193,000. If the IRS says you intentionally disregarded the rules, you can be fined $530 per return, with no maximum.
    When your receipts are $5 million or less, the same per-return fines apply, but maximum penalties range from $186,000 to $1,064,000.
    Information reporting requirements are no game. Contact our office for assistance.
    Call us at (219) 769-3616 with your questions, or email them to

FDIC and SIPC: Important Allies in Uncertain Times

Worried about the next financial crisis? Reacquaint yourself with two important allies: the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC).

The FDIC. The FDIC is an independent agency of the U.S. government and provides up to $250,000 in protection for qualified bank accounts in case of a bank failure. The insurance applies to each unique account owner, regardless of the number of accounts held at the failed bank.

Knowing how ownership is defined can be tricky. For example, every individual who is a co-owner of a joint account receives $250,000 of coverage as long as each has equal withdrawal rights and has signed the bank card. Each uniquely designated beneficiary of a revocable trust receives $250,000 in coverage when certain requirements are met. But coverage for irrevocable trusts is generally limited to $250,000. All accounts owned by a corporation or partnership at the same bank are generally limited to $250,000 of coverage.

The SIPC. The SIPC is a nonprofit membership corporation that is overseen by the U.S. Securities and Exchange Commission. The SIPC helps preserve investment accounts when a participating brokerage firm goes out of business and assets are missing. In that situation, the SIPC will work to restore the cash and securities held in your account at the time of closure, with protection of up $500,000. That includes up to $250,000 for cash.

The SIPC does not safeguard you from market losses or worthless stocks, nor protect you from bad investment advice. In addition, certain types of investments, such as commodities futures contracts, generally do not qualify for coverage.

Protection is determined by the way you hold accounts. For example, if you have a regular taxable brokerage account and an IRA with the same firm, each account is generally eligible for separate coverage.

Keep in mind that your financial institution must be an FDIC or SIPC member to qualify. For more information about determining your level of protection, contact our office.

Call us at (219) 769-3616 with your questions, or email them to

Get Familiar With These Estate Planning Documents

Basic estate planning begins with completing documents that allow your last wishes to be carried out as you choose. But are you familiar with the documents you'll need? Here's a list of common estate planning documents and their purpose.

Advance Directive. Your instructions for end-of-life and quality of life wishes regarding medical treatments. Share your directive with your healthcare providers and family.

Asset inventory. A list of all your financial assets that shows how much you paid for the asset (your basis), and how the asset is titled, such as joint tenancy or payable on death.

Beneficiary designations. Forms you complete to specify who will receive the proceeds of accounts and assets that aren't distributed via your will, such as life insurance policies, IRAs and 401(k)s. Be sure to appoint contingent beneficiaries as well, in case your first choice predeceases you.

Power of attorney. Gives the person of your choice the ability to act on your behalf if you become incompetent or incapable.

Power of attorney for healthcare. Gives the person of your choice the authority to make healthcare decisions for you that are not specified in your Advance Directive.

Record of locations. A list of the location of legal and financial documents and assets, including safety deposit boxes and keys, mortgage deeds and titles to property, bank and retirement accounts, and your will.

Trust agreement. Trusts are legal arrangements that can be used to carry out your wishes to distribute income, provide for your long-term care, transfer your assets, and make sure a favorite charity receives donations.

Will. Also called a last will and testament. Explains how you want to transfer your property.

Estate planning is about much more than taxes. It's also about peace of mind, for both you and your family. We're happy to work with your financial team to make sure your plan accomplishes what you intend.
Call us at (219) 769-3616 with your questions, or email them to

Navigate Business Changes Successfully

Change happens. That's especially true in the business world, where changes may be mandated by tax or regulatory requirements, increased competition, shifts in customer needs, or technological advances. Whatever your reason for making a change in your business, managing the process effectively is the best way to succeed. Here are suggestions for handling change.

Clarify your desired outcome. Determine what actions are needed to achieve your goal, then identify the employees, vendors, or other stakeholders who will be affected and anticipate their reactions. Depending on your business structure, you may want to bring one or more key managers and/or employees into this initial analysis. You also may want to consult with an outside expert, such as a financial and accounting professional, particularly if the changes relate to tax, regulatory, or accounting questions. An expert can clarify the issues involved, help you create a comprehensive plan, and assist in updating your systems and procedures to accommodate the changes.

Communicate your plan. Once you've established and outlined your course of action, make sure everyone who will be affected understands their role and what's expected. Explain what changes are needed and why they're necessary. Encourage feedback, and be open to suggestions for alternative procedures.

Establish a reasonable timetable for each expected action. Include allowances for the unforeseen complications and glitches that will inevitably arise.

Monitor, evaluate, and make adjustments. As the changes are being implemented, stay on top of the process. Otherwise, your employees may put change-related work on the back burner while focusing on more familiar day-to-day activities. Watch for unanticipated adverse effects on your business and act quickly to mitigate them.

Ask for help. If you're considering a significant change in the way you run your business, contact us for assistance. We'll help you address the issues, create a plan, and carry it forward.


Call us at (219) 769-3616 with your questions, or email them to

Wednesday, August 31, 2016

What's New with ABLE Accounts?

Remember the Achieving a Better Life Experience (ABLE) Act, which was passed in 2014 and authorized tax-favored savings accounts for people with disabilities? Proposed regulations issued in 2015 provided a blueprint for creating these ABLE accounts and authorized the IRS to develop forms needed for reporting purposes. Another law passed in December 2015 eliminated certain restrictions on the accounts. Now individual states are gearing up for action. So far, 40 states and the District of Columbia have approved legislation for ABLE accounts, including a consortium of nine states that are working together. If your state does not yet offer ABLE accounts (Indiana adopted ABLE accounts on March 21, 2016), you can open one in a state that does.

How the accounts work. An ABLE account resembles a Section 529 college savings plan, but is designed to benefit people with disabilities. The account offers a way to accumulate savings without losing other benefits. In brief, you establish an account for an eligible individual, make a contribution, and choose an investment option. The funds in the account grow on a tax-deferred basis. For 2016, the maximum contribution is $14,000, which may be sheltered from gift tax by the annual gift tax exclusion.

Account distributions for qualified expenses are tax-free. Qualified expenses include payments for education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, and financial management and administrative services.

ABLE accounts are restricted to individuals who experienced the onset of a significant disability before age 26. A family member who meets this requirement and who is already receiving Supplemental Security Income and/or Medicaid is eligible to participate, typically with no impact to those benefits. However, when total assets in the account exceed $100,000, the Supplemental Security Income will be suspended until the balance drops below this threshold.

If you're interested in learning more about ABLE accounts, please contact us.


Call us at (219) 769-3616 with your questions, or email them to

Reduce Fraud in Your Business With Prevention Strategies

When it comes to fraud, the old adage about a small amount of prevention being worth a large amount of cure is spot on. Investing in fraud prevention methods can be more cost-effective than spending time and money on clean-up after a fraud has been detected. Here are suggestions to help prevent fraud in two key areas.
Payroll. If your company uses payroll software, set up the internal control features to keep master hourly rates, hours worked, and bank direct deposit information safe. Pull timecards periodically to verify that payroll checks are being issued to actual employees, not "ghosts." (Ghost employees are workers who don't actually work for your company, such as former employees who continue to receive paychecks.) Monitor your expense accounts and financial statements. Higher-than-budgeted payroll costs are a potential tip-off to payroll fraud.
Accounts payable. Establish a very clear segregation of duties between the employees who receive goods or authorize services, and the employees who process the payments for those goods and services. Having more than one person complete a task makes fraud more difficult. Take time to get to know your vendors. You want to be sure the companies you're paying are real, not fictitious entities. Monitoring the number of invoices you receive from individual vendors, as well as the average payment amounts for specific vendors, can alert you to suspicious payments.
One more tip: Communication about what is and is not acceptable behavior is also a prevention method. Emphasize to your employees, your vendors, and your clients that unethical behavior and practices are not acceptable, and clearly state the consequences.
Whatever the size of your business, fraud can impact your bottom line. If you have questions about implementing fraud prevention strategies, please contact us. We have suggestions and tips that can help keep your business assets safe.

Monday, August 1, 2016

Real Estate Matters: Know the Tax Rules

Taxes are an important part of the decision to own real estate. Here's a brief overview of tax benefits you can realize while you own real property, as well as when you sell or otherwise dispose of the property.
Current expenses. As a rental property owner, you can deduct current expenses to offset the tax you owe on the rent you receive. For instance, you can write off mortgage interest, property taxes, repairs, and expenses of maintaining your property. The cost of capital improvements is generally added to your basis, providing a benefit when you sell. Be aware that passive activity rules may limit your ability to claim current annual losses.
Depreciation. Depreciation lets you convert the purchase price of your rental property into an expense over the property's expected life. The recovery period for residential buildings is 27½ years, while commercial buildings use a 39-year period. Some qualified improvements may be expensed over a shorter time.
Capital gain. The sale of real estate is generally taxed under capital gain rules. If you sell rental property you've held for longer than one year for more than you paid for it, the gain is taxed at rates up to 15% (20% if you're in the top ordinary income tax bracket). However, you may have to recapture some of the depreciation expense you claimed over the time you owned the property. That can mean part of your gain may be subject to higher tax rates. Losses can offset capital gains from sales of other assets.
Like-kind exchange. Instead of selling your property, you might arrange a like-kind exchange under Section 1031 of the federal income tax code, where you "swap" your property for replacement property. If certain timing and other requirements are met, you can defer tax on part or all of the transaction.
Please contact us to discuss these and other tax-saving opportunities.
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