The Joint Committee on Taxation estimated that approximately 170 million individuals will benefit from the payroll tax reduction, with the White House estimating that taxpayers will see an average of $1,000 in tax reductions in 2012 from the tax rate cut. All wage earners and self-employed individuals will benefit from the payroll tax cut extension up to the Social Security earnings cap of $110,100. The reduced OASDI withholding will have no effect on an individual’s future Social Security benefits.

Included in the Act was a repeal of the recapture provision included in the short-term extension that covered January and February, 2012. Under this provision, taxpayers who earned more than $18,350 in remuneration during January and February 2012 would been required to pay a recapture tax in 2013 when the individual filed their 2012 income tax return. The Act repealed the recapture provision for January and February.

Along with the payroll tax cut extension, the Act also extended unemployment benefits and included a Medicare “doc fix.”  Provisions discussed, but not included in the Act, included an extension of 100% bonus depreciation and a tax extenders package that would have extended the research tax credit, state and local sales tax deductions, and the higher education tuition deduction among many others. Many of these provisions will likely be addressed at a later time.

If you have any questions about how the provisions of the Middle Class Tax Relief and Job Creation Act of 2012 will affect you or your business, please call Cassady Schiller for a more in-depth discussion.

We have reviewed the President’s proposal and put together a brief summary of some key areas that could bring change in coming years:

• Extend Bush tax cuts for all but the top two brackets.

The only change would be to have the 33% and 35% rates go back to their pre-2001 levels of 36% and 39.6%. Taxpayers in the top two marginal brackets would still benefit from reduced rates on the portion of their income taxed in the lower brackets.

• Raise the long-term capital gains rate for certain taxpayers.

Capital gains tax rate would increase to 20% for single taxpayers making more than $200,000 per year, $250,000 for married taxpayers filing jointly and $125,000 for married taxpayers filing separately.

• Increase qualified dividends to ordinary income tax rates (up to 39.6%) for the same taxpayers.

For everyone else, the rate would stay at 15% (or 0%)

• End LIFO Accounting

• Extend 15-year life on Qualified Leasehold, Restaurant and Leasehold improvements through 12/31/12

• Extend 100 percent Bonus Depreciation through 12/31/12

• Extend Work Opportunity Tax Credits

• Tax carried interest as ordinary income.

• Reduce value of itemized deductions for taxpayers in the 33% and 35% brackets to 28%.

(33% bracket current starts at $178,650 for single taxpayers and $217,450 for married filing jointly.

• Reinstate the personal exemption phase-out for upper income taxpayers.

• Enact a permanent AMT Patch.

• Make the HOPE tax credit permanent. The credit is worth up to $2,500 per year.

• Make recent expansions of the low-income tax credit permanent.

• Restore the estate, gift and GST tax to 2009 rates.

• Require a minimum term for GRATs of ten years.

• Limit the duration of GST tax exemption to 90 years.

• Modify the rules on valuation discounts.

• Require consistency in value for transfer and income tax purposes.

• Enhance and Make Permanent the Research and Experimentation Tax Credit

 The proposal calls for making it permanent and increasing the rate of the alternative simplified credit from 14 to 17 percent effective 12/31/11.

• Provide Additional Tax Credits for Investment in Qualified Property for Advanced Manufacturing Projects

Provides a 30 percent tax credit for investments in eligible property used in a qualifying advanced energy project

Projects would expand, re-equip, or establish a manufacturing facility for the production of:

• Alternative energy property
• Fuel cells, micro turbines, or batteries for electric cars
• Electric grids for renewables
• Property designed to capture CO2 emissions
• Property designed to refine or blend renewable fuels
• Electric vehicles
• Other advanced energy property

Sets a $5 billion cap on credits

• Change 179D to a Credit

Sets 179D as a credit instead of a deduction

Changes the reference to ASHRAE 90.1-2004 from 90.1-2001

Changes the credit calculation to the following:

• 20 percent reduction – $0.60/sf
• 30 percent reduction – $0.90/sf
• 50 percent reduction – $1.80/sf

Special rules would be implemented for REITs, but those rules have not been specified.  It is also not referenced how this would affect designers.

• Extend 1603 Grant on Alternative Energy Property through 2012

• 45L Credit for the construction of energy efficient homes would be extended for 2012

Treasury has put out a summary document explaining the proposals.  The full text of the Treasury Document can be found here.

As stated, the proposals listed are just proposals and carry no weight unless passed.  However, it is important to know the policies and proposals being discussed when planning for the 2012 tax year.  If you have any questions feel free to contact us directly.

Implementing and investing

Implementing a WMS can enhance inventory flow management and transaction processing by easing inventory stocking, picking and replenishing activities. Depending on the type of functions offered with the software selected, a WMS can also facilitate a variety of important warehousing activities, such as automated data collection and material handling.

But is investing in a WMS the right decision for every distributor? Honestly, no. As with similar undertakings, you must carefully weigh the costs vs. the benefits because, like other distributors, you may be unable to justify the initial, often sizable, investment.

Plus, you can’t just plug in a WMS and expect it to run on its own. Setting up and operating this application is often a complex process. You’ll need to dedicate resources to manage the data-intensive system — your WMS may even warrant its own staff.

Classifying inventory data

When comparing the costs and benefits, keep in mind that implementing a WMS involves classifying inventory data by physical characteristics. You might need to capture and maintain inventory item details including size dimensions, weight, how the item is stocked, stacking height, hazard precautions, and movement rate.

Other necessary data includes order sequence logic for directing stocking, picking and replenishing activities. You can even base order sequence for these activities on either the first-in, first-out or last-in, first-out inventory accounting method. Of course, you’ll want to adjust the specified logic based on workload changes and busy seasons. Subsequently, the more diverse the product mix, the more complex the WMS setup and implementation process.

Considering compatibility issues

As you evaluate whether a WMS is right for your business, also consider how easily it will integrate with your other accounting or resource planning systems, and whether it can support other types of warehouse functions.

For instance, you may want to execute automated data collection using radio-frequency identification technology, or you may have automated material handling equipment (such as automatic guided vehicles or pick-to-light systems) to factor into your decision. In any case, you’ll likely need to do some programming to integrate other systems and equipment, so be sure to plan for these costs.

When implementing a WMS, thoroughly test the new application. It’s better to discover any kinks during a trial run than during a client transaction. Moreover, your system will be only as useful as your staff using it, so take the time to train workers well.

Don’t make an impulse decision

Before making a final decision on whether to implement a WMS, it’s important to review all facets of your distributorship. A WMS can be complex and costly to implement, so task your management team with determining exactly how they’ll use it and how it will integrate with your other systems.

If you require employees to substantiate travel or entertainment expenses that are bona-fide business deductions, partial or complete advances or reimbursements are not treated as compensation income to the employee, and the advance or reimbursement is not subject to social security taxes or to income tax withholding. However, only 50 percent of any business-related meal or entertainment expense is deductible by the company, including costs of meals consumed by employees while they are traveling.

To ensure that the reimbursement is not subject to payroll and withholding taxes, the business must maintain a fairly detailed recordkeeping system. For travel, employees must submit a written statement of the time, place, destination and business purpose of the trip and the amount of expenses incurred by category (e.g., travel, meals, lodging). For meals or entertainment, the employee must submit a written statement showing time, place and cost of the event, who was entertained, and the business purpose of the meal or entertainment (if the event follows or precedes a business discussion, additional recordkeeping is required). Finally, the employee must keep and turn in to the employer documentary evidence such as receipts for all lodging expenses, and for other travel and entertainment expenses over $75.

Because the recordkeeping can be onerous, the law provides some shortcuts, depending on the type and frequency of the travel and entertainment expenses. For example, the paperwork burden and the cost of travel expenses can be decreased by giving employees who travel for business purposes a flat daily allowance, a per diem, which varies by destination, to cover meals, lodging and incidental expenses. If the daily allowances do not exceed IRS-determined maximums, they are payroll and income tax free with a minimum of paperwork; all that is required is a record of the time, place and business purpose of the travel. To-the-penny accounting of expenses and corroborating receipts is not necessary.

One simple way to cut out paperwork while boosting company tax deductions is to give employees a flat allowance for anticipated travel and entertainment, and not require these expenses to be substantiated. The allowance is fully deductible as compensation (assuming the employees’ compensation packages are reasonable), and there is minimal paperwork required. The allowance, however, is subject to payroll and income tax withholding, and the company may not be able to determine what their actual travel and entertainment expenses are for budgeting purposes. In addition, there are unfavorable tax consequences for the employee, even if the travel and entertainment expenses are deducted on their own returns.

Travel and entertainment expenses are particularly susceptible to challenge by the IRS. However, in some instances, businesses may fail to deduct qualifying travel and entertainment expenses, or may be deducting these expenses improperly. We can perform a confidential review of your company’s travel and entertainment expenses to ensure compliance with the complex rules that govern these deductions. Please call us to arrange an appointment at your earliest convenience.

Having just passed the CPA exam, Craig Vonderhaar is Cassady Schiller’s newest CPA.  An associate with Cassady Schiller, Vonderhaar works primarily on tax preparation and audit work.  Vonderhaar holds a Master of Accountancy degree from University of Cincinnati and an undergraduate degree in accounting from Miami University.

“Craig put forth great effort in obtaining this distinguished designation and we are proud of his achievement,” commented Mike Clark, Partner at Cassady Schiller.  “His dedication to our clients and aspirations for continual career growth is of great value at Cassady Schiller.”

A CPA is a statutory title for accountants who have passed the Uniform Certified Public Accountant Examination and have met ethic, education, and experience requirements.

Cassady Schiller, established in 1990, is a team of more than 40 professionals dedicated to building relationships with their clients. Providing consulting, tax and accounting services in Cincinnati, Cassady Schiller also offers financial services, business valuations, merger and acquisitions, due diligence, family business planning and management consulting.

Hear what we’re all about directly from the Cassady Schiller team. Watch our new video today!

To encourage consistency in the classification process, three key initiatives have arisen over the past few months. The first of these is a voluntary classification settlement program (VCSP) established by the IRS in September, which allows taxpayers to reclassify workers for tax purposes, while only paying approximately 10% of the employment tax liability due on compensation paid over the past year to the reclassified workers. To qualify, businesses must meet the IRS’s criteria and complete Form 8952.

The IRS has also partnered with the Department of Labor allowing the IRS access to information and data from the DOL’s Wage and Hour Division, relating to any investigations on employment tax compliance. The IRS will then evaluate and classify these employment tax referrals, and make any necessary examinations; share these referrals with the taxing agencies of states and municipalities; and provide the DOL with annual reports and aggregate data on misclassifications.

President Obama’s current “jobs plan” also includes a provision permitting the IRS to issue regulations or guidance for proper classification, in addition to requiring the prospective reclassification of currently misclassified workers.

Further information can be found in the following:
http://www.aicpa.org/publications/taxadviser/2012/january/pages/dccurrents_jan2012.aspx
http://www.irs.gov/businesses/small/article/0,,id=246013,00.html
http://www.aicpa.org/Publications/TaxAdviser/2012/January/Pages/clinic-story-05.aspx

Should you have questions or concerns on the classification of your employees or subcontractors, please contact us at Cassady Schiller so we can assist and advise.

Cassady Schiller Announces Three New Hires

CINCINNATI, OHIO – January 25, 2012 – Cassady Schiller, a CPA and Advisor firm located in Blue Ash, has recently hired three new employees. In order to increase capacity to serve a growing client base, the firm has hired one seasonal employee and two interns for the 2012 tax season.

Heather Davis, CPA, EA has been hired as a seasonal employee at Cassady Schiller. While at Cassady Schiller, she will be preparing individual and business taxes for federal, state and local jurisdictions. She has experiences as a CPA, accountant and tax auditor.

Brien Dulle, a recent intern hire at Cassady Schiller, will be assisting professional staff as they prepare tax filings and financial statement audits. He is currently a student at the University of Cincinnati studying accounting and has a projected graduation date in 2013.

Cassady Schiller’s second intern hire is Bethany Maynard. She will be assisting professional staff as they prepare tax filings and financial statement audits. Maynard is also studying at the University of Cincinnati in accounting and finance with a projected graduation date of 2014. “Our newest team members will gain valuable experiences while helping Cassady Schiller serve our clients during this busy time of year,” commented David Lingler, Partner of Cassady Schiller. “We are excited to have three new employees sharing their ideas, knowledge and help providing timely, responsive client service.”

Cassady Schiller, established in 1990, is a team of more than 40 professionals dedicated to building relationships with their clients. Providing consulting, tax and accounting services in Cincinnati, Cassady Schiller also offers financial services, business valuations, merger and acquisitions, due diligence, family business planning and management consulting.

Contact: Heather Bucher
Cassady Schiller
T: 513.483.6253
F: 513.483.6690
hbucher@csa-cpa.com
www.csa-cpa.com

A simpler calculation for enterprise value is the equity value plus total debt minus cash. Equity value, or sometimes referred to as market capitalization, is calculated by taking the number of outstanding shares of common stock multiplied by the current price per share.

Enterprise Value considers much more than just the value of a company’s outstanding equity. To buy a company outright, an acquirer would have to assume the acquired company’s debt, though it would also receive all of the acquired company’s cash. Assuming the debt increases the cost to buy the company, acquiring the cash reduces the cost of acquiring the company.

Debt and cash can have an enormous impact on a particular company’s Enterprise Value. For this reason, two companies with the same equity values may have very different Enterprise Values. For example, Company A has an equity value of $5 million, no debt and $1 million in cash which calculates to an enterprise value of $4 million using the formula above. Company B with the same $5 million equity value with $3 million of debt and no cash calculates to an enterprise value of $8 million. Company A would be cheaper to acquire.

Call us today at Cassady Schiller to learn more about business valuations, valuation techniques and how we can assist you and your company in your endeavors.