Monthly Archives: June 2014

New Job – Don’t Forget Your Retirement Plan

What to do with your old retirement plan when you change jobs.

iraFirst and foremost, don’t take a lump-sum distribution from your old employer’s retirement plan.  It generally will be taxable and, if you’re under age 59½, subject to a 10% early-withdrawal penalty.  That’s a big chunk.  Read on for some ideas that might work out better and save you money.

Here are three alternatives:

  1. Stay put.  You may be able to leave your money in your old plan.  But if you’ll be participating in your new employer’s plan or you already have an IRA, keeping track of multiple plans can make managing your retirement assets more difficult.  Also consider how well the old plan’s investment options meet your needs.
  2. Roll over to your new employer’s plan.  This may be beneficial if it leaves you with only one retirement plan to keep track of.  But evaluate the new plan’s investment options.
  3. Roll over to an IRA.  If you participate in a new employer’s plan, this will require keeping track of two plans.  But it may be the best alternative because IRAs offer nearly unlimited investment choices.

There are additional issues to consider when deciding what to do with your old retirement plan.  The tax professionals at Ciuni & Panichi, Inc. can help you make an informed decision and avoid potential tax traps.  Contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information and assistance with all your tax questions.
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© 2014

Tax Benefits of Combining Business Travel with Vacation

Additional Tax Benefits of Travel

Are you thinking about combining a business trip and a family vacation this year?  This is a grvacationeat way to fund a portion of your vacation costs.  But be careful or you could lose the tax benefits of business travel.

Generally, if the primary purpose of your trip is business, then expenses directly attributable to business will be deductible (or excludable from your taxable income — an excellent tax benefit, if your employer is paying the expenses or reimbursing you through an accountable plan).  These  expenses generally include:

1. Air, taxi, and rail fares,
2. baggage handling,
3. car use or rental,
4. lodging,
5. meals and tips.

Expenses associated with taking extra days for sightseeing, relaxation, or other personal activities, generally, are not deductible, nor is the cost of your spouse or children traveling with you.  During your trip, it’s critical to carefully document your business vs. personal expenses.  Keep in mind that special limitations apply to foreign travel, luxury water travel, and certain convention expenses.

In some cases you may be able to deduct expenses that you might not think would be deductible.  This can lead to extra tax savings and more vacations.  For more information on how to maximize your tax benefits when combining business travel with a vacation, please contact Ciuni & Panichi, Inc. and Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.

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Vacation home owners: More Tax Savings Ideas

Adjusting rental vs. personal use might save taxes

vaca homeWith summer drawing to a close, if you own a vacation home that you both rent out and use personally, it’s a good time to review the potential tax consequences:

  • If you rent it out for less than 15 days, you don’t have to report the income.  But expenses associated with the rental won’t be deductible.
  • If you rent it out for 15 days or more, you must report the income.  But what expenses you can deduct depends on how the home is classified for tax purposes, based on the amount of personal vs. rental use.

Rental property:  You can deduct rental expenses, including losses, subject to the real estate activity rules.  You can’t deduct any interest that’s attributable to your personal use of the home, but you can take the personal portion of property tax as an itemized deduction.

Nonrental property:  You can deduct rental expenses only to the extent of your rental income.  Any excess can be carried forward to offset rental income in future years.  You also can take an itemized deduction for the personal portion of both mortgage interest and property taxes.

Look at the use of the home year-to-date to project how it will be classified for tax purposes.  Adjusting either the number of days you rent it out or your personal use between now and year-end might allow the home to be classified in a more beneficial way.

If you have questions or want to know more, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com. We’d be pleased to help.

Do you want more ideas on saving taxes on your investments?  The tax professionals at Ciuni & Panichi, Inc. are always ready to help.  We have tax-efficient strategies for all your investments.

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© 2014

How Can Board Actions Impact an Organization’s Fraud Risks?

The Fiduciary Responsibilities of the Board

Fraud happens everywhere, in all industries and in companies of all sizes, and research by the Association of Certified Fraud Examiners (“ACFE”) shows that those organizations that focused more on fraud have less risk of fraud occurring.  Organizations worldwide lose an estimated five percent of annual revenue to fraud, according to the ACFE 2014 Global Fraud Study.  The results of this study demonstrate that the presence, or lack thereof, of Board oversight has a profound effect on the median loss and duration of fraud.  The business case for managing fraud risk should be at the front of every director’s mind when considering the cost/benefit of fraud detection and prevention efforts.

The basic fiduciary duty of care principle, which requires a director to act in good faith with the care an ordinarily prudent person would exercise under similar circumstances, is being tested in today’s business climate.  Personal liability for directors, including removal from the Board, civil penalties, and tax liability, as well as damage to the reputation of themselves and their organizations, appears not so far from reality as once widely believed.  Yet, many directors continue to be in the mindset of “that won’t happen in my organization.”  Because of this, a basic understanding of the director’s fiduciary obligations and how the duty of care may be exercised in overseeing the organization’s internal control and compliance systems has become critical.

While fraud risk management should be a part of an overall risk management program, effectively addressing the risk of fraud requires dedicated, deliberate focus and consideration, including a formal process for oversight by directors.  The Institute of Internal Auditors, American Institute of Certified Public Accountants, and ACFE jointly recommended that the committee charged with fraud risk oversight “should meet frequently enough, for long enough periods, and with sufficient preparation to adequately assess and respond to the risk of fraud, especially management fraud, because such fraud typically involves override of the organization’s internal controls.”

Dedicated and observable fraud risk oversight activities by the Board will not only enhance the ethical reputation of the organization but will also set the stage for an antifraud culture within their organization.  Moreover, the directors’ proactive involvement in fraud risk management initiatives has the added benefit of serving as a strong deterrent to fraud by heightening the perception of detection throughout the organization.  Increasing the perception that potential fraudsters will be caught is among the most effective deterrence mechanisms available.

Accordingly, a director must be educated on fraud’s “red flags” and be willing to ask the tough questions, both of a general nature and specific to potential fraud risks.  The best director is inclined to think like an investigator when details don’t add up or explanations don’t make sense.  Answers should not be accepted at face value as necessarily accurate or even, in some cases, honest or truthful.

By requiring, implementing, and overseeing a proactive fraud risk management plan, directors will meet their fiduciary responsibilities, while helping to secure a financially and ethically sound future for their organization.

For more information or if you have concerns about your organization, contact Reggie Novak at 216-831-7171 or rnovak@cp-advisors.com.

Reggie is a Senior Manager in the Audit and Accounting Services Group.  As a Certified Fraud Examiner, Mr. Novak can assist you with prevention services including recommending internal controls and other measures to be implemented to prevent theft or misappropriation.  If fraud is suspected, he can investigate and present his findings and recommendations.

Additional Medicare Tax – Are you Withholding Enough?

Employers Need to Watch Additional Medicare Tax

In 2013 the Affordable Care Act (ACA) added an additional 0.9% Medicare tax on the excess earnings.  Taxpayers with FICA wages over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) had to pay more.AACA Health Care Reform

Unlike regular Medicare taxes, this additional Medicare tax does not include a corresponding employer portion. But, employers must withhold the additional tax to the extent that an employee’s wages exceed $200,000 in a calendar year. The $200,000 amount doesn’t include the employee’s income from any other sources nor does it take into account their tax filing status.

The IRS released the final regulations in November 2013 regarding the additional tax and the employer withholding requirements. The only substantial change from the proposed regulation was that employers no longer get relief from payment liability for any additional Medicare tax that was required to be withheld but that they didn’t withhold, unless the employer can provide evidence that the employee has paid the tax.

At Ciuni & Panichi, Inc., we know what the requirements are and we would be happy to answer your questions about them to make sure you are in compliance with these requirements.  Please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information or with any questions you may have.

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Affordable Care Act – Play-or-Pay? Are You Prepared?

The Affordable Care Act – Offer sufficient coverage or pay the penalty

ACAAre you a “large” employer?  Your time is running out to get prepared for the Affordable Care Act’s shared responsibility provision.  Also called the “play-or-pay” provision that is scheduled to go into effect in 2015.  Under transitional relief the IRS issued earlier this year, for 2015, large employers generally include those with at least 100 full-time employees or the equivalent, as defined by the Affordable Care Act.  However, the threshold is scheduled to drop to 50 beginning in 2016, and that threshold will apply beginning in 2015 for the Affordable Care Act’s information-reporting provision.

The play-or-pay provision imposes a penalty on large employers if just one full-time employee receives a premium tax credit.  The credit is available to employees who enroll in a qualified health plan through a government-run Health Insurance Marketplace and meet certain income requirements, but only if:

  1. They don’t have access to “minimum essential coverage” from their employer, or
  2. the employer coverage offered is “unaffordable” or doesn’t provide “minimum value.”

The IRS has issued detailed guidance on what these terms mean and how employers can determine whether they’re a large employer and, if so, whether they’re offering sufficient coverage to avoid the risk of penalties.  If you are not sure if you fall into these categories, contact Ciuni & Panichi, Inc. and we can help you determine what will work for you and your company.

If your business could be subject to the play-or-pay provision of the Affordable Care Act and you haven’t yet started preparing, do so now.  For more information on play-or-pay, or on the information reporting requirements, please contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com.

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© 2014