Inside DMLO

#CPALife can be highly rewarding but also present its share of challenging moments. Sometimes it’s the little things that make a difference in your day. In our industry, that often involves food or refreshments! In addition to the treats delivered to our office during busy season from vendors, clients and friends of the firm, and the healthy snacks provided by our Health & Wellness Committee, we have a wonderful administrative staff who go the extra mile to bring in ice cream for Float Fridays, keep the popcorn machine poppin’ on Wednesday afternoons, stock the break room with free soft drinks, coffee and iced tea, celebrate birthdays each month with cake, and coordinate meals on Saturdays during tax season.

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Wondering how you are going to figure out where you fit best, when CPA firms often seem to be more similar than different at first glance? Look closer, and you will find we each have a distinct ‘personality’ and culture, and it can have a big impact on your satisfaction and success if you end up in a firm that doesn’t ‘get’ you.

We embrace specific values that you won’t find to be as highly prioritized at other firms in our area. If words like choice, fun, flexibility, meaningful work, buy local, social impact, using business as a force for good, and more than the numbers resonate with you, keep reading. And don’t just take our word for it. Learn about the independent recognition we repeatedly receive for our workplace culture and philanthropic work.

We’re unique in important ways, and if that piques your interest, stay tuned as we update this Top 10 series:

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Kentucky House Bill 487 includes provisions related to expanded sales tax regulations. The bill, effective July 1, 2018, impacts many nonprofit organizations. This infographic addresses some of the questions we are hearing most frequently about what is taxable and what is not. You may also find helpful information here.

Changes in annual not-for-profit financial statements prescribed in Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities (ASU 2016-14) will affect substantially all NFPs. They are designed to provide more relevant information about an organization’s resources, and the changes in those resources, to donors, grantors, creditors, and other financial statement users. We will be happy to review the changes in more detail with you, but below is a brief overview.

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Kentucky House Bill 487 includes provisions related to expanded sales tax regulations.  This bill does apply to nonprofit organizations and is effective July 1, 2018. 

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We are excited to announce that Ben Benedict has been promoted to IT Director.

Ben was born and raised in Auburn, California – in the foothills of the Sierra Nevada Mountains. He earned a Bachelor of Business Administration degree in Accounting from Simpson University. He began his career after college with a small tax accounting firm, where he provided tax, bookkeeping, and IT services for six years. He moved to Nashville and took a job in IT for Dell, before changing gears and becoming a warehouse manager for a flooring company. A better financial opportunity brought him to Louisville, but unfortunately his job was eliminated when the economy took a dive. He went back to school, earning an Associate Degree in Computer Science from Sullivan University.

“I’ve always built and managed computers on some level, so it just made sense,” said Ben. “I met some great people, and after considering several job options, I decided DMLO was the perfect fit, given my experience.” Ben joined the IT team in June 2012.

Awesome Moment: “Reconnecting with someone I’ve known for over 20 years, who has become my best friend and love of my life.”

Odd fact about myself: “I had the opportunity to travel while in college. I’ve been to Ukraine twice, for a month each time, working at an orphanage. I also had the opportunity to lead a group of business students to India for 6 weeks.”

What I bring to the table as the new IT Director: Loyalty

If I could pick one word of the year, it would be: Growth

Congratulations Ben!

With the passing of April 26, 2018, House Bill (“HB”) 487 became law. The bill is effective immediately, unless other effective dates are noted. This bill includes most items from the original tax reform House Bill 366, with added technical corrections, as well as some key additions – thereby, effectively replacing HB 366. Following is a summary of key provisions of HB 487:

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We have an immediate opportunity in our growing tax practice.

Our tax team provides comprehensive tax services and specialized expertise to businesses, individuals, trusts, estates, non-profit and governmental entities and associations. Services include compliance (preparation), planning and consulting, and various outsourcing projects. We serve clients in all fields, with particular emphasis in manufacturing, distribution, construction, healthcare, exempt organizations and private equity firms.

You will be required to consult on large projects, so strong technical skills are vital. You will also be responsible for the compliance function, including technical review of corporate, partnership and personal income tax returns; identifying and assisting with implementation of tax planning and tax savings strategies; and research and consulting on complex tax matters.

This position requires a CPA license and a minimum of five (5) years of experience.

We offer a full benefits and competitive compensation package, along with an award-winning workplace, a recently-renovated office in a convenient Hurstbourne location, and a family-oriented culture. You will not only have the opportunity to make a difference here, but will have fun doing it! 

Apply online here or mail to:

DMLO CPAS
Attn: Personnel
9300 Shelbyville Road, Suite 1100
Louisville, KY 40222

Responding to many questions received in response to newly-enacted restrictions on home mortgages, the IRS has confirmed that taxpayers can continue to deduct home equity loan interest and interest on a home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labeled.

The Tax Cuts and Jobs Act of 2017 suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.

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College accounting students: we’d like to invite you to join us for our expanded 2018 Student Leadership Program. Learn about #CPALife, our firm, how to have an awesome interview, and the skills you need to be recognized as a leader.

Join us for a social event on Wednesday afternoon, followed by a full program on Thursday. Jeans are perfectly appropriate – we wear them daily.

Check out photos from last year and read what participants had to say about the program.

Applications are due March 31st, so apply now by completing this form and emailing to santle@dmlo.com.

The IRS has announced that the start of the 2018 tax season will be Monday, January 29, meaning it will begin accepting both electronic and paper tax returns on that date. The IRS chose the date to ensure the security and readiness of key tax processing systems in advance of the opening, and to allow time to assess the potential impact of tax legislation on 2017 tax returns. 

The filing deadline to submit individual 2017 tax returns (that have not been properly extended) is Tuesday, April 17, 2018, rather than the traditional April 15 date. In 2018, April 15 falls on a Sunday, and this would usually move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17, 2018. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

A note about refund processing: by law, the IRS cannot issue refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit before mid-February. This applies to the entire refund — even the portion not associated with the EITC and ACTC. If you claim one or both of these credits, expect the earliest refunds to be available in bank accounts or on debit cards starting on Feb. 27, if choosing direct deposit and there are no other issues with the tax return.

The IRS also reminded taxpayers in the announcement that a trusted tax professional can provide helpful information and advice, which we completely agree with of course. No need to wait until the IRS opens on January 29th – we kicked off our tax season today (see a few of our team pictured at the kickoff event), and are ready to meet with you!

The Tax Cuts & Jobs Act (TCJA), has both good and bad news for taxpayers. Here are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning after December 31, 2017.

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Congress is enacting the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay. Since most of the changes will go into effect next year, there’s still a narrow window of time before year-end to soften or avoid the impact of crackdowns and to best position yourself for the tax breaks that may be heading your way. Here’s a quick rundown of last minute tax moves you should think about making.

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Friday evening the House and Senate Conference Committee agreed to the Tax Cuts and Jobs Act. Barring a delay, it is anticipated to pass both chambers tomorrow and be signed into law before December 25th. Click here to view Policy Highlights of the Act.

Not included in the highlights document are some of the deductions that may be lost or reduced under the Act, such as:

• College athletic event seating rights
• Miscellaneous itemized deductions (2% deductions) including tax preparation fees and investment management fees
• Personal casualty loss deduction

You may still be able to benefit from certain of these deductions, if payment is made before the end of 2017; for example, prepaying donations tied to college athletic event seating rights. Deducting prepayments of other items, such as 2018 state and local income taxes, is specifically prohibited in the language of Act.

Please call your DMLO advisor, or our main number (502) 426-9660, if you want to discuss the specifics of your situation and whether you should consider taking action before 12/31.

Year-end tax planning can provide a good way to lower a tax bill that will otherwise be waiting when you file your 2017 tax return in 2018. Since tax liability is primarily keyed to each calendar tax year, once December 31 passes, your 2017 tax liability – good or bad – will mostly be set in stone.

Year-end 2017 presents unique challenges due to efforts by Congress and the Trump Administration to enact tax reform legislation – the scope of which has not been seen since 1986 (according to supporters). Whether this ambitious plan will be successful by the end of this year remains uncertain; but the reasons to prepare to maximize any benefits if it does happen are indisputable. Both talk of lower tax rates and fewer deductions requires careful monitoring at this time, with contingency plans ready should these changes occur.

Potential tax reform, although important, is not the only reason to engage in year-end tax planning this year. Other changes made by the IRS and the courts in 2017 have already become effective. Opportunities and pitfalls within these recent changes should not be overlooked, particularly as we approach the close of the year.

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Mindy Heck recently added a new credential to her resume – the Advanced Defined Contribution Plans Audit Certificate. This offers additional evidence of her expertise in the area of employee benefit plan audits, and her commitment to performing the highest quality work for this very specialized area of practice.

Developed by leading subject matter experts from the AICPA’s Employee Benefit Plans Audit Quality Center, the Advanced Defined Contribution Plans Audit Certificate Exam tests an auditor’s ability to plan, direct and report on these types of plan audits in accordance with the latest AICPA standards and Department of Labor and IRS requirements. The advanced level is designed for auditors with seven or more years of experience in performing and reviewing defined contribution plan audits. The exam covers:

• Planning and general procedures
• Internal control
• Net assets available for benefits
• Changes in net assets available for benefits
• Plan tax status
• Financial statement presentation, disclosure, and regulatory reporting
• Audit reports

This certificate requires the ability to evaluate and analyze the core concepts related to client acceptance, engagement planning, engagement analysis, concluding an engagement and guiding principles for defined contribution plan audits at an advanced level as outlined in the AICPA Competency Framework: Employee Benefit Plan Auditing.

Having this deep and highly specialized knowledge means that Mindy can provide the best possible insights – a real value to plan fiduciaries.

For more information about our employee benefit plan audit services, click here. 

View Mindy’s full bio and contact info here.

Congratulations to Jenny Lamkin on earning two credentials recognizing her expertise with the cloud-based Sage Intacct accounting solution:

Jenny is a member of our Business Services team, providing valuable accounting and payroll help to business owners so you can focus on what you do best.

If you would like to learn more about collaborating with us on your accounting needs using a secure, real-time, 24/7 access from anywhere application, with role-based dashboards, custom reports, document management, and more, click here or email Jenny.

In 2017, a man posing as an Atlanta-based tax consultant was sentenced to 27 months in prison for fraud and money laundering that impacted one of the largest health care organizations based in Louisville. The scheme involved tax credits falsely obtained through the Kentucky Department of Revenue.

Could this situation have been avoided? It’s hard to say without more detail. But after working with numerous businesses and organizations over the years, I find that many of the simple things that can help leaders manage the top fraud risks for not-for-profit organizations are overlooked or assumed for one simple reason. Trust.

If a large, for-profit organization like the one mentioned here can experience fraud, imagine the challenges for small not-for-profit organizations that have fewer staff and resources. Too often, leaders trust that vendors are carefully vetted and that financials and systems are accurate — managed with the proper controls. The organization may have part-time staff with limited hours and volunteer board members. Even with the best intentions and focus, they may have limited capacity to explore improved processes and systems.

Too much trust can impact more than the organization. You may risk the reputations and personal finances of leaders and volunteers who pledge to take fiduciary responsibility.

It is okay to trust people, but let’s add some facts and risk management by taking a look at the top fraud risks for not-for-profit organizations. The tips that follow can help staff and fiduciary leaders improve and monitor internal controls to support a healthier organization.

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As the 2018 filing season nears, the IRS is reminding taxpayers that the Affordable Care Act (ACA) remains on the books. The ACA’s reporting requirements for individuals have not been changed by Congress. At the same time, the Trump Administration has proposed administrative changes to the ACA, which could expand health reimbursement arrangements (HRAs), the use of short-term, limited duration health insurance, and association health plans.

Health coverage status

The ACA generally requires individuals to have minimum essential health coverage or make a shared responsibility payment, unless exempt. Most employer coverage as well as Medicare, Medicaid and coverage through the ACA Health Insurance Marketplace is minimum essential coverage. Individuals with minimum essential coverage merely check a box on their federal income tax return to report their health coverage status. Individuals who need to make a shared responsibility payment do so when they file their federal income tax returns.

Since passage of the ACA, the IRS has accepted returns that fail to report health coverage status. These are known as “silent returns.” Last year, the IRS announced that it would not accept these “silent returns.” However, the IRS later reversed course and accepted them for processing.

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The IRS is strict about collecting unpaid payroll taxes and tough on “responsible persons” who don’t pay them. Withheld federal income, Social Security, and Medicare taxes are known as “trust fund” taxes because they are held in trust until they’re paid. If they aren’t paid, the IRS can assess liability for 100% of the unpaid amount on responsible individuals. Once that move is taken, the tax agency can start collection action against an individual’s personal assets. It can file a federal tax lien or take levy or seizure action.

A recent court case shows that a person may not be able to escape the penalty even if someone else is primarily responsible for handling payroll taxes.

The case involved a 50% owner and CEO of a tool and die company. He signed the paychecks. The other 50% owner served as the COO and prepared the payroll tax deposit checks. Both men had authority to handle money for the company, to open and close bank accounts in its name and to sign checks.

Payroll Service Bails

The company used a third-party payroll service provider to process its paychecks. But in December 2003, the service ended the contract after the tool and die company wasn’t able to remit the full amount of its gross payroll, including taxes.

At the COO’s urging, the company began using an in-house software system to handle payroll. Both the CEO and the COO expected to be able to fix the tax shortfall early in 2004.

The CEO maintained that the COO was the sole person entrusted to ensure that the payroll taxes were paid. He says that he didn’t learn that the COO was routinely failing to do so until July 2004. At that time, the CEO arranged a meeting with IRS to discuss the shortfalls.

At some point, the CEO was going through the COO’s desk and discovered that although the man was regularly cutting payroll tax checks, he wasn’t paying the taxes. Up until that point, the CEO claimed that the regular cutting of the checks led him to believe the taxes were being paid.

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