 HARDING, SHYMANSKI & COMPANY Certified Public Accountants and Consultants
Our Goal: Your Success! February/ March 2011 |
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| Employee Tips & Whistleblower Hotlines are the Most Effective Way to Detect Fraud | |
According to the ACFE's 2010 Report to the Nation, the Manufacturing industry ranks 2nd out of 22 industries in occurrences of fraud, with a median loss per fraud of $300,000.
Employee tips are far and above the most effective way of detecting fraud, uncovering 34% of the cases per The Report. The next most common method was Internal Audit at 11%.
You can download a copy of the report at http://www.acfe.com/rttn/2010-rttn.asp.
To learn how to impliment a Fraud Reporting Hotline at your company call Priscilla Capes, CPA, CFE, AAP, at (502) 584-4142 or email pcapes@hsccpa.com. |
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| Manufacturing and Wholesale Distributors | |
Is today's business environment presenting unique opportunities and issues for your manufacturing operation? How are you addressing the push from your customers for continuous quality improvement? Are you having difficulty finding and retaining quality employees? Add to these issues declining profit margins and strained resources due to rapid growth and you have major challenges facing you day in and day out.
At Harding, Shymanski & Company, P.S.C. we have a dedicated team ready to assist you with those unique challenges and issues facing your industry.
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| IRS Releases 2011 Mileage Rates | |
Business Milage
The standard mileage rate for business mileage in 2011 is 51 cents per mile. When a taxpayer uses this mileage rate for automobiles the taxpayer owns, depreciation will be considered to have been allowed at a rate of 22 cents per mile. This depreciation reduces the taxpayer's basis in the automobile. The 2010 rates were set at 50 cents and 23 cents per mile by Rev. Proc. 2009-54.
A taxpayer computes a deduction using the business standard mileage rate on a yearly basis, in lieu of computing the fixed and variable automobile costs allocable to business purposes, such as depreciation, lease payments, maintenance and repairs, tires, gasoline, oil, insurance, and license and registration fees. However, the taxpayer may continue to claim separate allowable deductions for parking fees and tolls, interest relating to the purchase of the automobile, and state and local personal property taxes. The standard business mileage rate may not be used when five or more automobiles are owned or leased and used simultaneously by the taxpayer (such as in fleet operations). Rules providing for substantiation of an employee's ordinary and necessary expenses for local travel or transportation away from home are also provided. Such expenses will be deemed substantiated when the employer, its agent, or a third-party provider provides a mileage allowance under a reimbursement or other expense allowance arrangement.
Medical, Moving Mileage Rate
The 2011 standard milage rate for medical and moving expenses is 19 cents per mile. The 2010 rate was 16.5 cents per mile.
Charitable Mileage Rate
The 2011 standard rate for charitable purposes will remain at 14 cents per mile.
If you have any question please call John Rittichier, CPA, at (502) 584-4142 or email jrittichier@hsccpa.com. |
| FASB Defers the Expected Effective Date for Its Project on Disclosure of Certain Loss Contingencies | |
The Financial Accounting Standards Board (FASB) has decided to rule out a 2010 effective date for its loss contingencies disclosure project. The proposal has received much attention from companies, auditors, members of the legal community, and other constituents given the sensitive nature of the information that it would require to be disclosed. The FASB staff noted that several significant issues have been raised in the more than 330 comment letters received to date, and that adequate due process is needed to address those issues. The Board did not conclude on a new proposed effective date pending its redeliberations on the proposal. However, the Board indicated that it plans to conduct these redeliberations before the end of 2010.
For more information on how these disclosures could affect your financial statements, please call Scott Olinger, CPA, CPIM, at (502) 584-4142 or email solinger@hsccpa.com.
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Cost of Insurance May Begin an Upward Swing |
The end of the soft market may be in sight and prices may begin an upward swing toward the latter part of this year, according to the chief executive of MarketScout.
Richard Kerr, the chief executive officer for the Dallas-based electronic insurance exchange, said in a statement that "2010 will prove to be the beginning of the end of a six-year soft market cycle." He said that while rates were down for all of last year, they exhibited some moderation and held steady in a small, tight range of three to five percent. The first six months of this year will see slight reductions on "competitively marketed placements" and flat renewals on markets not under those pressures.
Mr. Kerr's remarks came with the release of MarketScout's latest market barometer that showed an average market rate pricing decrease of five percent for December. The figure is identical to November, and those numbers are only one percentage point higher than September and October. |
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Audited Financials Can Provide a "Real Cost Benefit" |
The Wall Street Journal reports small businesses whose books are audited by a hired certified public accountant improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.
To read the full article please click " Audits Add Shine to Firms."
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| Implementing the Reduced Social Security Tax | |
The New Law in Summary
Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $106,800 (in 2010 and 2011), while self-employed individuals pay 12.4 percent. Effective for calendar year 2011, the new law reduces the employee-share from 6.2 percent to 4.2 percent up to the taxable maximum. The employer-share remains unchanged. Self-employed individuals will pay 10.4 percent on self-employment income up to the taxable maximum. The reduction has no effect on an individual's future Social Security benefits.
The payroll tax cut replaces the Making Work Pay tax credit, which temporarily reduced income tax withholding in 2009 and 2010. The Making Work Pay tax credit phased-out for higher-income individuals. The payroll tax cut is across-the-board (up to the taxable maximum of $106,800).
The payroll tax cut opens up some tax planning opportunities for individuals. The savings could be contributed to an IRA or another retirement savings vehicle, thereby compounding available tax benefits. The savings also could be used to help fund a Coverdell education savings account.
Example
Let's look at an example...
Tyler, who is single, earns $106,800 (the maximum taxable wage). For 2011, the new law reduces Tyler's share of Social Security taxes on his earning to 4.2 percent. Tyler will see $2,136 in savings for 2011.
Implementation
Shortly after the new law was passed, the IRS instructed employers to start reducing the amount of Social Security tax withheld as soon as possible in 2011 but no later than January 31, 2011. For any Social Security tax over-withheld in January, employers should make an offsetting adjustment in an individual's pay no later than March 31, 2011.
The Trap
However, be on the lookout for the following trap. The IRS has recently announced that if an employee is paid in 2011 before the employer implements the reduced social security tax rate for employees in 2011 (4.2% vs. 6.2%), and if the employee is not paid after the employer implements the new rate, the employer may not move the employee's excess social security tax withholding to the employee's year-to-date federal income tax withholding accumulator (and report this according on Forms 941, W-2 and W-3).
So stated in another way, if all of the following exist, the employer will have to review its payroll records for people who meet these conditions and issues checks to refund excess social security tax.
- An employer did not have the 4.2% rate programmed for the first payroll of 2011;
- The employer pays employees and withholds social security tax at the wrong rate; and
- Any of these employees are not paid after the 4.2% rate is implemented (e.g., they are terminated or resigned).
If you have any questions, please call Matt Folz, CPA, at (800) 880-7800 or email mfolz@hsccpa.com.
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Harding, Shymanski & Company, P.S.C. provides accounting, tax, and consulting services to clients from offices in Evansville, Indiana, and Louisville, Kentucky.
Call us today! (800) 880-7800 in Evansville and (502) 584-4142 in Louisville
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| Disclaimer |
The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice. |
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