Summer 2014
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Construction and Real Estate Industry News
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Because Harding, Shymanski & Company, P.S.C. is committed to providing quality service to our construction and real estate clients, we have selected a team of dedicated professionals to serve as your industry's consultants. These individuals understand the language and key issues unique to your industry and possess the drive and determination to help you manage your company on a proactive basis.
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Increasing Profitability Through Efficiency
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Tight margins and operating profits have made it difficult for most contractors to increase the cash level on their balance sheet and build up the strong working capital and equity position that banks and bonding companies hold in high regard. To win bids in this environment, contractors must look for ways to gain efficiencies on projects as well as in the office.
Click here to ready the article in its entirety.
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Benchmarking: What's the Score?
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How would it be to coach a team and know your team's score but not your opponent's? Most companies prepare their financials on a regular basis so they know their own score, but how do they compare to others in their industry? Benchmarking is an important tool to help you see how you stack up against your competition. Just like a coach will review their stats and see where they have strengths and weaknesses, a business owner should regularly do the same.
Click here to read the article in its entirety.
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Risk Sharing Through Joint Ventures
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Contractors live in a world full of risk. Around almost every corner, risk is waiting to unhinge a project and bulldoze profits. While contractors accept risk as part of working in the industry, their challenge is to identify how much risk to accept in order to become a profitable entity.
There are many ways a contractor can look to manage risks: risk transfer options such as transferring risk to customers or subcontractors; risk assumption options such as self-insurance; risk reduction options such as safety measures; risk avoidance options such as not performing certain types of projects or avoiding certain geographic areas; and, risk sharing options such as joint ventures or partnerships. As part of their overall business processes, management should spend time adequately reviewing all of these options and determine the best course for the particular challenges confronting the entity.
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Federal Income Tax Withholding on Supplemental Wages
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What are supplemental wages? In general all wages that are not regular wages are supplemental wages. Although tips reported by employees and overtime pay meet the definition of supplemental wages, the regulations give employers the option of treating such payments as regular wages. The most common supplemental wages are bonuses and commissions.
There are two methods of withholding available to an employer with respect to a payment of supplemental wages when an employee has not received cumulatively more than
$1 million in supplemental wages for a calendar year.
The first method is the aggregate method. Using the employee's current Form W-4, the employer calculates the amount of withholding due by aggregating the amount of the supplemental wages with the regular wages paid for the current payroll period or for the most recent payroll period of the year of payment, thereby treating the aggregate as if it were a single wage payment for the regular payroll period. The employer must use the aggregate method if the optional flat rate method cannot be used.
The second method is the optional flat rate method. The employer disregards the amount of the regular wages paid to an employee as well as the withholding allowances claimed or additional withholding amount requested by the employee on his or her Form W-4. The employer uses a flat percentage rate in calculating the amount of withholding. The optional flat rate for 2014 is 25%. The employer must withhold at this rate if using the optional flat rate and cannot take into account requests by an employee that the rate be increased or lowered. This method can only be used if two conditions are met:
- The employer has withheld income tax from regular wages paid to the employee during the same year as the payment of supplemental wages or during the preceding calendar year.
- The supplemental wages are not paid concurrently with regular wages or are separately stated on the employee's pay stub.
If the conditions for using the optional flat rate are met, then the decision as to which method to use is discretionary with the employer. If the conditions are not met, then the employer must use the aggregate method.
If a supplemental wage payment--when added to all supplemental wage payments paid to an employee during a calendar year--exceeds $1 million, then the employer must withhold from wages in excess at a flat rate equal to the maximum tax rate in effect for that year. In 2014 that rate is 39.6%.
Please contact Jane Hildenbrand, CPP at 800.880.7800 ext. 1339 if you would like to discuss this in more detail.
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Disclaimer
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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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Harding, Shymanski & Company, P.S.C. provides accounting, tax, and consulting services to our clients from offices in Evansville, Indiana, and Louisville, Kentucky.
Call us today! 800.880.7800
www.hsccpa.com
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