PGwire

Retirement Plan Forfeiture Suspense Accounts

2011-11-30T12:02:00.001-05:00

Doryanne Hamel, CPA, Manager

By Doryanne Hamel, CPA, Manager
Contact information: doryanneh@pgco.com
401-831-0200

Many defined contribution plans include a period of service requirement prior to a participant becoming fully vested in the employer contributions. Therefore, when an employee is terminated prior to meeting the full vesting requirement their non-vested account will be forfeited. Often, these forfeited account balances are transferred to a plan suspense account.

IRS Revenue ruling 80-155 states that a defined contribution plan will not be qualified unless all funds are allocated to participant accounts in accordance with a formula defined in the plan’s document. Therefore, plan administrators who allow the plan’s suspense account to accumulate forfeitures for a number of years may be risking the plan’s qualified tax-exempt status.

The plan document terms should include provisions for how and when forfeiture suspense accounts will be utilized. Plans may include a provision to reduce future employer contributions, pay plan expenses or allocate to participant accounts. A plan’s failure to use forfeitures timely denies plan participants additional benefits or reduced plan expenses.

To comply with IRS and ERISA requirements plan administrators should:

Review the provisions in the plan document for handling plan forfeitures to ensure the plan complies with IRS and ERISA regulations.

Monitor plan suspense accounts to ensure that forfeitures generated in any plan year are used in accordance to the provisions of the plan document.

If plan forfeitures have not been allocated properly, the plan administrator should apply the correction principles in Revenue procedure 2008-50, section 6 when making the correction. More information can be found on the IRS web site www.irs.gov/retirement.

ABOUT THE AUTHOR

Doryanne Hamel, CPA is a manager at the Firm and is responsible for audit, review, compilation and other accounting and tax engagements for a wide range of clients. She is qualified to perform employee benefit plan audits in accordance with the guidelines established by the AICPA Employee Benefit Plan Audit Quality Center. Contact Doryanne at doryannh@pgco.com or 401-831-0200.

Employee or Independent Contractor? IRS Offers Amnesty

2011-11-29T10:36:00.000-05:00

Partner John Mathias

One of the more difficult questions facing a business is whether a service provider is an employee or an independent contractor. Answering this question requires an interpretation of both individual facts and circumstances and common law. If the business decides that the service provider is an independent contractor, the obligation to remit income taxes and pay employment taxes falls squarely on the independent contractor. If the business, however, considers the service provider an employee, the business assumes all obligations to remit income, social security and Medicare taxes as well as the liability for matching payroll taxes.

Businesses that have been liberal in construing service providers as independent contractors could face large employment tax liabilities for past non employee treatment. Those businesses currently treating some of their service providers as independent contractors now have the opportunity under the Voluntary Classification Settlement Program (VCSP) to voluntarily treat these workers prospectively as employees. In exchange for this “amnesty” the business will pay ten percent of the employment tax liability that may have been due on the compensation paid to these workers. The employment tax liability will be calculated under the reduced rates of section 3509 of the Internal Revenue Code. In addition, the taxpayer will neither be liable for any interest and penalties on the liability nor subject to an employment tax audit with respect to the classification of workers for prior years. Any taxpayer participating in the VCSP must agree to the extension of the period of limitations on the assessment of employment taxes.

To be eligible for the VCSP, a taxpayer must have consistently treated the workers as nonemployees, filed all required Forms 1099 and not be under audit by the IRS, Department of Labor or any state government agency. Eligible taxpayers who wish to participate in the VCSP must submit an application for participation in the program. Information about the VCSP and the application is available on www.irs.gov.

Is your Business Separating Credit Card Sales? New Requirements Effective with 2011 Tax Year

2011-10-14T09:53:00.000-04:00

Beginning in 2011, businesses will need to start paying much closer attention to their credit card sales! Credit card companies will be issuing Form 1099-K to merchants detailing these transactions starting in January 2012. Businesses must report sales included in the 1099-K, sales not included in the 1099-K and returns, allowances and "cash back" on three separate lines on their business tax returns beginning with the 2011 tax year. Be sure to keep a close eye out for these important tax documents! More information will be available as the IRS finalizes the rules regarding these requirements.

Fox Network "The Rhode Show" Spotlights P&G

2011-09-19T11:57:00.000-04:00

Partner Rich Sullivan has raced

in every Downtown 5k

since its start.

Piccerelli, Gilstein & Company, LLP has a long association with the CVS Caremark Downtown 5k. The Firm is featured on Fox Providence's "The Rhode Show". Click here to view the story.

Partner Rich Sullivan has raced in every Downtown 5k
since its start.

RI Sales Tax Changes Begin October 1st

2011-09-13T16:43:00.000-04:00

You can expect more than just fall color changes in RI over the next few weeks. New provisions to Rhode Island's sales tax take effect October 1, 2011. The changes are a result of the legislation approved by the General Assembly and signed into law on June 30, 2011 by Governor Lincoln Chafee. Click here to read the Division of Taxation's Advisory. Do not hesitate to contact your P&G professional if you have any questions.

Tax Partner Pat Thompson Provides Testimony on the IRS Paid Tax Return Preparer Program

2011-08-09T15:15:00.000-04:00

On July 28, 2011, Tax Partner Pat Thompson, Chair of the AICPA Tax Executive Committee, testified to the U.S. House of Representatives Committee on Ways and Means Subcommittee on Oversight regarding the implementation of the IRS paid tax return preparer program.

The AICPA has been a steadfast supporter of the IRS' overall goals of enhancing compliance and elevating ethical conduct in the tax preparer community. To read Pat's testimony, click here.

Governor Chafee's 2012 Budget Addresses State's Structural Deficits

2011-07-01T17:07:00.000-04:00

Governor Lincoln Chafee signed the fiscal year 2012 budget on June 30, 2011. The $7.7 billion plan begins to address the state’s structural deficits and includes expense reductions, revenue increases (rather than tax increases) and repays the rainy day fund. Click here to read highlights of the budget.

Foreign Bank Account Holders - Report by June 30

2011-06-13T14:20:00.000-04:00

Do you have a foreign bank account that you are required to report?

If you are a United States person, who maintains one or more foreign accounts, and the aggregate value of those accounts exceeded $10,000 at any time during the year, you may be required to report those accounts to the IRS. The due date for reporting foreign accounts is June 30th. The penalties for failing to report a foreign account include steep fines and possible criminal prosecution.

To learn more, click here.

Minimizing the Stress of Divorce

2011-05-10T14:47:00.000-04:00

Laura DaFonseca, Principal
CPA, MST, CFE, CFF, CDFA,

Divorce, one of the more traumatic events in life, is becoming a statistical certainty for more than 50% of married couples. Stress is an inherent element in this extremely emotional and personal experience, but some of the stress can easily be prevented when the proper specialists have been consulted. Read my recent article in "Sumnews", the Massachusetts Society of Certified Public Accountants' quarterly newsletter. Click here to read more.

Employee or Independent Contractor - Which Is It?

2011-05-02T11:44:00.000-04:00

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers' compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

Continue reading

Don't Have the Funds to Pay your Tax Liability?

2011-04-13T16:10:00.000-04:00

Many individuals appreciate the six month extension of time to file their individual income tax return. However, filing form 4868 only extends the filing date and not the payment of any tax due with the return. Your options? If the reason you seek an extension is due to not having the funds to pay, it is far better to file the return timely without payment and ask for an installment payment plan with the IRS. In addition, you will eliminate additional penalties being imposed. To view the Installment Agreement Request, click here.
http://www.irs.gov/pub/irs-pdf/f9465.pdf

Government Shutdown Will Not Impact IRS Operations

2011-04-08T10:23:00.000-04:00

With the growing possibility of the government closing, the IRS wants you to know that taxpayers are still expected to send in their tax returns by the April 18 filing deadline.

According to the Commisioner of Internal Revenue Doug Shulman, if the government closes, Internal Revenue Service operations will be affected, but the agency will be able to normally process and issue refunds for electronically filed returns. Processing of paper returns will be delayed, he said.

The Commissioner stressed the administration's goal is to avoid a shutdown. Asked how a shutdown might impact the work of the IRS chief counsel and tax regulations, Shulman gave a more general answer.

IRS has 100,000 employees; if the government closes, “not all of us will be coming to work,” he said, without implying whether that would affect the chief counsel's office. Shulman said he could not provide “nuances of who's going to be doing what.”

The IRS commissioner said his agency is a “huge operation” involved in the running of government. “Funding the government every two weeks is not a great way to operate,” the official said, noting that “not knowing what to expect” makes IRS's tasks difficult.

IRS Filing Deadline Moves to April 18, 2011

2011-04-04T12:06:00.000-04:00

Emancipation Day, a legal holiday in the District of Columbia, will be observed on Friday, April 15, 2011. As a result, the deadline to file your personal income tax return has been moved to Monday, April 18, 2011. Often, taxpayers find they cannot file their personal tax returns by the deadline. The cause could be due to missing information, late arriving investment data or the more common reason, "I just didn't get around to it".

The government allows for an automatic six month extension of time to file, bringing the new filing date to October 15th. To obtain this extension of time to file, you must file Form 4868 by April 18.

Tune in as Pat Thompson Discusses Governor Chafee's Proposed 2012 Budget

2011-03-25T14:32:00.000-04:00

On Sunday, March 27th at 11:30am on Channel 10, Tax Partner Pat Thompson will be a member of 3-person panel to discuss Governor Chafee's proposed 2012 budget on the program "Ten News Conference". Tune in to learn how the proposed budget will impact the Rhode Island business community.

Divorce - Avoid These Financial Mistakes

2011-03-22T16:46:00.000-04:00

Donna Slater, CPA, CDFA
Principal

It’s a sad fact that over 50% of marriages will end in divorce and though divorce is very prevalent, most people don’t understand the financial distress it can cause. With emotions running high, it is important to keep a level head and with proper planning, you can avoid some of the more common pitfalls.

Since income will likely drop after a divorce, it is important to develop a budget based on your current and projected income and expenses. Understand what your financial needs are and negotiate enough liquid assets to meet those needs.

Identify what assets you have and the value of each asset. Be sure to include everything. Some assets are easy to forget such as stock options, the cash value of life insurance policies and timeshare properties. Use this list as a starting point in negotiations.

Be aware of the value of all pensions. A pension is often more valuable than the marital home, since pensions produce income and home maintenance costs deplete income.

Since no two pension plans are identical, involving a pension expert early in the divorce process will minimize costly mistakes. A Qualified Domestic Relations Order (QDRO) is the legal document from the court that directs a pension plan administrator to give a certain amount of an employee’s pension to his or her ex-spouse after the divorce is final. It should be prepared pre-judgment and presented to the judge for signature concurrent with the final divorce decree. An order cannot be accepted after the death of a participant and any benefits that have been awarded to the alternate payee will not be paid by the plan.

If you would like to retain the marital home, first determine if you can afford it and then be sure to pre-qualify for a mortgage before the divorce is final. Have a home inspection prior to signing the divorce papers to determine if expensive repairs are necessary and be sure to subtract the closing costs and projected expenses needed to get the house ready to put on market from the value you assign to the house.

Keep in mind the after-tax values of all assets, since that will determine how much you will ultimately end up with. For example, you could end up paying capital gains taxes on the sale of your home or investment assets.

Cancel all joint credit cards in writing and open new ones in your name only. Remember that third party creditors can still hold you liable for joint debt regardless of what your divorce decree states.

Contact Donna by emailing donnas@pgco.com, or by calling 401-831-0200.

Does your Employee Benefit Plan Need a New Auditor?

2011-03-15T14:05:00.000-04:00

Auditing employee benefit plans is an industry-specific task that requires specialized experience and knowledge. According to the U.S. Department of Labor, approximately one-third of all benefit plan audits fail to comply with Employee Retirement Income Security Act (ERISA) requirements. One of the most important duties of the plan's administrator is to hire an independent qualified CPA. Click here for helpful tips in choosing an auditor. To learn more about our Employee Benefit Plan Audit services, contact Sharon Kennedy at 401-831-0200, or sharonk@pgco.com.

Your Missing Money Awaits You

2011-03-08T13:27:00.000-05:00

If you own a business, I’m sure you’ve noticed that sometimes an employee or a vendor doesn’t cash a check. Or maybe you’ve noticed that a bank account hasn’t been used in years. Who owns that property? Those funds are still the property of the employee, the vendor or the account holder. Most states have laws designed to gather and return lost or forgotten property to its rightful owners.

In Rhode Island, unclaimed property is turned over to the RI General Treasury if there has been no activity for three years. For wages and utility deposits the time period is only one year.

--------------------------------------------------------------------------------

Any business with two or more employees should file a report with the General Treasurer’s Unclaimed Property Division listing the abandoned property.

What will the State do? The State will publish a list of the unclaimed property and try to reunite the property with its rightful owner.

An individual should visit the General Treasurer’s web site which has a cumulative list of unclaimed property dating back to the 40”s. RI General Treasury - Unclaimed Property

Pat Thompson Addresses Congressional Ways and Means Sub-Committee

2011-03-03T11:19:00.000-05:00

Tax Partner Pat Thompson is in Washington, D.C. this morning to testify to a Congressional Ways and Means Sub-Committee. Pat will testify at a hearing on the special burdens that the tax code imposes on small businesses and pass-through entities and the need for comprehensive tax reform to address these problems. Pat is the Chair of the American Institute for Certified Public Accountants Tax Executive Committee.

Employee Benefit Plans and ERISA's Fiduciary Advisor

2011-03-02T15:45:00.000-05:00

Visit P&G's Employee Benefit Plan Audits page to learn more about our audit services and to access helpful resources and links, such as the new IRS web tool for retirement plans. The ERISA Fiduciary Advisor is a helpful tool for retirement plans to determine your company's fiduciary responsibilities under the Employee Retirement Income Security Act. Check back for news and the latest regulatory developments impacting qualified plans and their related audits. For additional information on how we can assist you with your Employee Benefit Plan Audit, contact Irene Fasano: email: irenef@pgco.com Ph: 401-831-0200.

Read how Tax Partner Pat Thompson is Advocating for Small Business

2011-02-25T15:27:00.002-05:00

Tax Partner Pat Thompson, Chair of the American Institute of CPAs Tax Executive Committee, was featured in a recent Journal of Accountancy article, "House Committee Sends 1099 Repeal to the Floor". Pat urged the repeal of certain compliance provisions impacting businesses and rental property owners that were included in the Patient Protection and Affordable Care Act and the Small Business Jobs Act. Click here to read the article.

Did you file your 2011 Rhode Island Annual Report?

2011-02-17T13:09:00.000-05:00

March 1st is the deadline to file your 2011 Rhode Island Annual Report with the Secretary of State's Office to avoid revocation of your business certificate of incorporation or authority.

Click here to visit the Rhode Island Secretary of State website for additional information.

The Dollars and Sense of Divorce

2011-02-10T15:36:00.000-05:00

Because of the financial complexity of many divorces, more and more financial professionals are being asked to play an active role helping individuals and lawyers sort through the financial issues related to divorce. We are pleased to announce that P&G Principals, Donna Slater, CPA, CDFA and Laura DaFonseca, CPA, MST, CFE, CFF, CDFA recently completed a specialized education program in professional divorce analysis and are now Certified Divorce Financial Analysts (CDFA). Laura and Donna, the only certified public accountants in Rhode Island to have the CDFA designation, are trained to evaluate the tax implications of dividing property and the financial impact of various settlement options for dividing marital property (including pensions) and child and spousal support payments. Contact Donna at donnas@pgco.com and Laura at laurad@pgco.com or call our office, 401-831-0200.

Eager to File Your 1040? Not so Fast says the IRS

2011-02-03T14:21:00.000-05:00

The IRS has announced that some "early birds" who traditionally file individual income taxes early, will have to wait until mid-to-late February to file 2010 returns. Why? The IRS needs more time to reprogram its processing systems to reflect new legislation included in the late-breaking Tax Relief Act signed on December 17th. Who has to wait?

Taxpayers claiming itemized deductions on Schedule A.
Taxpayers claiming the higher-education tuition and fees deduction.
Taxpayers claiming the educator expense deduction.

Depreciating Equipment and Sport Utility Vehicles

2011-01-25T18:25:00.005-05:00

Good news from Congress? Read on.

The Federal Income Tax Code ordinarily requires equipment, furniture and fixture investments by businesses to be depreciated over pre-defined time periods such as 5 or 7 years. In December 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law.

There are two significant provisions in this new legislation for 2010 and 2011 with respect to writing off fixed asset purchases. These two provisions have been put into place to encourage businesses to expand, improve and upgrade. One provision allows a 100% write off for unlimited fixed asset acquisitions if the assets acquired are NEW and purchased after September 8, 2010 and before December 31, 2011. That’s right! UNLIMITED 100% write off! The second provision has more restrictions including a phase out provision that limits the deduction at $500,000, but it can be utilized for USED fixed asset acquisitions, whereas the 100% deduction cannot. Determining which provision is applicable to your specific circumstances is the first step in planning your 2011 business investment plan. Just let us know your 2011 asset acquisition plans.
One particular interesting aspect to the new bonus depreciation law, is the ability to write off the cost of trucks using the 100% bonus depreciation provision. Sport Utility Vehicles with Gross Vehicle Weights greater than 6000 pounds are considered trucks for this provision. Prior to the passage of this law, first year depreciation on these SUV’s was limited to $25,000. While it was probably an unintentional result of the new law, at the time of this writing these greater than 6000 pound SUVs appear to be 100% deductible in 2011 if acquired after September 8, 2010 or in 2011. Please contact us if you are considering the purchase of such a vehicle so that we can review the latest information about the tax law.

Window of Opportunity Closes on January 31, 2011

2011-01-12T19:59:00.000-05:00

Don't miss the IRA tax opportunity included in the legislation signed by President Obama on December 17, 2010. This one has a very short window of opportunity; it ends January 31, 2011.

Taxpayers over age 70 1/2 have the option to transfer up to $100,000 from an IRA to a qualified charity and have the transfer count as the required minimum distribution.

• You can still make your 2010 transfer by the end of January 2011. The advantage is that a taxpayer can contribute a maximum of $200,000 to charity. If they miss the January 31, 2011 deadline, the most they could transfer would be $100,000.

• This provision expires at the end of this year.

To learn why an individual would transfer the funds to charity rather than take the distribution and then write the check directly to the charity, contact Irene Fasano, irenef@pgco.com.