In November of 2015, sponsors of audited employee benefit plans received a letter from the Department of Labor notifying them that over 40% of all audits submitted were not completed in accordance with auditing standards. Why is this concerning? Because audits that are not correctly performed create many issues for all those involved with employee benefit plans, including the plan sponsors, fiduciaries and participants.

Annual audits are an ERISA (Employee Retirement Income Security Act of 1974) requirement for plans with participants over a certain threshold and are attached to Form 5500. An audit verifies the assets of the plan and confirms the plan is operating according to the plan documents and in compliance with applicable laws and regulations. These audits have a filing deadline of October 15 each year.

Errors in plan administration can trigger issues with the IRS, including penalties, and can also cause legal problems for the plan’s fiduciary. More importantly, audits that are correctly done can detect a number of errors that, if not caught early, turn into major problems.  Commonly seen errors include: incorrectly calculated employee deferrals, employer matches, and deferrals for unique forms of compensation (like commissions or bonuses). Other common issues that may be uncovered with an audit include:

• Improper disposition or holding of forfeitures
• Failure by the plan of certain nondiscrimination testing, without adequate corrective action taken
• Top-heavy issues
• Other deviations from the Department of Labor and IRS requirements or from the plan document

The November Department of Labor letter communicates the results of the DOL’s audit of plan auditors. The intent of the letter was to encourage plan sponsors to confirm that they are using qualified, experienced auditors. Plan administrators are held responsible as fiduciaries of the plan, and can be held personally liable if they are not making reasonable choices with regard to their plan. This includes due diligence with selection of their plan’s auditor.

While many accounting firms are choosing not to continue to offer employee benefit plan audits as a service, Cray Kaiser assures clients that we are uniquely qualified for this work. In addition to our commitment to quality and continued education in this area, our staff has a great deal of experience understanding the nuances of these audits. Cray Kaiser is also a member of the American Institute of Certified Public Accountants’ EBPAQC (Employee Benefit Plan Audit Quality Center), a group created to improve quality of benefit plan audits with news alerts, training, webinars, audit quality center and other resources.

On the surface, a franchise seems like a low-risk investment with promising rewards. You don’t need to start your own business from scratch and a lot of the hard work seems to come with preset directions. It can’t be that bad, right? The reality is, buying a franchise is not just an investment of hundreds of thousands dollars, but also a healthy investment of analysis and skepticism.

Starting your own business is no easy task. There is lots of risk involved and the resulting stress can become overwhelming to handle while navigating hundreds of business decisions a day. If you add a spouse into the ownership arrangement, things only become more complex. Here’s what you should know before starting a business with your spouse.

Time to sell your business? Unfortunately, it’s a little more complicated than signing some paperwork and watching a large sum of money appear in your bank account. Many entrepreneurs make mistakes when selling, and the same mistakes can be seen repeating in every industry. We picked the most common six mistakes to avoid.

If you fill out your own 1099, it always seems less daunting than other tax forms due to its shorter length. But did you know one little mistake can cost you $100 per infraction? Don’t let this “little form” bite you with expensive penalties later on. All mistakes are easily avoidable if you’re thorough.

Ever since wire transfers moved online, both personal and work bank accounts are more vulnerable to fraudulent electronic funds transfers from tech-savvy thieves. Avoid malicious attacks by recognizing the tell-tale signs of a fraudulent wire transfer.

We don’t mean to paint a bleak picture – but what would happen to your company in the event of your own disability or death? No one likes to think about these things, but it’s extremely important to have a succession plan of who, what, why, when, how just in case. If you want your business to survive in your absence, don’t let it suffer from a lack of planning like 30% of small businesses do.

Unless you’re a manager in an accounting or finance firm, working capital may be a foreign term to you. With today’s ever-shifting economy, it’s important to understand the benefits and complications that arise from managing working capital.

Although the tax code contains some exceptions, income is generally taxable in the tax year received and expenses are claimed as deductions in the year paid. But “carryforwards” and “carrybacks” have special rules. In this case, certain losses and deductions can be carried forward to offset income in future years or carried back to offset income in prior years, providing tax benefits. 

Here are four examples:

Capital losses. After you net annual capital gains and capital losses, you can use any excess loss to offset up to $3,000 of ordinary income. Remaining losses can be carried over to offset gains in future years. The carryforward continues until the excess loss is exhausted. For example, suppose you have a net capital loss of $10,000 for 2023. After using $3,000 to offset ordinary income on your 2023 return, you carry the remaining $7,000 to 2024. The excess loss is first applied to your 2024 capital gains, and then to as much as $3,000 of your ordinary income. Any remaining loss is carried forward to 2025 and future years. 

Charitable deductions. Your annual charitable deductions are limited by a “ceiling” or maximum amount, as measured by a percentage. For example, the general rule is that your itemized deduction for most charitable donations for a year can’t exceed 50% of your adjusted gross income (AGI) (60% for years through 2025). Gifts of appreciated property are limited to 30% of your AGI (20% in some cases) in the tax year in which the donations are made. When you contribute more than these limits in a year, you can deduct the excess on future tax returns. The carryover period for charitable deductions is five years. 

Home office deduction. If you qualify for a home office deduction and you calculate your deduction using the regular method, your benefit for the current year can’t exceed the gross income from your business minus business expenses (other than home office expenses). Any excess is carried forward to the next year. Caution: No carryforward is available when you choose the “simplified” method to compute your home office deduction. 

Net operating losses (NOLs). Historically, NOLs could be carried back two years and forward 20 years. Under current law, NOL’s can only be carried forward in most cases. Give us a call for help in maximizing the tax benefits of carryforwards or carrybacks. 

Please note that this blog is based on tax laws effective in December 2023, and may not contain later amendments. Please contact Cray Kaiser for most recent information. 

By implementing sound principles of saving and investing, average people – with average salaries and expenses – can build wealth. For most people wondering how to build wealth, it may be a lot like cooking stew in a crock pot. Two ingredients are required: discipline and time.

• Time harnesses the power of compound interest. Simply put, compound interest is the money gained by leaving your dollars invested. It’s interest earned on the interest. Say, for example, you put $1,000 in an investment earning 5% annually. After the first year, your account balance will have grown to $1,050. Leave your money invested, and by the end of the following year you’ll have $1,102.50. You make more money the second year because you also earn interest ($2.50) on the first year’s interest ($50).
• The sooner you start investing, the less you’ll need to save. Take, for example, two fellows named Tom and Jerry. Both are 18 years old. Tom paid attention in accounting class and started saving $100 a month. For ten years he contributed to a relatively conservative mutual fund that earned 7% annually. At age 28, Tom lost motivation and stopped saving.

Jerry, on the other hand, was a party animal. For the first ten years after high school, he spent every penny he earned. But at age 28, he got discipline. He started saving $100 each month, the same amount Tom had been saving for ten years.

By age 65, who comes out ahead? Tom is the clear winner with about $230,000; Jerry places second with $210,000. Consider that Tom saved $100 a month for ten years ($12,000) and Jerry saved the same monthly amount for 37 years ($44,400). Why did Tom end up with more money? Because his funds were invested longer. The power of compounding amplified his investment. (By the way, had Tom invested $250 a month from age 18 to 65, he’d have over a million dollars by age 65.)

Are you wondering how to build wealth? Cray Kaiser can help you with tax and financial planning strategies. Contact us today!