Online Retailers & Sales Tax
There is a continuing debate about what to do with online retailers and collecting sales tax. Many of the top “e”-tailers do not collect sales tax in states in which they have no physical presence. For consumers, it is becoming more and more popular to shop online to save money and avoid paying any sales tax.
Should online retailers be collecting sales tax? Do online retailers have a built in advantage over local stores? Click here for an article discussing these questions and items to keep in mind related to sales tax if your company buys or sells over the internet.
Long-term Care Insurance & Your Business
Owner-Employees of S Corporations vs. Owner-Employees of C Corporations
Providing fringe benefits such as long-term care insurance to owner-employees can be an effective way to add value to your company. In general, the Internal Revenue Code allows employees to exclude certain fringe benefits from gross income and deduct the fringe benefit as a business expense. However, there is a difference in the treatment to owner-employees depending upon what type of entity structure your business is operating under.
Below is a comparison of the tax impact to owners of C corporations vs. owners of S corporations when providing long-term care insurance as a fringe benefit:
Rules for C Corporation Owner-Employee
- Nondiscrimination rules do not apply to LT care insurance plans that are in separate plans from other health benefits. (The insurance company may require the employer to define the classes of employees eligible. If the employer intends to provide coverage to key employees, it may be beneficial to buy individual policies rather than having a group plan).
- Individual contracts purchased for key employees are fully deductible by the business and no income is reported to the employee.
- They are not subject to ERISA since individual policies are not group plans.
- Language in employment contract stating that LT care insurance is being provided may be a good idea.
- No limitations apply in the amount of LTC insurance that can be provided for tax free to an employee.
Rules for S Corporation Owner-Employee
- Greater than 2% shareholders must include the premiums paid on their W-2.
- Income is not subject to FICA tax and are excluded from boxes 3 and 5 of the W-2.
- An above-the-line deduction is allowed on the shareholder’s Form 1040.
- The amount that is deductible on Form 1040 is limited based upon the age of the shareholder.
- Under age 40, the limit is $340
- 41-50 it is $640,
- 51-60 it is $1,270
- 61-70 it is $3,390
- over 70 it is $4,240.
President Obama’s Proposed Deficit Reduction Plan
On September 19, 2011, President Obama proposed a $3 trillion federal budget Deficit Reduction plan, including $1.5 trillion in tax increases. Although this is just a proposal and not yet law, it is important to stay informed of the items included in the proposed Deficit Reduction Plan.
Click here to view the White House Tax and Deficit Reduction Proposals Special Report
The Special Report highlights the following proposals:
- Repeal of Bush-Era Tax Cuts for Higher Income Taxpayers
- The Warren Buffet Rule
- Estate Tax Reform
- Elimination of Oil, Gas and Coal Preferences
- LIFO Repeal
- Permanent FUTA Surtax Extension
- International Tax Reforms
Feel free to contact Froehling Anderson at 952.979.3100 with any questions you may have on the proposed Deficit Reduction Plan.
Your Company’s Future is Determined by Your Business Model
The Harvard Business Review featured a spotlight on business models – with good reason. The authors of the articles in the spotlight researched a variety of highly successful companies and found that these companies had something in common – they were all “well on their way to new business success [each time] their existing business started to stall”.
How did these companies manage to find themselves poised for new growth every time an existing market became saturated? They carefully planned a new business model that would mature in time to replace a predecessor.
- What is a business model?
The business model should tell a story that describes how your business works, encompassing the product you are selling and how it is being marketed and delivered.
- When is it time to invent a new business model?
The best time to begin inventing a new business model is while an existing model is still prosperous.
- How should a business model be designed?
A successful business model requires finding a consumer wish that is not yet being fulfilled. There is no shortage of unfulfilled consumer needs and wishes, but the challenge lies in finding which ones your business can create at a cost that is less than what the customer can afford to pay.
Remember, your company’s future is determined in your business model. When is the last time you looked at your business model?
The New Normal: Telecommuting
Wikipedia defines telecommuting as a work arrangement in which employees enjoy flexibility in working location and hours. In other words, the daily commute to a central place of work is replaced by telecommunication links.
As I communicate with other businesses, it has become clear that telecommuting or alternative work schedules are becoming more and more common. Our firm now has 35% of our employees on an alternative work schedule, which included telecommuting. The benefits of these arrangements have been vast, including:
- Increased productivity due to eliminated commute time
- Decreased involvement in office gossip
- Reduced stress
- Fewer disruptions in the work day
The telecommuters at our firm have worked hard to make this arrangement work and have developed systems to improve efficiency and communication, increasing both quality and productivity. As an added benefit, employees who couldn’t get into work due to a snowy Minnesota day, could work from home and not miss a beat. Not only did we not see a drop in productivity, the employee experienced reduced stress and risk of a potential accident. We have concluded that our telecommuters are happier employees as outlined in the article, “The Real Reason Telecommuters Are Happier”. Click here for the full article.
According to the June 2011 report on the State of Telework in the U.S., businesses need to remember that they benefit from telecommuting as well. Providing telecommuting as an option to employees, will:
- Improve their ability to recruit and retain the best people
- Increase productivity
- Decrease space requirements, absenteeism and energy costs
- Enable employee’s performance to be measured on what they accomplish rather than the number of hours they work
Whether we like it or not, telecommuting is the new normal. In 2009, Forrester Research reported, “more than 34 million U.S. adults telecommuted at least occasionally”. This is a significant number that cannot be ignored. Not all businesses are ready to make this culture shift to managing a remote workforce. It is not easy to overcome the issue of mistrust regarding whether employees are “really working”. In addition, not all businesses have the tools, training and technology needed to support the remote employee. Know this, we are currently seeing a new era of telecommuting that will impact how we work and become productive in the 21st century.
To receive assistance developing alternative work schedules, telecommuting policies, procedures or agreements, do not hesitate to contact me at lsimonson@fa-cpa.com.
