Retirement Plan Audits
Our team performs employee benefit plan audits every year for all types of retirement plans across the Pacific Northwest.
We take our commitment to quality service, cost efficiency, timely communication, and technical expertise seriously. Our client promise is to issue benefit plan audits within 60 days of the information being provided and are willing to guarantee a delivery date in most situations. Serving all regions of Oregon from our offices in Bend, Eugene, and Portland, we provide audits for 401(k), 403(b), ESOP, Defined Benefit, and Health & Welfare plans.
We are a member of the American Institute of Certified Public Accountants Employee Benefit Plan Audit Quality Center. Our clients are as small as 100 participants and as large as 14,000.
Contact us for a no-obligation fee quote for your retirement plan audit and/or a second opinion on your current services.
“As one of the leading Retirement Plan Audit Firms in the Pacific Northwest, our promise is to deliver high quality work, on time, with efficiency that is cost effective.”
— Evan Dickens, CPA
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Evan Dickens, CPA
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Jon Newport, CPA
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Mark Reynolds, CPA
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In addition to income tax, you must pay Social Security and Medicare taxes on earned income, such as salary and self-employment income. The 12.4% Social Security tax applies only up to the Social Security wage base of $118,500 for 2016. All earned income is subject to the 2.9% Medicare tax.
The taxes are split equally between the employee and the employer. But if you’re self-employed, you pay both the employee and employer portions of these taxes on your self-employment income.
Additional 0.9% Medicare tax
Another employment tax that higher-income taxpayers must be aware of is the additional 0.9% Medicare tax. It applies to FICA wages and net self-employment income exceeding $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately).
If your wages or self-employment income varies significantly from year to year or you’re close to the threshold for triggering the additional Medicare tax, income timing strategies may help you avoid or minimize it. For example, as a self-employed taxpayer, you may have flexibility on when you purchase new equipment or invoice customers. If your self-employment income is from a part-time activity and you’re also an employee elsewhere, perhaps you can time with your employer when you receive a bonus.
Something else to consider in this situation is the withholding rules. Employers must withhold the additional Medicare tax beginning in the pay period when wages exceed $200,000 for the calendar year — without regard to an employee’s filing status or income from other sources. So your employer might not withhold the tax even though you are liable for it due to your self-employment income.
If you do owe the tax but your employer isn’t withholding it, consider filing a W-4 form to request additional income tax withholding, which can be used to cover the shortfall and avoid interest and penalties. Or you can make estimated tax payments.
Deductions for the self-employed
For the self-employed, the employer portion of employment taxes (6.2% for Social Security tax and 1.45% for Medicare tax) is deductible above the line. (No portion of the additional Medicare tax is deductible, because there’s no employer portion of that tax.)
As a self-employed taxpayer, you may benefit from other above-the-line deductions as well. You can deduct 100% of health insurance costs for yourself, your spouse and your dependents, up to your net self-employment income. You also can deduct contributions to a retirement plan and, if you’re eligible, an HSA for yourself. Above-the-line deductions are particularly valuable because they reduce your adjusted gross income (AGI) and modified AGI (MAGI), which are the triggers for certain additional taxes and the phaseouts of many tax breaks.
For more information on the ins and outs of employment taxes and tax breaks for the self-employed, please contact us.
Typically, it’s better to defer tax. One way is through controlling when your business recognizes income and incurs deductible expenses. Here are two timing strategies that can help businesses do this:
1. Defer income to next year. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.
2. Accelerate deductible expenses into the current year. If you’re a cash-basis taxpayer, you may make a state estimated tax payment before Dec. 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.
But if you think you’ll be in a higher tax bracket next year (or you expect tax rates to go up), consider taking the opposite approach instead — accelerating income and deferring deductible expenses. This will increase your tax bill this year but can save you tax over the two-year period.
These are only some of the nuances to consider. Please contact us to discuss what timing strategies will work to your tax advantage, based on your specific situation.
Aren’t estate taxes and estate planning based on the “fair market” value of assets at the date of death or the date of the gift? You only thought so!
Fair Market Value is defined as “…the price at which property would change hands between a willing buyer and a willing seller when the former is under no compulsion to buy and the latter is under no compulsion to sell, both parties having reasonable knowledge of all relevant facts.” It is being proposed by the Treasury Department that this will not be the standard of value used when valuing minority interests in family-controlled entities
On August 2, 2016, The US Treasury Department released proposed regulations under Internal Revenue Code Section 2704. The proposed regulations change significantly the manner in which minority/non-controlling interests in family controlled entities are valued for estate, gift, and generation skipping transfer tax purposes. The proposed valuation regulations impact these interests in family limited partnerships, family owned C and S corporations, family owned LLCs, and family owned joint ventures. In addition, “family controlled” is the governing wording. The entity need not be owned 100 percent by the family, it need only be controlled by the family.
The Treasury Department is proposing to eliminate the application of the lack of control discount. As appraisers, we access data bases which provide objective observations of the existence and magnitude this discount for lack of control (DLOC). The Treasury Department is, with these regulations, re-defining “fair market value” as it pertains to these types of non-controlling interests. Objective observations suggest the magnitude of this discount could be 10percent, and maybe as high as 90 percent or more, with 20 to 30 percent normal. This means the value of the interest on which your client, the estate or the person making the gift, will be paying the estate and gift tax, may be 40% or higher.
The time period during which comments regarding the proposed regulations will be accepted ends December 1, 2016. Business appraisers, en masse, are arguing against the implementation of these regulations. We appraisers will live with it if it happens, BUT CAN YOUR CLIENTS AFFORD IT?
The proposed regulations do not eliminate all applicable discounts. The discount for lack of marketability (DLOM) will still be applicable. This is the discount which reflects that lack of liquidity implicit in privately held business interests. This DLOM may be as large as 40 percent or more, but the resulting value, after applying the DLOM, will still be significantly higher than the market would pay for the interest.
Some pundits believe the Treasury is “overshooting” what it will accept, in hopes it at least gets the elimination of the DLOC for non-controlling interests in family controlled entities which exclusively hold marketable securities, leaving the valuation of non-controlling interests in family controlled operating businesses to use the DLOC in its determination. Even if this is the case, this is a slippery slope.
House Republicans in the current Congress have introduced two bills which would nullify the proposed regulations, and members of the Senate Finance Committee have sent the Treasury Secretary a letter requesting the proposed regulations be withdrawn.
Estate planning for transfers no later than December 31, 2016, may be appropriate. Elections have consequences.
Jones & Roth, P.C. is one of Oregon’s largest consulting and CPA firms, serving you from Oregon offices in Lane, Deschutes, and Washington Counties. Our BV and Litigation Support team has combined experience of more than 50 years. Bill Mason has been providing this expertise since 1975. All members of our team are credentialed. For more information on our Business Valuation and Litigation Support Services, contact Bill Mason at firstname.lastname@example.org or Tiffany Mellow at email@example.com or call any of our offices.
William V. Mason, ASA, CPA/ABV, CFF is the managing senior financial analyst and co-leader of the Jones & Roth Business Valuation and Litigation Support team. He provides business valuation services for mergers and acquisitions, estate planning, employee stock ownership plans (ESOPs), and litigation support.
Tiffany Mellow, CPA, ABV is a manager and member of the Jones & Roth Business Valuation and Litigation Support team. She provides business valuation services for mergers and acquisitions, estate planning, employee stock ownership plans (ESOPs), and litigation support.