As we continue to welcome in the first quarter of 2018 and the new tax bill, let’s take a quick look at what has changed and what remains the same.
Federal
Thanks to the Tax Cuts and Jobs Act, beginning in 2018, the exemption for Gift, Estate, and Generation Skipping Transfer (GST) tax has increased. The amount that can now be left to heirs, tax free, will be approximately $11.2 million per person and $22.4 million for married couples. Furthermore, the annual gift tax exclusion has been raised from $14,000 to $15,000 beginning in 2018. The 40% tax rate for estate, gift, and GST tax remains the same. In addition, the basis step-up rules, adjusting assets passing from a descendent to fair market value at date of death, does not change.
Rhode Island
For descendants dying on or after January 1, 2018, the estate tax threshold will be raised an additional $22,500, changing from $1,515,156 in 2017 to $1,537,656 in 2018.
What is happening in our neighboring states?
Connecticut
On October 31, 2017, Connecticut increased the individual exemption up from $2 million to $2.6 million in 2018. This will increase again to $3.6 million in 2019 and will match the federal Estate, Gift, and GST Tax Exemption in 2020.
Massachusetts
Massachusetts’ exemption remains unchanged at $1 million. In fact, Massachusetts and Oregon are now tied for the lowest estate tax exemptions in the nation.
Partnering with Your Professional Services Company
As a Professional Services organization, you work to meet your client’s needs while also growing your business. Strategic planning, coping with employee turnover, and utilizing the latest technologies are just a few of the challenges you face every day. You need a strategic, financial partner who knows your industry like it’s their own.
While you navigate the entrepreneurial landscape of the Professional Services industry, we help you plan for success. As an established Professional Services firm with clients in the medical and legal fields, DiSanto, Priest & Co. helps you reach your internal and external goals. Our unique hybrid tax, assurance, and advisory services were designed for Professional Services companies like yours. And as your company continues to grow, our services grow with you.
Our Local CPAs Help You Achieve Your Organizational Goals
Whether your goal is to grow your Professional Services organization today or leave a lasting legacy tomorrow, any transition comes with its own unique challenges. As you prepare for a merger or work to hire the right people, the future of your company depends on your ability to stay ahead of the change. Our local RI CPAs have the financial foresight and personal perspective to help your organization stay prepared for whatever the future holds. Life’s too short. Plan proactively so you can enjoy today instead of worrying about tomorrow.
Knowing Your Industry Is Our Industry
We’re one of Rhode Island’s top accounting firms, and we pride ourselves on understanding the Professional Services industry and its challenges because we operate within the same space. Our professional and personal experience offers valuable knowledge on the unique labor, strategy, technology, billing, and licensing challenges you face every day. You don’t need just another accounting firm – you need a relevant financial advisor who understands the ins and outs of professional services accounting.
As part of the 2018 tax reform, significant changes were made to the ability of businesses to deduct meals and entertainment expenses. The changes took effect January 1, 2018, and, as such, there are steps you should consider taking now to ensure compliance with the new provisions.
Prior Law
Previously, expenses for meals and entertainment were generally 50% deductible provided the taxpayer was able to demonstrate the expenses were ordinary, necessary, and directly related to their trade or business. There were certain circumstances under which 100% was deductible, including employer-operated eating facilities.
New Law – Entertainment
The Tax Cuts and Jobs Act completely eliminates an employer’s ability to deduct business entertainment expenses. This includes, but is not limited to, golf outings, sporting events, theater tickets, and sailing. Taxpayers may still be able to deduct 50% of meal expenses incurred at these events provided you are able to prove there was a substantial and bona fide business discussion associated with the activity.
New Law – Employer-Operated Eating Facilities
The Tax Cuts and Jobs Act has changed the deductible percentage of an eligible employer-operated eating facility from 100% to 50% for amounts paid or incurred beginning January 1, 2018 through December 31, 2025. For expenses paid after December 31, 2025, no deduction will be allowed.
Actions to Consider
In light of the above changes, there are many items taxpayers should consider. Some of the more notable items include:
- Establishing new general ledger accounts to track entertainment expenses disallowed under the new law to ensure these charges are separate from meals charges for which a 50% deduction is allowed
- Review substantiation requirements with respect to meals and entertainment expenses to ensure sufficient detail is provided on all charges
- Assess current policies with respect to employee business entertainment to see if any changes are warranted
The above summary provides highlights with respect to one area of the Tax Cuts and Jobs Act. If you would like to discuss how these provisions, or any other provisions related to tax reform, impact you, do not hesitate to contact us.
To remain competitive in today’s working environment employers will offer employees the opportunity to participate in a pre-tax retirement plan. In addition, they may offer to match the employee’s contribution up to a certain percentage. As part of the process, the employee is required to complete certain paperwork which includes a Beneficiary Designation Form (BDF). This form directs the plan administrator as to who should receive the funds in your retirement plan upon your death. This document takes priority over your will.
Just recently (March 2017) there was a case decided in Florida Federal District Court that addressed an improperly completed Beneficiary Designation Form. The case, Ruiz vs. Publix Super Markets, was about a former employee who wanted to change her beneficiary designation. The Plan had clear directions on how to complete the BDF.
The former employee called and was informed to make a change she would need to do the following:
“She must write a letter. And in the letter, she must put the person she wants, with their social security number….That she must include her name, her Social Security number, cards if she can get ahold of them. The main thing was, they kept emphasizing that the most important part of the letter was to make sure she signed it and dated, that was a must.“
The former employee was able to obtain a BDF but did not sign and date it. Instead, she referenced the letter she had written. Publix did not process the request but sent it back because the BDF was not signed and dated. The former employee died a day after she wrote the letter.
The funds were distributed to the original beneficiaries and the court agreed and ruled that the Plan’s requirements were not precisely followed. The BDF was not signed and dated by her. The fact that there was a written letter that “substantially complies” did not matter.
Moral of the story…..“Follow Directions”.
You should periodically review your beneficiary designations on all retirement accounts including IRA’s and company plans. More importantly, you should look at your beneficiary designations when one of the following life changing events take place:
- Marriage
- Divorce
- Birth or adoption of a child
Today’s health care providers face an onslaught of new rules —including complex coding requirements, privacy concerns, higher copays, unpaid debts, and denied claims, to name a few—making it more important than ever for medical offices to create clear medical billing policies.
Establishing a comprehensive written set of policies and procedures—and training staff to use it effectively—can help with accounts receivable management and provide consistency among the billing staff.
Experts seem to agree that there are at least eight steps that are fundamental in this process: 1) registration. 2) Establishment of financial responsibility. 3) Check-in/check-out. 4) Coding/billing compliance. 5) Preparing and transmitting claims. 6) Adjudication. 7) Generating bills. 8) Assigning payments/arranging collections.
The aforementioned pressures have led to the development of a number of best practices that help medical offices streamline billing from start to finish as well as save time, money and frustration. Some of those best practices are the following:
Collect Co-Payments At Registration
First thing’s first: The best way to secure co-payments is to require it in full as part of the registration process. Post a sign at the front desk and train the receptionist to review insurance cards and collect the appropriate payment. Health care is increasingly seeing cost burdens shifted to the patient. Staff needs to be aware of these changes and confirm the proper amount is collected, every time.
Train (and Retrain) Coders
Never has medical coding been so complex and never has the risk for underpayment due to coding errors been so high. It is essential that medical billing clerks are trained and certified before they start work. And the more specific the training, the better. An effective billing policy must, therefore, include clear training standards for new hires and incorporate regular retraining sessions. Medical associations, insurance companies, and hospitals offer educational resources and classes. Monitor common errors and denial claims as well as review them regularly with the billing staff.
Forms of Payment
It’s a fact: we live in an increasingly cashless (and checkless) world. The more different kinds of payment you accept, the more customers you can process. At the same time, mobile payment options like Square, Google Wallet, and Apple Pay have streamlined transactions even further. What’s more, security improves by the day. Nevertheless, like all vendors, you’ll need to look out for identity theft so a fraud detection protocol should be part of the collections policy. Keep an active credit card on file to expedite payment. Utilize technology (electronic remittance, claims status, insurance confirmation) to increase efficiency and payment.
Rule for Non-Payment
It’s inevitable, especially in a time of increasing health costs, some customers will be unable to pay. As difficult as it is to turn patients away, carrying a balance for them is not sustainable. Set a maximum limit for non-payment (anywhere from $150-$250 is typical). Make it clear upfront that there will be late fee charges and that accounts will be turned over to a collection agency after a set period of time.
Last Resort: Collection Agency
Unfortunately, there will be occasions when a collection agency becomes necessary to retrieve debts. Adherence to the collection practices listed above should help limit these instances, but the billing policy should include a clear system for debt collection when all else fails. Set clear deadlines so your staff doesn’t have to make individual decisions. Not all collection services are created equally. Find one that is experienced in healthcare collections and the relevant privacy laws. Do your homework, conduct interviews, check references, and choose carefully. The fee charged for collections can vary widely and the cost of using an agency should always be compared against exhausting all in-house options.
We all know that people are your most important asset. They create new ideas, service your customers, and handle all the things that machines simply cannot. Let’s face it, that large payroll expense on your income statement is there for a reason. You have probably spent quite a bit of time trying to hire the best people, the smartest people, and the ones that fit your company’s culture; essentially trying to build your dream team. You have probably never gotten your entire team just perfect, but most likely you have identified a few MVPs, your go-to people who you know can solve the problem or get things done. On a few occasions, you probably didn’t even fathom the idea of that person leaving the company…but then they do.
Why? They probably have given you some explanation about a great new opportunity that they couldn’t pass up, and that may be true, but chances are there is another reason that is not being communicated. So to help you keep your most important people and hopefully finish assembling that dream team, here are 6 of the top reasons people leave and some suggestions for avoiding these pitfalls.
- Unchallenged – Although we tend to think of routine as a good thing, employees who find themselves doing the same thing day after day, or who find their responsibilities unchanged, eventually get bored. Good employees look for new challenges and want to grow. The lack of challenge can leave an employee feeling unfulfilled and potentially even untrusted. As a result, they will look for an employer willing to provide that new experience. Talk to your employees about their roles, specifically what parts they dislike, what they enjoy, and what they would like to learn. Consider giving each of your employees a new responsibility at least annually, while also keeping in mind that some of their previous responsibilities may also need to be reallocated to someone else.
- Lacking opportunity for advancement – Good employees often look to advance into higher and more rewarding positions. Those employees will become frustrated if they feel no advancement opportunities exist or if the path to succession is unclear. Similarly, employees can become frustrated if they feel that someone less qualified for a position has been promoted, while they resume the same position. Make sure that job descriptions and responsibilities are clear; and that the company has an organization chart to keep employees aware of potential roles that they can work towards.
- Inadequate system of rewards – Employees want to feel valued for their efforts, especially when putting in extra hours to meet a deadline or accomplish a big project, but also on a day to day basis. If employees feel under compensated for the work they perform, they will likely leave in search of a job where they feel compensation is more adequate. Additionally, when employees go above and beyond their daily responsibilities, they want to feel appreciated for that extra effort. Employees should be recognized both financially and publicly. Consider announcing good work and accomplishments during company meetings, or awarding bonuses for exceeding certain performance goals.
- No connection to the big picture – Although employees can be exceptional at fulfilling their role, it can be easy to lose sight of where that role fits into the big picture or overall mission of the organization. This can cause the employee to feel a lack of meaningfulness, which can reduce motivation or excitement towards that role. Make sure your employees are aware of how their role fits into the organization’s overall goals. This will help to give your employees a sense of purpose. Additionally, try to give your employees new responsibilities that fit their interests and specific skills. Developing your employees’ specific interests and skills creates trust and empowerment, which can also help to boost motivation and morale.
- Feeling like a number – We often get so caught up in our work and getting things done that we forget to ask people how they’re doing. In these situations, employees may see how their role is important to the organization, but they don’t feel that they themselves filling that role, rather than someone else, is important to the organization. It’s important to listen to your people. Make time for your employees, be respectful, and make sure they know they are valued.
- All work and no play – Feeling overworked is one of the top reasons employees claim for leaving their job. We have several commitments in the course of a day in addition to our jobs, such as our family, our health, and our hobbies; and employees want a job that leaves enough time for all the other commitments. Many employers have started creating flexible work arrangements that allow employees to create a schedule that works best for them, rather than the typical nine to five work day. Employers are also looking for ways to make the workplace fun to boost employee morale. Consider having at least one fun activity a month, such as a team competition, or office lunch, or small after work happy hour.