General Articles

Author: Sherri VanArendonk

Enrollment in Medicare Part B can be difficult and lead to large fines if done at the wrong time. For example, if an individual fails to enroll, he or she must pay a late enrollment penalty (LEP) of 10% his or her monthly premium for life. James Sullivan, in an article published in the Journal of Accountancy, discusses how to maneuver the Part B enrollment process.

What does Medicare Part B cover?

Medicare Part B covers outpatient medical care such as: medical services, tests, and supplies used outside a hospital or skilled nursing care facility.

The 3 Enrollment Periods

Source: Medicare General Information, Eligibility, and Entitlement Manual, Centers for Medicare & Medicaid Services.

The IEP leads to no penalty, but may lead to gaps in coverage. The SEP can only be used by someone who is losing employer-provided coverage. The GEP is used as a last resort and may lead to gaps in coverage and late penalties.

To read the full referenced article, click here. For assistance in navigating the Medicare Part B enrollment process, please contact Sherri VanArendonk at (231) 726-5898 or svanarendonk@brickleydelong.com.

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Over the recent years, there has been an increase in stolen Social Security numbers and fraudulent tax returns being filed. The Internal Revenue Service has continued efforts in combating tax fraud. They recently announced a collaborative effort of 34 state revenue departments and 20 tax industry members to put strong new safe guards in place for the 2016 tax season.

Sally Schreiber, in a recent article published in the Journal of Accountancy, reports on the announcement.

The effort, known as the Security Summit, involved the IRS, tax preparation firms, tax software firms, and state tax administrators. Three working groups are focusing on three key issues of authentication, information sharing, and cyber security. The effort also includes verifying identities in tax software, adding security questions, increasing password requirements, and timed locked outs.

For more information on this announcement, please visit the referenced article, or contact Brian McFarren at (231) 726-5815 or bmcfarren@brickleydelong.com.

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On January 1, 2016, there will be a minimum wage increase in Michigan. The increase is part of the Workforce Opportunity Wage Act of 2014.

Effective January 1, 2016:

• Minimum wage in Michigan will increase from $8.15 to $8.50 an hour.
• Tipped employees’ wages will increase from $3.10 to $3.23.
• Minors (age 16-17) rate stays the same at $7.25, or 85% of the minimum hourly wage.

The next increases will happen January 1, 2017 to $8.90 and January 1, 2018 to $9.25.

For more information on the Workforce Opportunity Wage Act, click here. For assistance in your business’s payroll or bookkeeping services, contact Terry Maycroft at (231) 726-5825 or tmaycroft@brickleydelong.com.

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In an October article published in MiBiz, reporter John Wiegand discusses a new scholarship fund for Muskegon County high school seniors that pays for two years of community college.

The goals of the Muskegon Area Promise are to increase the area’s educated workforce, develop talent, and attract new families. The program emulates a similar program in Kalamazoo which has seen an 11% return on investment since 2005.

According to the article, once fully funded, students who graduate from 12 Muskegon County school districts, and maintain a 3.5 GPA will have the ability to use the Promise to cover 100% of tuition and fees for an associate degree or equivalent technical program at Muskegon Community College or Baker College of Muskegon. Students can also choose to take 62 credits of general education, and then transfer to a four-year university.

This scholarship fund will relieve or reduce the burden of paying for college education that many Muskegon parents and students face. Undoubtedly this will lead to more young adults in the area receiving higher education, and an improving workforce.

To read the full article about the Muskegon Promise, click here.

Peter Klein, in a recent article in the Financial Advisor discusses how business owners face distinctive challenges in relation to operating their business and personal expenses.

Seven challenges he addresses are:

• Business owners underestimate their personal exposure to business risk. The risks of business ownership are ever-changing. Owners need to make it a priority to protect their personal assets, especially when dealing with bank loans.
• Business owners double down on market risk.
  Business owners tend to reinvest their money in what they know, rather than countercyclical assets.
• Business owners loot their retirement funds to save their businesses.
  Owners tend to be too hopeful about an economic turnaround. And, if their business is failing, using a retirement fund to save the business makes little to no sense, especially when the fund has special protection.
• Business owners focus on control.
  The tendency to not want to turn business control over to an expert happens many times with business owners. However, turning over control allows for an experienced professional to help overcome barriers the business is facing.
• Business owners often fail to consult with financial professionals to gain a broader perspective.
  Owners may not be aware of market and economy changes like a financial professional.
• Business owners often do not regard taxes, succession and estate planning, which are especially important issues to Baby Boomers.
  Generational transfers are on the rise, and it is important for owners to be aware of tax, succession, and estate planning challenges.
• Business owners often lack awareness about special benefits.
  Business owners and self-employed individuals have tax-deferred savings opportunities that they may be unaware of.

For more information on these challenges, please read the full article. For assistance in overcoming some of these challenges, please contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.

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President Obama recently signed a budget deal that eliminated the “file-and-suspend” strategy used by many married couples.

What is the file and suspend strategy?

This strategy is when a spouse applies for Social Security retirement benefits and then suspends payment in order to trigger spousal benefits. While spousal benefits are being collected, the spouse that applied and suspended Social Security will have their own retirement benefits continue to grow by 8% a year until he or she reaches age 70.

This strategy can lead to a significant increase in Social Security retirement income for couples. There was no warning to the end of this; rather, the Social Security rule changes were slipped into a backroom budget compromise.

What are the effects?

Those who are already 66, or will turn 66 in the next six months, are still able to suspend-and-file under the old rules.

Those who turn 66 after May 1, 2016, will still be able to file-and-suspend, but their spouses and dependent children will not be able to collect benefits unless the primary beneficiary is also collecting benefits.

For more information or assistance on this new law, please visit this article or contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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On November 24, The Internal Revenue Service announced an increase in the de minmis safe harbor limit from $500 to $2500.

What is the de minimis safe harbor?

The de minimis safe harbor rule allows taxpayers to deduct eligible expenditures in the year they were paid or incurred as supplies or repairs, which would otherwise have to be capitalized.

Impact of these changes

This increased threshold will simplify the paperwork and recordkeeping requirements for many small businesses. According to the IRS, they received over 150 requests from businesses and their representatives requesting an increase in the threshold because the $500 limit was too low and provided no relief to the administrative burden of managing capital assets.

This change affects businesses that do not maintain an applicable financial statement (AFS). For businesses with an AFS, the threshold remains at $5000.

The new $2500 threshold will be effective January 1, 2016, although there may be opportunities to apply it sooner.

For more information on this threshold increase, please read the full IRS announcement, or contact Patrick Mutchler at pmutchler@brickleydelong.com or (616) 608-8540.

Read more about our business and individual taxation services here.

Eileen Reichenberg Sherr, in an article in the Journal of Accountancy, discussed how this past summer, Congress and President Obama signed legislation that modified the due dates for several tax returns.

The AICPA has been encouraging these changes since 2006, mainly due to flowthrough entities’ Schedules K-1, Partner’s [or shareholder’s] Share of Income, Deductions, Credits, etc. containing tax return information provided by partnerships and S corporations arriving late. Late K-1s make it difficult to file an accurate return on time, and many practitioners are forced to use estimates to file extended returns timely.

This will create a more logical flow for tax preparers and clients and ease the stress of those waiting for their K-1s to arrive.

To view a chart of the new due dates, click here.

For more information on the new due dates, please read the full referenced article or contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.

Learn about our business taxation services here.