February 28, 2017

The Right Outsourced CFO Solutions for Your Business

Growing companies require more sophisticated accounting processes, financial reporting, and planning services. Existing team members need to become more effective. Hiring an internal Chief Financial Officer (CFO) to manage and adapt to these changes can involve costs beyond just salary, including investments in necessary resources, software and training. Outsourcing CFO responsibilities can be a cost-effective way to get the financial advice and solutions a business needs. To help determine if outsourced CFO services can be of value to your business, below is a list of key questions to consider:

  • Are you considering replacing or adding a full-time CFO, but can’t quite justify the expense?
  • Are you needing more real-time financial information to make critical decisions
  • Are you shifting leadership to focus on business operations rather than daily tasks?
  • Does your accounting department need further training and guidance?
  • Are you ready to understand your position in the market through benchmarking strategies?

If any of the above questions resonate with you and apply to your business, outsourcing your CFO processes may be a great solution. From wading through insurance forms and leases to being a voice of reason when faced with a tough decision, Anders Outsourced CFO Services can provide answers and options with knowledgeable financial insight on your company.

Outsourced CFO solutions can provide…

  • Fewer surprises and more control over your bottom line
  • Help with business plans, processes, and strategies
  • Assistance with budget preparation and long-term planning
  • Improved processes and quality control
  • Assistance with cash management
  • Consultation on systems selection and implementation consultation
  • Appropriate benchmarking strategies
  • A liaison with your banker, attorney, insurance agent and vendors
  • Mergers and acquisitions advice

Outsourcing CFO responsibilities allow you to focus on the areas of your business you do best while giving you peace of mind knowing that your CFO is looking out for your company’s best interests. Interested in learning more? Visit Anders Outsourced CFO Services or contact Anders.

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February 21, 2017

Minimizing Tax Penalties of Inheriting an IRA from a Non-Spouse

When a non-spouse leaves you a traditional individual retirement account (IRA), there are some tricky steps and options that must be followed. One wrong decision with the inherited funds can lead to immediate and expensive consequences, and it can be next to impossible to persuade the IRS to give you a do-over.

The worst thing to do is to cash out the plan, put it in an account and then ask your advisor “Now what?”  At that point, the ship has sailed and you could be in for a hefty tax bill.  So what can you do to lessen the pain?

Options for Liquidating IRA Fund

The money in an inherited traditional IRA must be taken out eventually, but there are a few options for liquidating the funds over a period of time.

Stretch Option
First, the non-spouse beneficiary can choose to take the distributions over their life expectancy, known as the “stretch option.” The stretch IRA allows a younger IRA owner to shelter funds from taxation while watching those funds grow over the years.

Five-Year Rule
Second, the non-spouse beneficiary can liquidate the funds under a five-year rule. This is the default option if the stretch IRA is not chosen. However, this option is not available if the account holder was already over age 70 ½. Then the distribution must be either a lump sum or over the life expectancy of the owner.

Plans are not required to offer these payout options. A plan can mandate either a lump sum payout or the five-year rule. In those cases, rolling the assets into an inherited IRA may permit a longer distribution period.

When to Take Required Minimum Distributions

Non-spouse beneficiaries shouldn’t procrastinate. In order to choose the stretch option, a beneficiary must take yearly required minimum distributions (RMDs) based on their own life expectancy.  There is a cutoff date for taking the first withdrawal. The first distribution must be made by December 31st of the calendar year following the year the owner died.  If you miss that date, you default back to the five-year rule.

The takeaway:  Don’t rush to make any decisions, but be wary that time is running out. In fact, the “stretch option” may not last too much longer. The Senate Finance Committee has recently supported a bill that would end the stretch option for non-spousal inherited IRAs. Stay tuned for any updates on this proposed change.

RMD Requirements

Year of death RMD requirements need to be considered if the deceased was age 70 ½ or older. If the owner of the inherited traditional IRA had not yet taken their RMD in the year of death, the beneficiary has to take it out by the end of the year of death. This can be tricky.  Let’s say your elderly uncle dies on January 24th, leaving you his traditional IRA.  He probably had not taken his RMD yet.  The beneficiary (you) should have ample time to make that distribution by the end of the year.

What if your uncle passes away on December 27th and had not taken his RMD for the year yet?  Even worse, you don’t realize you are the beneficiary until early the next year?  The year of death distribution requirement is subject to a 50 percent penalty.  However, the beneficiary may be able to request a waiver of this penalty if they can show that the shortfall was due to a reasonable error and steps are being taken to remedy the shortfall.

With planning and caution, the inherited IRA tax bite can be lessened and spread out over a period of years.  If you, have recently inherited any retirement funds and have questions, please contact an Anders advisor.

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February 21, 2017

MACRA Quality Payment Program Guide

The Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) is a Quality Payment Program that will affect how clinicians are reimbursed for Part B Medicare claims, starting in 2019.

Most clinicians will fall under the Merit-based Incentive Payment System (MIPS), and earn a payment adjustment, positive or negative, based on evidence-based and practice specialty quality data.

Payments will be impacted in 2019, based on 2017 performance, starting at 4% and increasing yearly.

Data must be collected in 2017 on chosen performance measures and submitted to the Centers for Medicare & Medicaid Services (CMS) to avoid a 4% penalty.

How Adjustments Will Be Determined

The MACRA Quality Payment Program is budget neutral for Medicare dollars, meaning eligible clinicians are competing to be top performers. Data submitted each year will be analyzed and a composite score will be calculated. Based on the composite score, clinicians above average will earn a positive adjustment and those below will receive a penalty, up to the maximum adjustment assigned for that year.

While employed professionals may have some protection in their salary contract initially, formulas for compensation are expected to change from heavy reliance on Relative Value Units (RVU) to quality-based factors.

Who is Affected

  • Medical Doctors
  • Doctors of Osteopathy
  • Doctors of Podiatric Medicine
  • Doctors of Dental Surgery/Medicine
  • Doctors of Optometry
  • Chiropractors
  • Nurse Practitioners
  • Clinical Nurse Specialists
  • Certified Registered Nurse Anesthetists
  • Physician Assistants

In 2019, Medicare has proposed to add more clinical professions such as physical therapists, clinical social workers and more.

Engage for Bonuses

Clinicians strategically prepared for MIPS and achieving exceptional results will be rewarded with an additional bonus in addition to their positive payment adjustment.


The Anders Health Care Group is prepared to assist your health care organization in transitioning into the first year of the program. To learn more about Anders Health Care Group or arrange a meeting with our team, please contact and Anders advisor.

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February 20, 2017

Research and Development Tax Credits for Startups

Research and Development (R&D) tax credits can be valuable for companies who incur R&D costs. Consulting an advisor who specializes in servicing startup companies is always suggested, but this cheat sheet will help get you started.

What is the R&D Tax Credit?

The R&D (Experimentation) Tax Credit is a general business tax credit available to companies who incur R&D costs in the United States. The credit is generally calculated based on a percentage of qualified R&D costs incurred during the year. It’s important to claim these credits even if you don’t think you can benefit this year. Any unused credit can be carried forward for 20 years until it is completely utilized.

New Benefit for Startups

Starting in 2016, startup companies benefit as the R&D tax credit can now be applied against an employer’s payroll tax liability. To qualify, the startup company must be within their first five years of operations and have less than $5 million of revenue. The annual cap on the amount of payroll tax liability that can be offset is $250,000.

As of 2016, the R&D tax credit can now be applied against an employer’s payroll tax liability.

What Qualifies?

There are a wide variety of companies/industries that qualify for the credit. Some examples include:

  • Companies who continually manufacture/research/engineer new processes and products
  • Businesses designing and developing product alternatives and more efficient designs
  • Companies improving techniques, formulas, inventions, and software
  • Businesses that employ engineers, scientists, software programmers, etc.
  • Software development companies and contractors

Qualified R&D expenses may include wages and supplies. Both in-house and subcontracted R&D expenses can be used to figure the credit. However, certain subcontracted expenses yield less credit than others. An Anders advisor can help in choosing a research contractor.

How is the Credit Calculated?

There are two different ways to calculate the credit, the regular method and the alternative simplified method. The regular method requires access to detailed historical records. When allowed, the alternative simplified method is easier to calculate and often the preferred method.

Taxpayers are allowed to amend tax returns to utilize the R&D tax credit. As of recently both calculation methods are allowed on amended returns. Regardless of which method is used, the allowable credit should be calculated by a professional.

More taxpayers can benefit from now permanent R&d tax credit
Until the Protecting Americans from Tax Hikes (PATH) Act went into effect in December 2015, the R&D Tax Credit had always been temporary and part of the annual Tax Extenders Legislation.

The R&D credit is now a permanent tax law, making it easier and more efficient for businesses to do year-end tax planning.

Beginning in 2016, PATH provides businesses with less than $50 million in gross receipts the ability to claim the R&D Tax Credit against the alternative minimum tax (AMT). This is similar to a provision originally enacted in 2010 which benefits a significant number of closely-held businesses and their owners.

Prior Year Tax Benefit

If the R&D tax credit was overlooked on prior year tax returns, not all is lost. Taxpayers are allowed to amend tax returns to utilize the credit.

Partnering with an experienced professional services firm to make informed business decisions is important. The health of your organization depends on it. We understand the startup industry and offer valuable insights on a wide range of issues that impact the growth and visibility of your organization.

To discuss how to increase the value of your startup or arrange meeting with our team, please contact:

Dave M. Finklang, CPA/CGMA, MBA, 314-655-5566, dfinklang@anderscpa.com
Tracy M Hutter, CPA, 314-655-5568, thutter@anderscpa.com

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February 14, 2017

Preventing Construction Industry Fraud with Internal Controls

Implementing and maintaining effective internal controls is one of the best actions a company can take to prevent fraud. The Association of Certified Fraud Examiners recently released its 2016 Global Fraud Study which analyzed occupational fraud cases worldwide. The cases studied in the construction industry had a median loss of $259,000, a 6% increase from 2014.

The most prominent weaknesses contributing to fraud were a lack of internal controls and an override of existing controls. Without effective controls, companies provide an opportunity for individuals to commit fraud. Opportunity, rationalization and pressure make up the three components of the fraud triangle. When all three elements come together, they create an optimal environment for risk.

The study noted areas with the highest risk of fraud as corruption, billing, expense reimbursements and non-cash items. Below are some internal control best practices that address the specific risks in the construction industry:

Corruption:

  • Continuously monitor for unusual employee behavior or unusual employee relationships
  • Implement a mandatory vacation policy
  • Recognize when an individual is living beyond their means

Billing:

  • Have a third party review line items and quantities on pay applications
  • Maintain an organized billing filing system
  • Segregate the duty of billing from processing customer payment
  • Maintain and monitor percentage of completion schedules

Expense Reimbursement:

  • Require approval of all expenses from an appropriate supervisor
  • Require original receipts be attached to expense report

Non-cash:

  • Use security cameras at job sites
  • Secure significant assets when not in use

Anders has assisted many of our clients improve their accounting and operational processes to protect against potential fraud risks.  For help assessing and improving your organization’s internal control environment, contact a trusted Anders advisor.

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February 7, 2017

Stress-Free Financial Statement Guide: Statement of Cash Flows

The third in a series to help entrepreneurs, startups and new business owners understand their financial reports.

Having a good understanding of your startup or new businesses’ financial statements is vital to attracting investors, keeping your company up and running, and driving your growth strategy. Our first blog post in the Stress-Free Financial Statement Guide explored the balance sheet. The second post provided detail on the profit and loss (P&L) statement. The third topic is the statement of cash flows, which shows how your company’s cash balance changed over the period. Since cash is a company’s lifeblood, this report should be of particular interest to early stage companies.

The statement of cash flows shows how the changes in your balance sheet accounts and your P&L accounts impact cash balance. The statement refers to how your company is producing cash (inflow) and how the company is consuming cash (outflow), and is organized into four sections to show how cash is produced and consumed within the company: operating activities, investing activities, financing activities, and supplemental information.

Operating Activities: Operating activities relate to your daily activities such as cash received from sales, cash paid for cost of production such as raw materials, inventory and freight and other operating expenses such as advertising and salaries.

Investing Activities: Investing activities will include cash outflows due to large purchases that would be included in your fixed assets such as land, building, and equipment or payment on loans made with vendors. It will also include cash inflows due to sale of fixed assets or payments received from customers who have a loan. A cash inflow due to dividends received is also an investing activity.

Financing Activities: Financing activities involve transactions related to financing the company such as a cash inflow received from investors (venture capitalist, banks), other long-term liabilities like a line of credit from a bank, or cash outflows such as dividends paid to a shareholder.

Supplemental Information: The final section, supplemental information, relates to non-cash activities. This would include transactions such as an exchange of a non-cash asset for another non-cash asset or converting debt to equity.

Managing your cash is essential to the success of your business. It is vital to grasp every inflow and outflow of cash early on so that no surprises arise as your business progresses. For example, being in budget does not equate with having cash. In the real world, your monthly budget may be in balance; however, expected income may be received later than expenses that are due. Therefore, in the short-term you may have a cash flow shortage.

On the flip side, being profitable does not equate with having cash, especially in the startup phase. For example, many startups will reinvest money back into the business through R&D or fixed assets during their growth phase that may strap the company’s cash flow, even if the bottom line shows something different.

For more information or assistance with understanding your statement of cash flows or other financial reports from previous blogs, please contact an Anders Advisor today. Learn more about Anders Startup and Entrepreneurial Services.

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February 6, 2017

Anders Named 2017 Best Place to Work in Large Employer Category

Anders has been named the 2017 Best Place to Work in the large employer category by the St. Louis Business Journal. This award honors 47 local companies, grouped by size to determine the most employee-friendly workplaces in St. Louis. Nearly 150 nominated companies and their employees completed surveys measuring communication, management structure, benefits, teamwork and more. The March 3 edition of the Business Journal showcases the winners of each category.

Check out the recap of the Best Places to Work Awards, or if you have an SLBJ subscription read the Best Places to Work feature on Anders.

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February 3, 2017

Repair Regulations Tax Savings Receives Another Extension

Businesses and rental property owners knew that time was running out to take advantage of repair regulations tax savings through the tangible property regulations (TPRs). Fortunately for taxpayers, the IRS recently released IRS Notice 2017-6, which extends the time to make automatic change of accounting methods to continue to take advantage of the TPRs. This includes making accounting method changes for repair and maintenance expenses, depreciation, and certain property dispositions. The extension may also present an additional tax savings opportunity for taxpayers who previously made accounting method changes to comply with the TPRs. While this has now been extended the past two years, experts expect this will be the last opportunity to take advantage of the automatic method changes.

For accountants, this additional extension solves the problem that many tax advisors challenged when the tangible property regulation guidance first came out. Tax advisors and their clients complained that the IRS’s guidance was not issued in time for them to fully analyze and comply with the complex rules. Additionally, the IRS continued to change the guidance on the regulations as the filing season went on, which did not help matters.

Catching Up

For taxpayers, this notice allows them to adopt certain method changes more than once in a five-year period, which generally is not allowed. Taxpayers who previously made certain accounting method changes to comply with the repair regulations can file a Form 3115 with their timely filed 2016 tax returns to make adjustments to previous capital expenditures and expenses. This could result in larger Section 481 catch-up adjustments in 2016 for expenses incurred in prior years.

Limitations

The Notice only covers certain accounting method changes that have the biggest effect on the repair regulations, including the following:

  1. From one permissible to another permissible MACRS depreciation method.
  2. The treatment of a disposition of a building or structural component or other tangible depreciable asset.
  3. From expensing to deducting repair and maintenance expenses, including the identification of the unit of property.

For small taxpayers who chose to opt out of the repair regulation changes in 2014, as the IRS allowed, Notice 2017-6 only allows for those taxpayers to go back and pick up expenses incurred in 2014-2016. These small taxpayers cannot go back and pick up pre-2014 expenses via a Section 481 catch-up adjustment, as Notice 2017-6 did not waive the small taxpayer limitation.

Taking advantage of these accounting method changes presents a huge opportunity to accelerate deductions in the 2016 tax year, which could result in permanent tax savings. While no one can be sure exactly what tax law changes are going to happen, the most likely change will be in the form of lower business and individual tax rates beginning in possibly 2017. Contact an Anders advisor to discuss the repair regulations further and see if these changes can affect you.

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