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Back in August of 2022, President Biden issued an executive order that would forgive federal student loan debt for lower income individuals. The program would have provided up to $20,000 in loan relief to borrowers with loans held by the Department of Education (DOE) whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college would have received up to $10,000 in loan relief. 

However, this program subsequently hit a snag when two court cases put a hold on the plan, which was one of Biden’s campaign promises. Those who brought the suits, as well as others, contend the President does not have the authority to forgive the debt, that it is the sole prerogative of Congress. The issue wound up at the Supreme Court which ruled against the plan at the end of June 2023. 

The Biden administration has since turned toward forgiveness under the income-driven repayment (IDR) plans where under the Higher Education Act and the DOE’s regulations, a borrower is eligible for forgiveness after making 240 or 300 monthly payments—the equivalent of 20 or 25 years—on an IDR plan or the standard repayment plan, with the number of required payments varying based upon when a borrower first took out the loans, the type of loans they borrowed, and the IDR payment plan in which the borrower is enrolled. Inaccurate payment counts over the years have resulted in borrowers losing progress toward loan forgiveness, so as part of the new arrangement the records have been cleaned up. This action also addresses concerns about practices by loan servicers that put borrowers into forbearance in violation of Department rules. Under this Biden plan, $39 billions of student debt would be wiped away for approximately 804,000 borrowers in the very near future. 

So, if your student loan debt is forgiven, what are the tax consequences? The Internal Revenue Code Section 61, says that all kinds of income, including earned, found, or won, is income for tax purposes unless specifically excluded. Taking that to extremes, if you find, for example, a $20 bill on the sidewalk while out for your morning walk that is technically income. 

However, the American Rescue Plan Act (ARPA) passed in 2021 included a provision that makes student loan forgiveness free from federal income tax for 2021 through 2025if the loan was one of the following. 

• A loan for postsecondary educational expenses from the federal or a state government or most educational organizations. 
• A private education loan made expressly for postsecondary educational expenses. 
• A loan from an educational organization that maintains a regular faculty and curriculum and normally has a regularly enrolled student body at its facility. 
• A loan from an organization exempt from tax–for example, charitable, religious and educational organizations–to refinance a student loan. 

So, in most cases if your loan is forgiven before 2026 you don’t have any debt forgiveness income to be concerned about for federal purposes. 

But what happens after that? The exclusion could be extended, or it could be allowed to lapse (sunset in tax lingo), which would mean the amount forgiven would be taxable income in the year forgiven, and the tax would be your top marginal rate times the forgiven amount. However, there are a couple of other options that might be available to exclude the income. 

• General Welfare Exception (GWE) – The first is a little-known administrative exception, called the general welfare exception (GWE), which allows some payments to be excluded from income. The IRS has consistently concluded that payments to individuals by government units, under legislatively provided social benefit programs, for the promotion of the general welfare, are not includible in a recipient’s income. Typically, to be excluded, these payments must be to pay or reimburse expenses for essential items such as food, medical, housing or heating costs.

  However, what any individual taxpayer “needs” is a subjective determination, and the IRS has applied the GWE to many different contexts, including education assistance. 

• Insolvent Taxpayer Exclusion – Another option, if the student loan debt exceeds the taxpayer’s assets, just preceding the forgiveness, the insolvent taxpayer exclusion allows a taxpayer to exclude debt relief to the extent the taxpayer’s debts exceed their assets. 

In addition, there are also state tax issues that can come into play where the taxpayer is a resident of a state with income tax. While most states will conform to federal law, there are those that may not, as detailed in a Tax Foundation report. 

With all that said there are other tax provisions that can help a taxpayer pay off their student loan debt.   

• Employer-Provided Educational Assistance – If the taxpayer’s employer has an employer-provided educational assistance plan, that plan can pay tax free to the employee up to $5,250 per year towards the employee’s student loan debt. This provision is available through 2025. 
• Sec 529 Plans – Distributions from a 529 plan of up to $10,000 – a lifetime limit – may be used to pay the principal and interest on qualified higher education loans of the designated beneficiary or a sibling of the designated beneficiary. 
• Employer Matching Contributions – Traditionally, employer retirement plans such as 401(k) and 403(b) plans permit the employer to match employee contributions to the plan based on the employee contributions or elective deferrals. For plan years beginning after 2023, employers may treat qualified student loan payments as elective deferrals for purposes of making matching contributions. Meaning employers can make matching contributions based on their employee’s student loan payments, rather than on amounts that are contributed to the plan. 

If you have any questions related to the foregoing, please give this office a call.    

When you are starting a business there are several possible business entity types that need be considered to make sure you get started off on the right foot and avoid costly mistakes that must be corrected later or those that must be changed later to maximize tax benefits. One also needs to be concerned about potential personal liability. 

Each business entity choice has its own pros and cons; the following is an overview of each possible business structure. 

• Sole Proprietor – This is generally the most basic business entity. It is a single owner entity, and for tax purposes the owner reports the business’ income and expenses as part of their individual tax return, using the 1040 Schedule C. This is simpler than for other business entities where income and expenses must be reported on a separately filed business return. However, that does not mean a sole proprietor cannot have employees and retirement plans like other business entities and qualify for some of the same tax credits and business deductions available to other business entities. The sole proprietor pays income taxes on any net profit from the business, as well as self-employment tax (Social Security and Medicare taxes). 
• Partnership – A partnership is a business entity with two or more owners with equal or different ownership interests in the business. The net profit or loss from such an entity is computed on Form 1065, and the profit or loss and other tax attributes are passed through to the partners on Schedule 1065 K-1 and included on their individual 1040 returns. Like a sole proprietor except the net profit and loss is determined at the partnership level and each partner’s proportionate share is passed through to them via the K-1. The major difference being a partnership agreement is required to establish business policies and how partnership funds are spent. Partners are also personally responsible for all the liabilities incurred by any of the partners. Partners who perform work for the partnership are not considered employees, and therefore, will be responsible for paying income and self-employment taxes on their share of the profits. 
• Joint Venture – Occasionally, a married couple may be in business together. Spouses who file a joint return may elect out of the partnership rules. Thus, when the election is made, a joint venture between them is not treated as a partnership for tax purposes. All items of income, gain, loss, deduction, and credit are divided between the spouses according to their respective interests in the venture, and each spouse considers their respective share of these items as if they were attributable to a trade or business conducted by the spouse as a sole proprietor. Accordingly, each electing spouse will report their shares on Schedule C.   
  • This rule does not apply to spouses who operate in the name of a state law entity (including a general or limited partnership or a limited liability company). The election can be made only for a business operated by spouses as co-owners that is, or should otherwise be, taxed as a partnership (whether there is a formal partnership). Both spouses must materially participate in the trade or business. 

• C-Corporation -A c-corporation is a legal entity that is separate and distinct from its owners. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, and own assets. Domestic corporations in existence for any part of a tax year must file a federal income tax return – generally Form 1120 – even if they do not have taxable income. Unlike some other business entities corporations pay taxes on their profits. Shareholders profit through dividends and stock appreciation but are not personally liable for the company’s debts. This can result in double taxation since dividends paid are not deductible by the corporation, thus taxable at the corporate level and taxable to the shareholder. Shareholders who perform work for the corporation are considered employees.
  • Qualified Small Business Stock – One big benefit for smaller C-corporations is the ability for shareholders to exclude up to $10 million from the sale of stock that meets a five-year holding period and the definition of a qualified small business stock.

  • Section 1244 Election – C-corporations can also make what is called a Sec. 1244 election which allows an ordinary loss (Form 4797) on the sale of stock from a domestic corporation of up to $50,000 annually ($100,000 on a joint return, even if the stock is only owned by one of the spouses), even though the loss would otherwise be treated as a capital loss. Gains still qualify as capital gains. There are several requirements to qualify for this treatment one of which is the stock must be purchased from the corporation. 

• S Corporation – An S corporation is a corporation that makes an election to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes thus avoiding the double taxation issue discussed previously. Form 1120-S is the federal tax return required to be filed by S corporations, and Schedule 1120-S K-1 is used to report each shareholder’s portion of the income/loss, deductions, and credits. Just because an S corporation is a pass-through entity, it does not mean the income can all be passed through to a working shareholder and escape payroll taxes. Working shareholders are required to take reasonable compensation which is reported on Form W-2 (wages).
  • S-Election – The election by a corporation or other entity eligible to be treated as a corporation, must be made no more than 2 months and 15 days after the beginning of the tax year for which the election is to take effect, or at any time during the tax year preceding the tax year it is to take effect. If the election was not made within the 2 months and 15 days prescribed to make the election, then a late election is available if certain conditions are met. 

• Limited Liability Company (LLC) – A Limited Liability Company (LLC) is a form of state business entity. The IRS did not create a new tax classification for the LLC when LLCs were created by the states; instead, IRS uses existing tax entity classifications: C or S corporation, partnership, or sole proprietor (the latter also being termed a disregarded entity). For federal purposes an LLC is always classified by the IRS as one of these types of entities. Regulation of LLCs varies from state to state. The profits, losses, and tax credits from an LLC are passed through to its members (LLC owners are called members, not shareholders), who report them on their individual tax returns. As the name implies, an LLC provides the same liability protection to its members as a corporation does to its shareholders.   

While you might be tempted to determine the right business entity on your own, we strongly encourage you to consult with this office and your legal counsel. The foregoing is only an overview of the possible entity selection and there are a considerable number of issues to consider. 

Marketing efforts today depend on collecting, analyzing and leveraging data to make informed decisions. Therefore, business owners need to understand how to harness the power of data and personalization to create targeted campaigns that drive growth. 

Importance of Data and Personalization in Modern Business 

Businesses today collect loads of data, enabling them to understand their customers’ preferences, behaviors and interests. The data comes from different channels, such as a business website, emails or social media. It is then used to identify patterns and trends to make informed marketing decisions. This yields valuable insights that help craft highly personalized and effective marketing strategies.  

Data is the foundation of personalization strategies. Personalization involves tailoring customer experiences to meet individual interests, needs and preferences. It aims to build strong customer relationships, encourage engagement, and drive revenue and growth.  

Personalization takes different approaches, such as recommendations based on previous purchases, creating unique landing pages, or sending emails based on customer browsing behavior. For example, e-commerce websites recommend products based on user browsing history and search queries. 

Business owners can’t afford to ignore personalization since customers today are more informed, can easily access information, have more options, and have more control over purchase decisions. Furthermore, customers are more demanding and want to be recognized as individuals, expecting to receive personalized experiences. This has rendered traditional, one-size-fits-all marketing strategies obsolete.  

How Businesses Can Use Data and Personalization for Targeted Campaigns and Growth 

Using a data-driven approach, a business can create campaigns that deliver the right message to the right audience at the right time by doing the following: 

1. Audience segmentation

Capturing the attention of a specific audience segment leads to higher conversion rates. To do this, a business can leverage data insights to segment the target audience. This means it is possible to categorize potential customers based on demographics, interests, or browsing behavior.  

2. Crafting personalized content

Once segmentation is complete, it becomes possible to create tailored campaigns that resonate with each segment’s unique preferences. Aside from addressing customers by their names, it involves delivering content that speaks directly to their needs, interests, and pain points. This could include product recommendations based on past purchases or sending targeted offers that align with customer browsing history. 

3. Omnichannel personalization

Customers interact with businesses using various channels, such as a business website, social media, emails, and mobile apps. A business can integrate data and personalization efforts to ensure a seamless journey for customers, regardless of where they engage. Additionally, it is crucial to deliver consistent and personalized experiences across these channels.  

4. Continuous improvement in data-driven campaigns

Data insights also help guide businesses on the most suitable content and distribution strategies. They can analyze types of content performing well and in which channels. For example, a business can conduct A/B testing to compare campaign and content variations to identify the most effective approach for each segment.   

5. Measuring and analyzing results

To establish the effectiveness of personalized campaigns, a business will need to develop clear key performance indicators (KPIs) and measurement methods. One way to measure the impact of personalization is through customer engagement. This is done by measures such as click-through rates on personalized emails, customer retention rates, customer lifetime value, customer feedback, and number of sales.  

It is worth noting that to make the most out of data insights, it is helpful to invest in advanced analytics tools or collaborate with data experts.  

6. Adapting to changing trends

The digital landscape is evolving constantly, with new technologies and trends emerging regularly. Businesses must stay updated on these changes and adapt their personalization strategies accordingly. Remaining flexible and open to innovation ensures that the company’s targeting efforts are relevant and effective. 

Data Privacy and Security 

Although personalization in modern business is crucial, it must be balanced with privacy concerns. First, a business must be transparent about the data it collects and how it will be used. In addition, businesses need to be careful with the data they collect. They must ensure data security by safeguarding data storage and using safe transmission methods; have access control limits; and regularly audit data privacy policies and practices. Customers should be allowed to opt out of data collection and personalization efforts easily.  

Customer data must be well protected to ensure compliance with relevant regulations. It also helps build trust with customers. Besides, a breach of trust can severely affect a business’s reputation and growth. 

You wake up in the middle of the night. Heart racing, drenched in sweat and breathing heavy. Thankfully, it was just a nightmare when the IRS showed up at your doorstep unannounced. Recently, however, this was the reality for some taxpayers – and not just a bad dream. The IRS just publicized a significant shift in policy, effectively ending the vast majority of surprise taxpayer visits. The change comes in an effort to create safer conditions for IRS officers as well as ease public concerns. 

Who’s Knocking at My Door? 

In order to understand the change in policy, you’ll need to understand the three categories of IRS employee that typically interact with taxpayers: Revenue Officers, Revenue Agents and Special Agents. 

IRS Revenue Agents are tax return auditors. They don’t typically show up unannounced. 

IRS Revenue Officers, of which there are approximately 2,300, have duties that include paying visits to taxpayers to collect back taxes and tax returns not filed. They are not auditors but instead focus on collection efforts, including issuing liens and levies. Revenue Officers are the main category of IRS employees impacted by the policy change. 

Special Agents deal with criminal matters and are part of one of the largest law enforcement agencies in the United States. The change in policy does not impact Special Agents. 

Safety 

Why the shift to (mostly) eliminating surprise visits from IRS Revenue Officers? Safety is cited as the main concern. Unannounced visits to taxpayers, whether at home or their business, can be risky. Historically, IRS Revenue Officers faced contentious and sometimes dangerous conditions during their unannounced visits. 

Taxpayer Confusion 

There is also a growing number of scam artists pretending to be IRS agents or officers. As a result, taxpayers are increasingly wary of unannounced visits, and this causes confusion for both the taxpayer and law enforcement. 

The difficulty in distinguishing between IRS representatives and fakes has caused concern for taxpayers already on-guard for scam artists. The IRS believes that maintaining trust among the public will go a long way to maintaining the legitimacy of the organization. 

Appointment Letters In Lieu of Visits 

In place of these previously unannounced visits, the IRS will contact taxpayers through a 725-B letter, more colloquially know as an appointment letter. 

An appointment letter will facilitate scheduling in-person meetings, with the opportunity for the taxpayer to prepare any information and documentation beforehand, allowing for quicker resolution of cases. These meetings occur at a pre-determined time, date and place. 

Limited Visits Will Still Occur 

The policy change does not completely eliminate unannounced visits by the IRS. In “extremely limited situations,” such as serving summonses and subpoenas and the seizure of assets, unannounced visits will still occur. To give some perspective, these types of visits will account for only a few hundred per year compared to the tens of thousands of unannounced visits under the old policy. 

Conclusion 

Unannounced IRS visits are (almost) a thing of the past. They will be carried out only in rare, necessary cases, with most Revenue Officer visits being pre-scheduled. This should ease taxpayer anxiety and make case resolution more efficient.

Looking at expenses for one’s business is essential to reduce cash flow issues. For example, it would show if there’s too much money leaving the business or what type of scenario the business might face if there’s an unexpected and large expense that guts the business’ cash position. Tracking expenses on a monthly basis is one way to determine a company’s financial health.   

Estimating sales by starting with last year’s month-by-month figures is one way to start. Looking at credit and cash sales from a business’ monthly income statements provides historical reference. Examining both fixed and variable past expenses, specifically, is a good starting point. However, it’s important when projecting future sales and reasonable increases to remember that the business could be impacted negatively by a new competitor or positively if one goes out of business.  

Determining when payment will be received is a good way to project cash flow. If it’s cash, then it’s instant and no further calculation is necessary. However, if payment is conducted by invoices, credit lines, etc., businesses are encouraged to perform the Days Sales Outstanding (DSO) calculation. This calculates, on average, how long customers take to pay outstanding invoices.  

DSO = (Monthly accounts receivables/Total sales) x Days in the month 

This is a good way to measure how long customers actually take to pay invoices versus what terms are specified in contracts or invoices.  

Another consideration is to look at fixed and variable expenses. While fixed expenses are just that, fixed, it’s important to monitor variable expenses because they can fluctuate. One example is inflation, which can increase the cost of input materials, salaries, overhead, etc. Depending on the volume of production or sales, electricity, commission or similar costs can also vary. 

Once this information is gathered, the current month’s projected cash flow can be calculated.  

The formula is as follows: (Last month’s cash balance + Current month’s projected receipts) – Projected expenses 

Preventing Bad Debt from Happening Before Collections is Necessary 

According to SCORE, there are many things a business can do to reduce the likelihood of customer debt default and increase cash flow. Businesses can check the credit worthiness of both individual and commercial clients before offering credit to determine the likelihood of defaulting.   

Similarly, if Net 30 is the standard timeframe to pay an invoice, offering a 5 percent discount if it’s paid within seven days is one way to encourage prompt payment. Businesses that get a deposit when signing the contract or before beginning work will generate a more consistent cash flow. 

Operating Cash Flow Ratio Example 

This looks at how easily a company can satisfy current liabilities from its cash flows that are produced from the business’ operations. If there’s negative cash from operations, a business might be relying too heavily on financing or selling assets to run its operations. If earnings are steady, but cash flow from operations is falling, this is a negative indication of a company’s health. It’s calculated as follows:  

(Operating Cash Flow/Current Liabilities) = ($15 billion/$45 billion) = 0.33 

Businesses with an operating cash flow ratio greater than 1 have produced more cash in an operating period than is necessary to satisfy current liabilities. Businesses that have a reading less than 1 did not produce enough cash to satisfy current liabilities. However, further investigation is required to ensure that it’s not taking some of its excess cash to reinvest in projects with potential to create future rewards. 

While there’s no way to predict future cash flow trends, making projections can help businesses compare actual results to projects and adjust their plans more efficiently. 

Sources 

https://www.score.org/resource/article/10-ways-improve-collections-and-cash-flow  

A widow or widower is eligible for a survivors benefit from Social Security even if they never worked – as long as the deceased spouse qualified for benefits based on his or her own income record. Also note that surviving spouses must have been married to their most current spouse for at least the nine months prior to their passing, or for 10 years if the couple was divorced.  

When Can You Claim? 

A widow/er may apply for benefits once she turns age 60; age 50 if she qualifies as disabled or if she is responsible for the care of a child under age 16 (or a mentally or physically disabled child aged 16 or older). However, if the widow/er applies for a surviving spouse’s benefit starting at age 60/50, that benefit will be permanently reduced from the maximum amount available if she were to wait until her own full retirement age.  

What Is Full Retirement Age for the Widow/er? 

For anyone born from 1945 to1955, their full retirement age (FRA) is 66. If born between 1955 and 1959, FRA increases by two months each year from age 66 to 67. FRA is age 67 for anyone born in 1960 or later. 

How Much Can You Get? 

First and foremost, all Social Security beneficiaries receive the highest benefit for which they qualify. Therefore, if a surviving spouse would receive a higher benefit from her own record of earnings than that of the deceased spouse, then that’s the amount she will receive. 

If the deceased was receiving Social Security disability benefits when he passed, the survivor benefit is based on the deceased’s disability benefit.  

Normally, the spousal benefit equals half the benefit of the higher earning spouse. However, the surviving spouse benefit equals 100 percent of what the deceased worker would have received, including any delayed retirement credits he earned by postponing benefits to age 70. 

The minimum surviving spouse benefit at age 60 is 71.5 percent of the available amount. This represents a permanent loss of 28.5 percent of the benefit available at FRA. The widow/er benefit is reduced for each month shy of his or her own FRA, so the closer they get to FRA before applying, the higher the benefit. The amount freezes once they begin drawing benefits, although it will increase incrementally based on cost-of-living adjustments.   

The maximum benefit a widow/er may receive is 100 percent of what the deceased spouse would receive if he was still alive. However, that amount may already be reduced. For example, if the deceased began drawing benefits at age 62 instead of waiting until FRA, then that is the maximum benefit the widow/er is eligible for. If she begins drawing early before her own FRA, that benefit will be reduced further. 

Ideally, the deceased will not have started receiving Social Security before his death. In this scenario, even if he died in his 50s, his maximum benefit is what he would have received at FRA. Now it’s up to the widow/er to time her survivor benefit – she can wait until her own FRA or take a permanently reduced benefit. 

Delay Strategy 

One strategy a widow/er may want to consider is to begin her own benefit at age 62, even if it is less than what she would draw as a survivor. Then she can delay drawing the survivor benefit until it grows higher – ideally the highest benefit at her FRA. 

If the widow/er does not have her own benefit from earnings or can’t live on that amount alone, she may want to withdraw income from other sources, such as retirement savings or an annuity. While that may reduce her overall net worth, it’s important to remember that the Social Security benefit continues for life, so it may be worthwhile to get the highest benefit possible. Other accounts, such as an IRA or 401(k), will stop paying out income once they are depleted. 

If the widow/er has the stronger earnings record, another option is to begin drawing the survivor’s benefit early and delay taking her own benefit until FRA or age 70, to receive a higher benefit for life based on her own record. Once she applies for her own benefit, the payout will increase to the higher amount. 

Seek Professional Advice 

Knowing when to begin drawing a widow/ers benefit can be challenging. The best option is usually based on factors such as other income resources, and even the widow’s health. If in poor health and not expected to live many years, it may be wise to begin the survivor’s benefit as soon as possible. Otherwise, it’s probably better to wait and get a higher payout for as long as she lives. 

Another thing to keep in mind is that if the widow/er doesn’t know the deceased spouse’s FRA benefit at the time of death, she is not likely to find out until age 60. The Social Security shuts down the deceased’s account at death and won’t reveal the benefit until the widow/er is of qualifying age to begin receiving it. It’s always a good idea for both spouses to check (and share with each other) their accrued benefits each year so that they have accurate numbers to plan with in case one spouse passes away. 

Sara joined the RBF team as an intern in early May 2023, working both with the Accounting & Audit and Tax departments. Raised in Boyertown, Pennsylvania, she is a rising sophomore at Lebanon Valley College (LVC) where she is majoring in Accounting. Sara’s internship ended in early August when she left the firm to play with the LVC field hockey team in Spain prior to the start of the academic year.

We talked to Sara about what inspired her to pursue accounting, what a typical day as an intern looks like, and what drew her to working at RBF.

What inspired you to study accounting?

I’ve always loved numbers and math. I took AP Statistics in high school and fell in love with crunching numbers. I also did a science fair project about baseball statistics in high school and really loved it. I fell into the business side after taking business electives in high school. My guidance counselor encouraged me to take an accounting elective, and that made me realize that accounting was something I might want to do.

I really enjoy it because some aspects of it are simple, and some are hard – it’s like a puzzle.

What does your role as an intern at RBF entail?

One of the best parts of my internship with RBF is getting to see the concepts I’ve learned in my accounting classes in action. I’ve had the chance to go where the work is, learning from both the tax and audit teams. It’s been really fun to get to do something different every day.

I’ve been able to work on different types of tax returns, which was eye-opening because I haven’t taken a tax class yet.

On the audit side, I’ve done field work and audit preparation. I’ve also been able to shadow people in the office. Everyone at RBF is so nice and willing to help.

What does a typical workday look like for you?

On a typical day, I get to the office around 9am. I check email and see if there are any tasks in my inbox. Once everyone gets to the office, I check in with Matt, Sean, or Jessica, and get tasks for the day. It might be field work or preparing a tax return. After lunch, I finish any tasks that need completing.

What are some of the most challenging things you deal with in your role?

The most challenging thing for me was working with clients, especially new clients. There is historical data on most of the firm’s audit and tax clients, like past years’ returns or past audit reports, and without that information, it was challenging to compile new information.

What is your favorite part of your internship?

Getting to work on something new every day. There are different tasks that challenge me. It’s awesome that I have this opportunity. During my first year, I started to doubt if accounting was something I wanted to do because my course load was much harder than my friends. This internship has made me solidify my choice that accounting should be my major, and I’m excited to have a cool career in the future.

What drew you to RBF as a place to intern?

I first heard about RBF at an accounting job fair at LVC, where I met Sean and Jacob. Talking to them made me feel like they’d be willing to work with me and help me figure out what I’d want to learn. I like that it’s a smaller firm because when my professors talk about the Big 4, it would intimidate me. I was also really interested in the work they do with non-profit organizations.

RBF has helped me figure out what I wanted to learn. They’ve also been flexible with my schedule because I live an hour away, and they were open to me doing a summer internship when they were initially looking for spring interns.  Plus, everyone here is really nice.

What advice would you give to students looking to intern with an accounting firm?

If you were hesitant about pursuing accounting, try to get an internship for the summer. Even if it’s not an internship, even if it’s just shadowing – building your connections with accounting firms is a wonderful opportunity.

If your school offers accounting fairs, those are great. They will open your eyes to local firms that might be hiring.

Also, have a lot of confidence when going into your major and your internship. I struggled with confidence in my first year of school, but my internship showed me I know what I’m doing! You know more than you think. You can do it!

In light of our current economy, making sure your money works hard for you is one of the best things to do this year. Here are some ways you can navigate your financial situation, keep tabs on where you are and adjust if you need to. 

Shop for a higher return on savings. These days, every extra cent counts. That’s why it pays to look around for higher rates on savings accounts. Several places to check out are PNC (4.65 percent APY); Sofi (up to 4.4 percent APY); and American Express (4 percent APY). Here’s a few others. Rates may increase even more with the Federal Reserve’s rate hike announcement on July 27. 

Open an HSA account. When you have one of these, it will help you pay for expenses that your health insurance plan doesn’t cover. If you are enrolled in a high-deductible insurance plan, you and possibly your employer can contribute pre-tax dollars into this account, from which you will use funds you’ve stocked away for qualified medical expenses. Whatever money you don’t use will roll over to the next year, unlike FSA accounts.  

Consolidate debt. Why pay a bunch of different interest rates on all your credit cards? If you have debt, find one card with a very low interest rate and do a balance transfer. Some credit cards offer 0 percent APR as an introductory rate, which will be a big savings to get a jumpstart on becoming debt free. Here are a few good ones: Bank of America® Travel Rewards Credit Card now offers 0 percent APR for 18 months. Discover it® Cash Back offers 0 percent APR for 15 months. Find other great deals here. 

Cut how much you pay on car insurance. Have you shopped around lately? We know this might seem like a pain, as it takes a lot of time, but here’s some good news, and it’s called The Zebra. This amazing site has done all the heavy lifting for you. Here, you’ll find dozens of real-time comparisons from many trusted companies. 

Max out your 401K. This year, the maximum yearly contribution limit has been raised by $200 to $22,500 (up from $20,500 in 2022). Even better, if you’re over 50, you can set aside catch-up contributions of $7,500, allowing a total contribution of up to $30,000. This allowance lets older workers add as much as they can, so that when they retire they’ll be in a better financial situation. 

Update your W-4. No one likes a shock when it comes to paying taxes. That’s why this is such a smart idea. And the IRS actually has a tool that can help you: The Tax Withholding Estimator. Go here to find out if your employer is taking enough money out for taxes. If you’re falling short, you’ll know. Better to learn and fix this before it’s too late. 

Create a net worth statement. When you have a realistic idea of your assets and liabilities, you will be able to see whether or not you are on the right track with retirement. This way, you’ll be able to set up new goals for yourself if you feel you need to.  

Keeping up with your finances, while time-consuming, really pays off. If you try one (or all) of these hacks, you’ll be better off in no time. 

Sources 

https://www.moneytalksnews.com/slideshows/15-of-the-best-money-moves-you-can-make-in-2021/ 

According to the Internal Revenue Service (IRS) and the National Federation of Independent Businesses (NFIB), almost one-third of companies see penalties due to payroll issues. Understanding a few examples, according to the NFIB, of how companies can better comply and avoid penalties is essential to smoother operations. 

Underpayment of Estimated Tax by Corporations Penalty 

As long as there’s a reasonable expectation of at least $500 in estimated taxes owed, corporations are required by the IRS to file. If, however, a corporation doesn’t satisfy its estimated tax payments or pays them after their quarterly submission deadline, the IRS will assess penalties. This can occur even if the IRS owes filers a refund.  

The IRS recommends the easiest way to avoid the penalty is to pay the quarterly estimated taxes by the 15th day of April, June, September and January of the following year (the following month after each quarter). If the 15th is on a weekend (Saturday or Sunday) or it’s a legal federal holiday, payment would be due on the next regular business day.  

When it comes to assessing penalties for underpayment of estimated taxes, the IRS determines the penalty based on how much estimated taxes are underpaid, the time frame of when the payment was due and underpaid, and the IRS’ current quarterly interest rates. 

Based on 2023’s third-quarter data from the IRS, the federal agency charges a 7 percent penalty annually, compounded daily.  

Failure to Deposit Penalty 

Another payroll tax mistake businesses may make is the Failure to Deposit Penalty. The NFIB reported that nearly 50 percent of small businesses see fines on average of $850 annually because they’re late or missing payments. In order for businesses that must make employment tax deposits, it’s imperative to do so either on the IRS’ monthly or semi-weekly basis.  

Required employment tax deposits cover Social Security, Medicare and federal income taxes, along with Federal Unemployment Tax. Employers on the monthly route are required to deposit employment taxes on payments for the prior month by the 15th of the following month. For the semi-weekly route, deposits for employment taxes on payments made between Wednesdays and Fridays are to be made by the following Wednesday. For deposits done on a Saturday, Sunday, Monday or Tuesday, employment tax deposits must be made by the following Friday.  

Beginning with the due date of the employment tax deposit, the penalty is calculated by the number of calendar days the deposit is late.  

Between one and five calendar days, there’s a 2 percent penalty on the unpaid deposit. Between six and 15 calendar days, the penalty increases to 5 percent of the unpaid deposit. If it’s late by more than 15 calendar days, the penalty is 10 percent of the unpaid deposit amount. 

If more than 10 calendar days has passed after the first written contact from the IRS notifying the filer of failing to deposit their employment taxes, or the day the business receives correspondence requiring immediate payment of employment taxes, the penalty increases to 15 percent of the unpaid deposit. It’s also subject to interest on the penalty. 

While these are only two ways businesses can incur payroll related tax penalties, it’s illustrative of how businesses need to keep on top of their federal (and state) obligations. 

Sources 

https://www.irs.gov/payments/failure-to-deposit-penalty  

https://www.irs.gov/payments  

https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates  

https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2  

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty  

https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-third-quarter-of-2023  

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty  

https://www.nfib.com/content/partner-program/money/are-you-guilty-of-committing-these-5-payroll-mistakes/   

When a company decides to conduct a reverse stock split, also referred to as a stock consolidation, the number of shares available to investors is reduced. 

In a normal (forward) stock split, a company increases its number of outstanding shares without changing their market value. For example, one share of stock valued at $200 may split into two shares, with the shares then valued at $100 each. So, with a shareholder who holds 10 shares for a total of value of $2,000, a traditional one-to-two (1:2) stock split would change his holding to 20 shares – still valued at $2,000. The difference is that the value of each stock would change from $200 to $100. 

The opposite occurs with a reverse stock split; a company decreases its number of outstanding shares without changing their market value. Using the same example, a shareholder who owns 10 shares at $200 would hold only five shares after a 2:1 reverse stock split. However, the worth of each share would double in value to $400. 

Why Conduct a Reverse Stock Split? 

A reverse stock split often indicates that a company is in financial distress, its stock price is on a downward spiral and it wants to reverse that momentum by giving investors a higher share value. This makes individual stocks more valuable to sell. In many cases, the company’s sinking stock price puts it in danger of losing its place on a stock exchange, which would then limit the pool of possible buyers – particularly fund managers and stock brokers. In most cases, companies that conduct a reverse stock split are small, lightly traded companies as well as some exchange-traded funds. 

Impact on Small, Retail Investors  

Smaller investors are more likely to be negatively impacted by a reverse stock split because they are more likely to own fewer numbers or fractional shares. For example, if a company conducts a 20:1 reverse stock split, investors receive only one share for every 20 they hold. However, if a shareholder owns less than 20 shares, he will simply be paid cash for his shares and his position would dissolve. This also holds true if the investor owns an uneven multiple of the reverse split. In the scenario of a 20:1 stock split, if the investor held 110 shares, he would receive five new post-split shares and be paid in cash for the remaining 10 shares. 

How Do Stocks Perform After a Reverse Split? 

While the total value of a shareholder’s holding would not change after a reverse stock split, history has shown that share prices after a reverse split tend to stagnate or continue to drop. After all, the company was likely already in financial distress, and this action serves to increase the price of a failing stock. It does not usually entice new investors or motivate current ones to invest more money in the company. 

Potential Advantages and Disadvantages of Reverse Splits 

To remain listed on a major stock exchange such as the NYSE or Nasdaq, a company’s share price must trade at $5 or higher. The advantage of a reverse stock split is that it increases the value of shares, which may allow them to remain listed on a major exchange. This offers value to both the investor and the company, as exchanges attract far more investors whose interest can help drive up the stock price. 

Another scenario in which a reverse stock split is advantageous is if a corporation is planning to spin off a portion of its business into a separate company. By conducting a reverse stock split before the spinoff, shares of the new company are assured to have a high enough stock price to be listed on a major stock exchange. 

However, a reverse stock split is most often a signal that the company is failing, is worried about a pervasive decline in its stock price and is seeking a way to artificially increase investor share prices.