Greg Papineau, Director at BiggsKofford, was featured on the popular Green Apple Podcast. To listen to their interview, click here!

John Garrett, self-proclaimed Recovering CPA and creator of the Green Apple Podcast, interviewed Greg and captioned the following about their discussion:

Greg serves others to create stronger client relationships

Greg Papineau takes service to a whole new level, especially now that he’s a Deacon in the Catholic Church. He was first called to this in 2000 as a chaperone on his son’s World Youth Day visit to the Vatican. Since then, he’s been ordained and in his words, can “marry, bury and baptize”. And, oh yeah, he also happens to be the 1989 Colorado State Champion Cyclist.

In this episode, we talk about how the word “Deacon” is derived from a Greek word meaning “servant”. Greg is always thinking how he can be even more service oriented and also develop a personal interest in clients and coworkers. This leads to a cycling group that meets in the warmer months and team meetings starting where the new staff members tell everyone a little bit about their life outside of work.

To hear their podcast, click here!

The U.S. Department of Labor (DOL) recently released the final rules pertaining to overtime regulations in the Fair Labor Standards Act (FLSA). The final rules raise the salary threshold from $455 a week ($23,660 for a full-year worker) to $913 a week ($47,476 for a full-year worker) effective December 1, 2016.

Neither the FLSA nor the DOL’s regulations provide an exemption from overtime requirements for nonprofit organizations. Further, while ministers are exempt from the FLSA, non-ministerial church staff are not exempt from this new overtime rule simply because they are employed by a church. However, there are limited exemptions under the “enterprise coverage” and “individual coverage” rules that may apply to some organizations.

Generally, hourly workers, workers with regular workweeks of 40 or fewer hours, workers who fail the “duties test” (because they should already be treated as hourly workers), highly compensated workers (those making in excess of $134,004 annually), and workers that meet one or more of the “enterprise coverage” and “individual coverage” exemptions will not be affected by the new rules.

Here are some points to emphasize:

• A worker, exempt or non-exempt, can be paid a salary and still be subject to overtime rules
• Even a worker that qualifies under the executive, administrative, or professional exemption must be paid overtime if his or her compensation is less than $913 a week ($47,476 a year), beginning December 1, 2016
• Overtime for this purpose is considered to be any hours worked in excess of 40 hours per week

The bottom line is that effective December 1, 2016, most salaried workers making less than $47,476 per year (or $913 per week) must be paid overtime for any hours worked in excess of 40 hours per week.

Many options for complying with the new salary threshold are available to organizations. These options include:

• Raise salaries above the overtime threshold ($47,476 per year)
• Pay overtime above a salary for hours worked in excess of 40 hours during the week
• Evaluate and realign employee workload to eliminate overtime
• Adjust employees’ base pay downward and pay overtime

For questions, call BiggsKofford at 719-579-9090 or email Greg Papineau at gpapineau@biggskofford.com.

Take a deep breath. While your financial statement audit may be a requirement, being prepared for your audit is a guaranteed stress-reducer and will help to ease pressure and tension during the process. Take note of the following five tips for a hassle-free audit experience:

Be Prepared and Proactive

Be in contact with your auditor before your assessment. If a list of required pieces isn’t provided to you automatically by your auditor, ask them for a list of items they’ll need during your audit. If you have any questions about any of the items listed, let your auditor know and immediately communicate if you won’t be ready by your agreed- upon dates.

Although surprise is a required element in any audit, you’ll also need to produce some information on the spot. This information could include program reports, expense reports, or journal entry support. Although surprise is necessary, you can still prepare by creating files throughout the year to have all the required information in one, easy to access place.

Have realistic expectations

Expectations for your audit should reflect your contract with your auditing firm. Your contract will outline what the audit will accomplish and your responsibilities. Auditors used to perform “clean-up” accounting work for their clients during the audit—including the preparation of year-end journal entries, fixed asset schedules, and various liability analyses. This is not the case today. These days, professional standards draw a clear line between accounting and auditing services, so your auditor must remain independent of your accounting procedures.

If there are certain tasks you do not understand or cannot do due to a lack of knowledge or expertise, consider hiring a different firm to handle them. If you are fully capable to handle your own processes, then engage your audit firm to assist with certain analyses and adjustment information outside of your audit.

Reduce your risks

Draw up and review your accounting processes guidebook.  Self-assessing inherent internal control weaknesses and determining the necessary internal controls to mitigate such weaknesses is a powerful tool. From there, periodically check to verify that your organization’s policies and procedures are being followed.

If your operations have changed, discuss these developments with your auditor during the year and update your policies and procedure accordingly. Do not wait until the fieldwork begins or there could be a potential delay in your audit process.

Be ready to handle control deficiencies  

Your auditor will apply risk standards during your audit. Auditing standards define and identify deficiencies in internal control, other material weaknesses, and significant shortages. For example, the auditor will look to see if there is more than one person handling cash receipts and reviewing and approving cash disbursements and payroll, a second person authorizing contracts and their payment, and adequate oversight of your checks and balances system.

Keep communications open

Don’t let your annual audit be the only time you talk to your auditor. If you save up all your questions, it’s likely to extend the length of the audit and create more work for you and your auditor. Ask if there are new accounting announcements or changes for the year so you aren’t surprised after year-end. Be proactive in understanding the new guidance and its impact on your next audit and future financial reporting.

Although your audit requires some work, the paybacks are abundant. The audit not only assesses your overall financial condition, but can also identify complications with financial management and financial reporting, which can help to identify ways to reduce risk and strengthen internal controls.

For additional information, contact BiggsKofford at 719-579-9090 or info@biggskofford.com.

Greg Papineau Director Send Email View Full Bio

Deborah Helton Director Send Email View Full Bio

Although Congress averted many of the consequences of a possible tumble over the fiscal cliff with last-minute action, we would like to recap the impact of the bill that was passed.

We have compiled an overview of the key provisions of this new law. We encourage you to review them and call us if you have any concerns about how your tax situation will change as we prepare your returns for this filing season.

• A Tax Increase on the Highest Incomes in 2013. Although most taxpayers avoided a tax increase, rates did rise for top earners. Taxpayers (including those who receive income through partnerships and S corporations) who earn more than $400,000 ($450,000 for married taxpayers filing jointly) have a marginal tax rate of 39.6%. All other existing rates remain the same.

• Higher Capital Gains Rates for Top Earners. The same individuals who are subject to the new 39.6% top rate on income now face a 20% rate on capital gains and dividends, up from 15%. Taxpayers in the 10% and 15% income brackets have a zero capital gains rate and those in the middle will continue to pay 15%.

• Higher Personal Exemptions Phase-out Levels. The phase-out levels for personal exemptions and itemized deduction have been raised to $300,000 for married couples and surviving spouses and $250,000 for individuals.

• Permanent AMT Inflation Indexing. The alternative minimum tax originally was intended to prevent high-income individuals from avoiding taxes. In the absence of a patch for last year, more than 60 million middle-income taxpayers might have been subject to the AMT on their 2012 income. After years of last-minute AMT “patches,” the new law permanently indexes the AMT to inflation starting in tax year 2012. For income you earned in 2012, the exemptions are $50,600 for individuals and $78,750 for married taxpayers filing jointly.

• Restoration of the Full Rate for Social Security and Medicare Taxes. The law did not extend the 2% cut for the employees’ portion of the Social Security payroll tax, which means it will go back to the full rate of 6.2% on income up to $113,700 in 2013.

• Clarity on Estate and Gift Taxes. After years of uncertainty in this area, the new law holds the estate and gift-tax exclusion at $5 million, indexed for inflation ($5.12 million in 2012). The top tax rate jumped to 40% from 35% as of Jan. 1, 2013, but without this change, it would have soared to 55% with a $1 million exclusion amount. The act made permanent the estate tax portability election, which allows a surviving spouse to use a deceased spouse’s unused exemption amount.

• Marriage Penalty Relief Retained. Certain taxpayers filing jointly will no longer have to worry about paying more than if they filed as single taxpayers; joint filers also will enjoy a larger standard deduction.

• Education Tax Benefits Extended. Many deductions for education expenses were set to expire at the end of last year, but they will remain in place under the new law. For example, the law extends the deduction for qualified education expenses through 2013 and retroactively for the 2012 tax year.
• Conversions to Roth Retirement Plans. The new law allows participants in an employer-sponsored 401(k) to transfer any amount to a Roth 401(k) — the funds will be taxed upon conversion.

• Tax Relief for Mortgage Loan Modifications. Taxpayers struggling to pay their mortgages, or whose home values have fallen below their purchase price, were given another year of tax relief on any qualifying “indebtedness income” they may receive as a result of a loan modification or short sale on their principal residence.

• Medicare Surcharge for High Income Earners. Also, taxpayers who have net investment income beginning in 2013 will face a 3.8% surtax on categories of certain unearned income, potentially increasing the total tax rate to 43.4%. This tax was already slated to go into effect as a result of health care reform.  The tax would impact items such as surgery center interests, rental property income, interest, dividends and capital gains to name a few.

Additionally, several popular business tax provisions were set to expire at the end of 2012. For example, small business expensing under Internal Revenue Code Section 179 was increased retroactive to Jan. 1, 2012, and extended through 2013. The dollar limit that can be expensed in 2012 and 2013 is $500,000 and there is a $2 million investment limit. You also can make use of the 15-year recovery period for qualified leasehold improvements, retail improvements and restaurant property until the end of 2013.

We can help you understand the effect that these changes will have on your tax situation. In addition to preparing your return in a way that maximizes your tax advantages, we are also available to advise on strategies and planning decisions that will help you minimize taxes and meet your financial goals. E-mail Deborah here or Greg here.

Leasing and lease renewals are not typically conducted on a level playing field. After all, the landlord is in the real estate business and most doctors are not. By planning ahead and having professional representation, you can negotiate a lower lease rate and receive substantial tenant improvement allowances and free rent.

How does the lease renewal process work?

An important clause found in a standard lease is the renewal option. This allows you to extend your lease for a predetermined amount of time (usually five or ten years) by giving your landlord six to twelve months’ written notice. Renewal options include terms for specific lease rates, concessions such as free rent and tenant improvement allowances, and whether a new base year for operating expenses will be granted. All of these terms are negotiable and play a large role in the financial structure of a lease renewal.

How do I calculate what I am currently paying per square foot?   

Knowing what you are already paying per square foot is especially important if you are thinking about renewing your lease. What you are paying now versus what buildings are leasing for in your immediate area can be vastly different. We have seen a substantial decrease in lease rates over the last two years. The way to calculate your price per square foot is to multiply your monthly rent by 12 months and divide it by your square footage. Keep in mind that NNN or CAM charges (operating expenses for the property such as real estate taxes, building insurance, and common area maintenance) are also calculated the same manner.

What type of cost savings can be achieved through a successful renewal?

If properly negotiated, you can receive significant rent savings and build out allowances. It is very common to start a lease renewal at a lower lease rate than what you are currently paying. As the economy continues to struggle, landlords are offering aggressive concessions and more attractive lease terms to good tenants to keep their buildings leased. The amount of overall savings will depend on the availability of competitive vacancies, the efficiencies of the buildings, the market knowledge of the broker and the broker’s ability to negotiate business points and reduce overall exposure.

What are some common mistakes doctors make during the process?

One of the most common mistakes doctors make is negotiating without the help of a commercial real estate professional, specifically one who specializes in representing healthcare professionals. Some doctors believe they can save money by not using a broker; but to benefit in real estate, you need leverage. Landlords are in the real estate business and negotiate with professional guidance. Selecting an expert to represent you provides the leverage needed to receive the best possible lease terms. Further, landlords are responsible for paying commissions, not tenants, so professional representation is available to you at no out of pocket cost.

Another mistake doctors make when entering into a lease renewal negotiation is not being familiar with their current lease terms and exposure. Prior to contacting the landlord about a lease renewal, you should be well aware of your current lease terms including every option and deadline. As mentioned, most leases contain options that must be exercised within a specific time period, typically six to twelve months prior to the lease’s expiration. If you allow this period to pass, you risk losing all rights outlined in the option, which can cause the negotiations to begin at a disadvantage.

When should the process begin?

As a rule of thumb, you should begin to consider the renewal process 12 – 18 months in advance of your lease’s expiration. This is recommended so that you can compare all relocation options in the market before your current lease options expire. Tenants who miss their lease options incur more risk. Landlords view this as an opportunity to push rents higher as the window of opportunity to relocate closes. If tenants holdover, they often see penalties of 150 to 200 percent of their last month’s rent and can also incur consequential damages if they holdover without permission. The bottom line is that if there is not ample time to relocate if necessary, the landlord has a strong upper hand.

This article was written by Roger Hernandez and Colin Carr, with Carr Healthcare Realty, where they specialize in representing Healthcare Professionals with all real estate needs. They have successfully negotiated over 750 lease and sale transactions. You can reach Roger at (719) 339-9007 or roger@carrhr.com.

Greg Papineau Director Send Email View Full Bio

Deborah Helton Manager Send Email View Full Bio

Year-end tax planning is challenging again this year because of uncertainty over whether Congress will enact sweeping tax reform that could have a major impact in 2012 and beyond. Regardless of what Congress does before the end of this year or early the next, there are solid tax savings to be realized by physicians taking advantage of tax breaks that are in effect for 2011.

We have compiled a checklist of actions for medical practices and individual physicians based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them.

Medical practices and practice owners

Medical practices should consider making expenditures that qualify for the business property expensing options (Section 179 expensing). Among the assets that qualify are tangible medical equipment, computers and off-the-shelf computer software, as well as some leased equipment depending on the terms of the lease.

For tax years beginning in 2011, the expensing limit is $500,000 and the investment ceiling limit is $2 million. Also, a limited amount of expensing may be claimed for qualified real property. This opens up significant year-end planning opportunities.

In addition, consider making expenditures that qualify for 100% bonus first-year depreciation if bought and placed in service this year. This 100% first-year write-off generally won’t be available next year unless Congress acts to extend it. Thus, medical practices planning to purchase new depreciable property this year or the next should try to accelerate their buying plans, if doing so makes sound business sense.

Traditional income tax planning calls for deferring income to 2012 and accelerating expenses into 2011. This strategy makes sense this year since the 2010 Tax Relief Act extended lower rates through 2012 and in most cases you will be subject to the same (or lower) tax rates this year as in 2012.

Physicians should also consider using a credit card to prepay expenses that can generate deductions for this year.

If you have a retirement plan for your practice consider adding a profit sharing option to your plan which could allow an additional deduction on your 2011 tax return for a contribution that doesn’t have to be paid until the due date of the practice’s tax return in 2012, including extensions.

If you own an interest in a partnership or S corporation you may need to increase your basis in the entity so you can deduct a loss from it for this year.

Individual physicians

If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year’s worth of deductible HSA contributions for 2011.

You can realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding and then buy back the same securities at least 31 days later.

If you believe a Roth IRA is better than a traditional IRA and want to remain in the market for the long term, consider converting traditional IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2011.

If you expect to owe state and local income taxes when you file your return next year, consider increasing withholding of state taxes on your last payroll (or pay estimated tax payments) before year-end to pull the deduction of those taxes into 2011 if doing so won’t create an alternative minimum tax (AMT) problem.

When estimating the effect of any year-end planning moves on the AMT for 2011, keep in mind that many tax breaks allowed for purposes of calculating regular taxes (i.e. real estate taxes, state income taxes, miscellaneous itemized deductions and personal exemption deductions) are disallowed for AMT purposes.

You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions.

You may qualify for a tax credit if you install energy saving improvements, such as putting in extra insulation or installing energy saving windows, or an energy efficient heater or air conditioner, in your home before 2012.

Unless Congress extends it, the up-to-$4,000 above-the-line deduction for qualified higher education expenses will not be available after 2011. Consequently, consider prepaying eligible expenses if doing so will increase your deduction for qualified higher education expenses. In addition, since contributions to many state 529 college tuition plans qualify for state income tax deductions you might think about making a 529 plan contribution before the end of 2011.

If you are age 70-and-a-half or older, own IRAs and are thinking of making a charitable gift, consider arranging for the gift to be made directly by the IRA trustee. Such a transfer, if made before year-end, can achieve important tax savings.

Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. You can give $13,000 in 2011 to each of an unlimited number of individuals, but you can’t carry over unused exclusions from one year to the next. The transfers may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.

These are just some of the year-end steps that can be taken to save taxes. It’s possible that tax legislation could still be signed into law before January 1, 2012 extending expiring tax breaks or making other changes for 2012 that would affect your 2011 year-end planning. Therefore, it is critical to review your tax situation with your tax advisor now and make any changes that are still possible before the end of 2011.

If you have any questions, please feel free to contact Greg Papineau, CPA,  or Deborah Helton, CPA.

Information from this article was furnished from an article published by Physician’s Money Digest.