Does your HEALTH PLAN need a CHECK UP?

As a small business, when was the last time you reviewed your health plan to ensure it was in compliance with IRS reporting requirements?  Health and other welfare benefit plans must file a Form 5500 annually unless they are specifically exempt by the IRS.  

The following summary of basic reporting requirements may be the tool you need to give your health and welfare benefit plan(s) an annual “check up”:

1. ______ Did your welfare benefit plan have fewer than 100 participants as of the beginning of the plan year?    (DO NOT COUNT covered dependents, but DO COUNT former employees who are still covered by the plan.) 

If you answered ‘YES’ to (1), see (2) below. 

If you answered ‘NO’ to (1), your plan must file a Form 5500.

2. ______Is your plan any of the following: unfunded, fully insured, or a combination of both?

Unfunded – The employer pays all of the benefits of the plan; there are no employee contributions and/or the employer does not use a trust to hold assets of the plan.

Fully Insured – Benefits of the plan are paid entirely from insurance contracts/policies.  Premiums are paid directly to the insurance company by the employer using employer’s assets, employee contributions, or a combination of both.

Unfunded and Fully Insured, a combination – An IRS example of combination funding would be a single plan that provides both unfunded medical benefits and fully-insured life insurance.

If you answered ‘YES’ to (2), your welfare benefit plan does NOT need to file a Form 5500. 

If you answered ‘NO’ to (2), you must file a Form 5500 for your welfare benefit plan(s). 

Welfare benefit plans that use a voluntary employees’ beneficiary association (VEBA), must file a Form 5500. 

The Form 5500 is due 7 months after a plan’s year end (e.g., a  12/31 year end would need to file by 7/31).   The Form 5500 is an information return, so there is generally no tax due.  However, the IRS does assess penalties for failure to file or for late filings. 

Your CPA is an excellent resource if you need to file a Form 5500 for your plan or if you have questions about the filing requirements.  

Most importantly, remember to give your health plan a “check up” annually. 

Daria A. Cruzen, CPA

80th anniversary fun facts (1992)

In the year, 1992 (sixty years after our founding):

• President George Bush apologizes for his famous “read my lips…no new taxes” quote, then…
• Bill Clinton is elected president in November.
• The first nicotine patch is introduced.
• The Internet Society is chartered, with 1 million host computers connected.
• While the Rodney King riots are happening in LA, John Gotti is convicted in New York.
• Famous deaths: Sam Walton, Lawrence Welk and Fred McMurray.
• The Mall of America opens in Minnesota.
• The average cost of a new car is $16,950 (up 112% from 1982), a house is $122,500 (up 48%), and annual income is $30,050 (up 42%)
• Hit TV shows: Home Improvement, Coach, Full House.
• Musicians topping the charts: Whitney Houston, Madonna, Boyz II Men, Mariah Carey
• Academy Award winner “Unforgiven” (Clint Eastwood); also in the theatres: “A Few Good Men”, “Basic Instinct”, ”Wayne’s World”

Meanwhile, back in Columbus, the historic merger of our two firms is now twelve years old. Three of today’s tax partners (Ron Thomas, Clinton Gilmore and Kris Braxton) begin to establish the next generation of leadership at Robinson, Grimes. The firm also expands its services into the new age world of computer consulting, which it continues today, along with traditional services of tax, accounting, audit and management and personal financial planning. As the country enters a time of economic growth, our firm adds to its strengths to take on the variety of challenges in the fast-paced, ever-changing world of public accounting.

More to come – hope you enjoy!!

Jay Pease - Audit Partner and Firm Historian

80th anniversary fun facts (1982)

In the year, 1982 (fifty years after our founding):

• The following people are born: LeAnn Rimes, Kirsten Dunst, Tara Lipinski.
• President Ronald Reagan declares War on Drugs.
• Barney Clark becomes the first artificial heart transplant recipient.
• The first issue of USA Today is published.
• The first episode of Late night with David Letterman airs.
• IBM releases the PC – DOS version 1.1.
• AT&T is broken up, spinning off the “Baby Bells”.
• Herschel Walker wins the Heisman.
• The average cost of a new car is $7,983, a house costs $82,500, and annual income is $21,073
• Hit songs are “I Love Rock ‘n Roll” (Joan Jett) and “Eye of the Tiger” (Survivor)
• “Ghandi” is an Academy Award winner
•  Also in the theaters: “E.T”, “Tootsie”, ”Poltergeist”

Meanwhile, back in Columbus, Ross Robinson and Keith Grimes are two years into the merger of the two largest accounting practices in Columbus. Employees are getting comfortable with their new offices on Whitesville Road. With 10 partners and 40 employees, it is the largest and most diversified firm in the region. 

Four of today’s partners (Lev Norman, Charlie Johnson, Scott Voynich and Jay Pease) helped establish the foundation of practice philosophy and firm culture 30 years ago, and that still carries on today.

More to come – hope you enjoy!!

Jay Pease - Audit Partner and Firm Historian

Tech Tip: Keyboard shortcuts and Mouse Keys

Have you ever been at home (or even at work) and had your mouse quit working?  For most folks this would result in an eventual “hard power off” of the computer because they aren't able to navigate at all without the mouse!  Admittedly, it’s a challenge in Windows to live without it.

Shortcut keys are handy to know – they can save time in your everyday computer use and can also help in case your mouse ever stops working.  The most important shortcut in the case of a non-functioning mouse is Alt+F4.  This is the universal “Exit” or “Close” shortcut, and you can use it (and any other keyboard shortcut) even if your mouse is working.  Just press Alt+F4 and the current program will behave as if you had clicked the “X” or selected File | Exit.  If your file hasn't been saved, you’ll get the standard prompt to save your work before exiting.  In the situation where your mouse quits working and you want to try restarting your computer, start pressing Alt+F4 to close your programs one by one.  Eventually you’ll get to your Windows desktop, and when you press Alt+F4 Windows will get the message that you want to close, and you’ll then see the prompts about shutting down the computer!

One feature to know in the event of a non-functional mouse is called Mouse Keys.  It’s not something you’d want to use to do all your work, but in a pinch (like when your mouse stops working after you've typed three pages of your best writing but haven’t saved the file yet) it can be a lifesaver.  Once activated you’ll use your numeric keypad to move the mouse cursor around the screen.  It can be slow and tedious, but remember that the alternative is losing your work!  On a full-size keyboard’s numeric keypad*, the “8” button moves the mouse cursor up, the “4” moves it left, the “6” moves it right, and the “2” moves it down.  Once you've positioned your cursor use the “5” button for a mouse click.

To activate the Mouse Keys feature, press Alt+LeftShift+NumLock*. This action will produce a prompt asking you to confirm that you want to turn on this feature.  You can press Enter to accept the default “Yes” answer, or press Alt+Y (since the “Y” in “Yes” is underlined).  Now you've activated Mouse Keys.  To navigate using Mouse Keys as described above, press NumLock and then begin using the keys on your numeric keypad*!  To turn off mouse keys (if your mouse suddenly begins working again) you can press Alt+LeftShift+NumLock again.  You won’t see a prompt this time, but Mouse Keys will be turned off.

*On a laptop, this can be a little tricky, because just pressing NumLock can be a bit of a challenge.  It usually involves pressing a “Function” key and the NumLock key (which doubles as a different key when the Function key isn’t pressed) simultaneously.  Also, since there isn't a numeric keypad on most laptop keyboards, you’ll have to look for the arrow buttons as alternate labels on “regular” keys.

Craig Rhinehart, Director of IT Services

80th anniversary fun facts (1972)

In the year 1972 (forty years after our founding):

1. The following people were born: Shaquille O’Neal, Jennie Garth
2. Richard Nixon defeated George McGovern for President
3. George Wallace was shot by Arthur Bremer
4. Federal Express was started
5. Summer Olympics in Munich was marred by terrorists
6. Bobby Fisher won the world chess championship
7. First major league baseball strike occurred
8. The average cost of a new car was $3,853, a house was $27,600, and annual income was $11,859
9. Hit songs were “American Pie” (Don McLean), “Lean on Me” (Bill Withers), and “Ben” ( Michael Jackson)
10. “The Godfather” was an Academy Award winner.  Also at the theatres were “Deliverance” and “The Poseidon Adventure”.

Meanwhile, back in Columbus… Otis LeMay and Sam Wellborn’s successors, Ross Robinson and Keith Grimes, have grown their accounting practices with the addition of partners Mims Oliver, Lev Norman, Ken Deaton and David Snipes. We are eight years away from a merger that will change the landscape of public accounting in Columbus.

More to come – hope you enjoy!!

Jay Pease - Audit Partner and Firm Historian

Wash Sales – A Clean Explanation

More and more people are trying their hand at trading securities through online websites.  If you are one of those people, the wash sale rule is something you may want to be aware of.

A wash sale occurs when a taxpayer sells a stock or security for a realized loss, and within 30 days before or after the day of the sale (a 61-day period), the taxpayer purchases “substantially identical” stocks or securities.  For example, let’s say I am a stockholder of a popular retail chain named Small-Mart. Small-Mart has had a slow year and their stock is down, so I decide to dump it.  A few weeks later I read they are acquiring a competitor named Jay-Mart.  Jay-Mart is a large, well-managed competitor, so I think the future of the new consolidated company is bright and I decide to look into adding the stock back into my portfolio.  If I repurchase the stock within 30 days of previously selling it at a loss, a wash sale has occurred.

When a wash sale occurs the loss on the original sale is disallowed.  Rather, the amount of the would-be “loss” is added to the basis of the newly purchased stock – essentially deferring it for future recognition.  The acquisition date for the subsequent purchase is adjusted back to the acquisition date of the original stock purchase.   It’s as if the sale and repurchase of the stock never even occurred!

In order for the sale to be considered a wash sale the stock or securities must be substantially the same, which usually means from the same corporation.  Therefore selling off a stock of one computer manufacturer for a loss and subsequently purchasing the stock of another computer manufacturer within 30 days does not result in a wash sale.  However, in cases such as acquisitions or reorganizations (as in the example above) the stocks may be considered substantially identical, depending on the facts and circumstances.  Usually bonds or preferred stock are not considered substantially identical to the common stock of the same corporation – unless the bond or preferred stock is convertible into common stock of that same corporation.

There are some exceptions to the rule that you should be mindful of.  Specifically, stock or securities acquired as a result of a nontaxable exchange, like-kind exchange, inheritance, or divorce settlement do not fall under wash sale rules.

Brad Williamson

Interesting historical tax timeline

Electronic filing of tax returns has been around since 1986.  If you like history, here are a few highlights of our tax timeline.

1862 – 1^st income tax signed into law by President Lincoln to help pay for Civil War expenses.

1868-1913 – 90% of all tax revenue came from taxes on liquor, beer, wine and tobacco.

1894 – The Wilson Tariff Act revived the Income Tax and the Bureau of Internal Revenue was formed.

1909 – Congress levied a 1% tax on corporate incomes greater than $5,000.

1913 – The first Form 1040 was introduced.

1918 – During WWI, the Revenue Act of 1918 imposed a progressive income-tax rate structure of up to 77% to help finance the war effort.

1929 – The income tax rate dropped sharply in post-war years, down to 24% in 1929. 

1932 – During the Great Depression, income tax rates reached 94% on all income over $200,000 in 1945.

1935 – President Franklin D. Roosevelt signed the Social Security Act into law.  This law provided retirement benefits to the primary worker. 

1942 – The Revenue Act of 1942, hailed by President Roosevelt as “the greatest tax bill in American history,” was passed by Congress.  It increased taxes and the number of Americans subject to the income tax.  It also created deductions for medical and investment expenses.

1944 – Congress passed the Individual Income Tax Act, which created standard deductions on Form 1040.

1939-1945 – During WWII, Congress introduced payroll withholding and quarterly tax payments.

1954 – The filing deadline for individual tax returns changed from March 15 to April 15.

1961 – The Computer Age began at the IRS with the dedication of the National Computer Center at Martinsburg, West Virginia.

1965 – The IRS instituted its first toll-free telephone site.

1974 – Congress passed the Employee Retirement and Income Security Act, which gave regulatory responsibilities for employee benefit plans to the IRS.

1986 – Limited electronic filing began. President Reagan signed the Tax Reform Act, the most significant piece of tax legislation in 30 years.  The Act codified the federal tax laws for the third time since the Revenue Act of 1918.

1992 – Taxpayers who owed money were allowed to file their returns electronically.

2003 – Electronic filing reached a high of 52.9 million tax returns, more than 40% of all individual returns.

Source:  IRS website

Rhonda Machalk, CPA