welcome and thank you for joining thewebinar today. my name is amanda jadro. i'm a portfolio manager with tricom. asan administrative and financial services provider to the staffing and consultingindustry, it is our philosophy to be an active member of the staffing industryby staying abreast of the ever-changing marketplace. for that reason, tricom ispleased to launch the industry insider webinar series designed to share ourexpert knowledge and resources with our fellow staffing industry colleagues. one of our core values is to build relationships and become a leadingresource to staffing and consulting firms nationwide. our presenters todayare bj hoffman, michael kline, and brett
dubin. bj is a tax partner with over 23years of experience in the areas of audit, tax, litigation support. he servesclients in a wide range of industries including closely-held entities in staffing healthcare and franchise, as well as law firms. michael, a tax partner,has more than 30 years of experience providing a wide array of tax andconsulting services. leading the philadelphia offices tax service group,he serves as an advisor to clients in a range of industries including healthcare,manufacturing, distribution, staffing, real estate, and technology. he also heads thefirm's tax quality control committee. brett is a partner in the firm'sphiladelphia office and provides audit,
tax compliance, and consulting servicesto clients and a wide range of industries with a concentration offinancial services, retail, staffing, medical, and legal firms, as well as realestate. he has deep expertise in representing clients in front of the irsas well as state and local government agencies. citrin cooperman is among thelargest, nationally recognized, full service accounting, audit, tax, andbusiness advisory firms in the united states, currently ranked in the top 25.with locations across the northeast, citrin cooperman has steadily built its business serving a diverse and loyal clientelesince 1979. their daily mission is to
help clients focus on what counts. theyenhance the business and personal lives of their clients through a customizedapproach which includes offering a wide range of assistance, assurance, taxand business advisory services, including forensic services across the globe.citrin cooperman has deep experience in a variety of industries includingentertainment, financial services, franchising, health care, private equity,real estate, staffing, and technology. citrin cooperman is an independent firmassociated with moore stephens international limited. appropriateyear-end planning coupled with tailor-made tax strategies should bedesigned with your specific business in
mind to capitalize on tax code laws,reduced tax liability, and maximize business profitability. intoday's industry insider webinar session we will cover: year-end tax planningstrategies in light of recent legislation, prospective business andtax plans for the incoming administration, a briefing on the newdepartment of labor overtime regulations. rest assured by the end of this sessionyou'll be prepared for year-end planning. if you have any questions during thepresentation please utilize the q&a feature, which is located on the righttool bar. after the presentation there will be time for questions and anopportunity for you to give us your
feedback on today's webinar bycompleting a short exit poll. please join me in welcoming bj. thanks a lot amandaand good afternoon to everyone that's joining and many thanks for thatintroduction and to tricom funding in general. you guys are a pleasure to dealwith. we've worked together with many staffing clients over the years andreally just a great firm. so as amanda mentioned, just a quick littleadditional insight on citrin cooperman. we are a full service accounting firmwhich generally means that we provide audit, tax, and business consultingservices. we do have a particular focus on the staffing industry and in fact webelieve that we provide more accounting
services, tax services, and consultingservices to the staffing industry than any other accounting firm in the country.currently we provide service to more than 150 staffing firms of all shapesand sizes, everything from startups to $8, $900 million in revenues,so really across all boards and across geography of the country as well. we doin addition to the tax work, we provide audit services, m&a merger andacquisition, consulting, profitability, benchmarking, consulting. we performindustry surveys and distribute them and we serve on staffing association boardsand are very active in all the conferences and national conferences sowe have a deep understanding of the
staffing industry and we're verycommitted to the industry. today though the focus of our discussion will be onincome taxes, specifically income tax planning and i'm joined of course by mypartners in philadelphia here, michael klein and brett dubin, both tax partners.michael's the head of our tax group here in philadelphia and each of them spendsa great deal of time in the staffing space with me. so with that just a broadoutline we're going to talk about the election and potential tax plans thatcan be taken and brought to bear with the new administration in mind, we'lltalk about some of the actually enacted 2016 tax changes, speak to some year-endplanning ideas, and we're going to also
touch on a slightly unrelated topic ofthe overtime regulations that are coming into play very, very soon that will bekey to many of you. so with that let's start with the election and i meanthis section to certainly be an open session with my colleagues, more of aroundtable. there's a lot of uncertaintyhere with the tax, a plan that's been put forth by the trump administration.the trump plans, which you'll see outlines here, are really just a startingpoint. we contemplate that there will be a lot of give and take between the trump administration and congress. in general terms some of the outlined proposals are unlikely to take
effect but are starting points fornegotiations, but i think that from an overall perspective one might assumethat in a broad sense tax rates will be declining in future years so that shouldbe perhaps our guide for enacting tax planning techniques so with that justsome some points that we can talk about on the trump proposal. the first thingtrump is proposing is a reduction in the number of tax brackets. currently there's7 tax brackets out there ranging from 10% to a low 10% to a high of 39.6%. trump is proposing that we move to 3 brackets,12%, 25% and 33%. so our top rate if trump had hisway would drop from 39.6%
to 33% and that 33% bracket would kick in for married at about $225,000 oftaxable income. so as you can see the rates will drop which should meanoverall tax burdens drop but there's some offsetting provisions also thatmight serve to increase taxpayers' tax liabilities. hey bj so it's michael klein.just wanted to jump in there an interesting fact if you look at thebrackets again you'll notice that for some americans the lower earning taxpayers in america are actually going to have a tax increase ifyou just look at the brackets, under the current plan the highestrates... the lowest rate is 10%.
under the new plan if it were to gothrough the lowest rate would be 12% so there's a potential for a taxrate, a tax increase for lower earning individuals or americans which issort of contrary to what this plan is proposed to be attemptingto do. yeah that's interesting it certainly hasn't been highlighted to date,but that is an interesting nuance here with these brackets. capital gains,currently they're taxed at either 15% or 20% depending onwhere your income level is. trump's proposing that that stay that rate forcapital gains stay constant but the 20% capital gains rate wouldkick in for income in excess of
$225,000 forthose that are married which is a lower threshold, michael, than we're currentlyseeing correct? right now a little over $400,000 to have the 20% kick in... so the higher rate kicks in at a lower levelwhich is essentially would be a tax increase right? yes, another interestingpoint. many of us are used to having their itemized deductions, writing offcharity and taxes and mortgage interest and essentially there's an unlimitedamount that one might deduct under the current tax structure. trump has putout there that itemized deductions would be maxed out at $200,000 for married or $100,000
for singles, so in other words if you hadmore than $200,000 if you're married and have more than $200,000 of itemized deductions you'd be limited to claimingonly $200,000 of itemized deductions. now that doesn't affect most of us butcertainly for the ultra high-income taxpayers that may have huge amounts ofcharitable contributions, that would serve to limit the value of thosemajor, major charitable contributions i suppose. there is some, you know,prior to the trump proposal there was bipartisan support to limit itemized deductions, it was gone... it was previously... congresswas looking at both the republicans and
the democrats had agreed in principle tolimit itemized deductions based on the tax rate or the tax benefits so they weregoing to limit the deductions to 28%. here this is muchmore restrictive because it actually limits it to a dollar amount. sothere's a huge difference here but still in line with the congress'sattempt to limit itemized deductions in some form. on the point of overall taxsimplification, especially for those with lower incomes, the next point is anincrease in the standard deduction from $12,600 to $30,000 for married taxpayerswould ultimately serve to you know simplify the tax preparation for lowerincome taxpayers, they wouldn't have to
worry about itemizing and in fact iftheir taxable income was really before the standard deduction was lower than$30,000 they wouldn't have any tax liability at all so thatpoint speaks to overall tax simplification. there are some otherpoints of simplification, the elimination of personal exemptions which are slightlyover $4,000 currently per individual and other tax simplification proposalsaddress the dreaded amt or the alternative minimum tax, which is forthose of you that don't know, essentially a shadow tax system that lies behind thetraditional tax computation. it certainly serves to make taxpreparation more complicated and tends
to hit those upper middle classtaxpayers who have income in the range of $250,000-$450,000 of income eachyear, it serves currently to limit the value of some of their itemizeddeductions. so trump is proposing with the amt be eliminated but it is a bigrevenue generator for the government so the question remains, if you eliminate the amt and drop some of these tax rates currently atnonpartisan tax foundations estimate that that would increase the federaldebt by $5 trillion over i believe a ten-year period, so it reallyunderscores the notion that you know everyone loves tax reductions but youstill have to pay for tax reductions and
how are you going to get this throughcongress? so there's major questions about this plan.further, the estate tax which really only affects 0.2% of the u.s.population essentially affecting those with estates more than $5.5 million dollars, really for $10 million for those that aremarried, the state tax would be eliminated which would make the superwealthy happy. of course there still may be in-state inheritance taxes that arein play even if the federal estate tax is eliminated but certainly that's beena target for the republicans for a long long time to get rid of the estate tax.now the next point which is more on
point possibly too many of you staffingcompanies is the corporate tax rate, so there's been some a. uncertainty and b. asort of a moving target element here on this point. there's areal lack of clarity. first of all for those of you that are c corporations,which is probably not many of you, the maximum corporate rate is proposed to be15% for c corporations at this point in time. for those of you thatare s corporations or pass-throughs like llc's, initially there was some talk of amaximum tax rate on that business income of 15% and when we allinitially saw that we were looking at each other thinking, wow that's a majormajor tax cut for most business owners.
in reality this has been a pretty vaguepoint and there's now this notion out there from the trump side that the15% tax rate may just apply for earnings that areretained at the business level and that there might be an additional tax imposedon distributions from your business entity to the individual, so that wouldbe more akin to the double taxation that's in existence for c corporations. idon't know, michael, if you want to add any insight to that but certainlyit is a moving target and what we originally thought might be a huge, hugetax break for businesses might in fact not be much of a tax break at all. yeahi think what
trump is attempting to do with thisproposal is which is really to help small businesses that are using profitsto funnel them back into their own business and buy only on taxingundistributed earnings at 15% it allows a small business topay less and conserve cash and be able to continue to fund the growth oftheir company. with a mature business that's distributing almost allof its profits, this won't have much of an effect because of this secondary tax that's being proposed on the actual distribution of the profit, soi mean i view this as you know i was thrilled when i saw because citrincooperman is a partnership and it would
have been a huge tax break for the threeof us for us. right. however, i don't know as i started to read into the proposal ibecame a little less enthused about it than before but it will be slightlymore complicated for people in our profession to be able to track the theseamounts: how much is distributed and how much is undistributed? but clearly iview this is something helping the small business as opposed to the fully matureflow-through that a lot of our clients are already. i think it's goingto benefit more corporations, big c corporations, to be more competitive withthe rest of the world where our top corporate rates are a lot higher thanmost other developed countries. i think
the idea is to kind of lower ourcorporate rate to be more competitive with countries around the world. exactly, soyou know if i am a staffing company owner that is either an s corp or an llcthis is where i want to focus my attention in the coming months,especially when the new congress comes in in january, to see what kind ofmovement there is between trump's proposed plans and what may come through or be approved in congress. again as it stands what we've just outlined to youwould serve to increase the u.s. deficit by $5 trillion or the debt by$5 trillion, so it's hard to believe that congress will really signoff and give a green light to this
plan you know these proposals as writtenhere so i think that this just bears watching and truly is a moving targetmoving forward. so i hate to be overly speculative because we don't knowwhat's going to happen in 2017 but again it is fair to say that tax ratesshould be coming down and tax burdens should be coming down somewhat for most taxpayers, especially i would think business owners, but again a lot ofuncertainty here so with that we can sort of finish speaking to what may beand there are certain things that we do actually know for 2016 so brett if you want to take that and run with the 2016 tax update that would begreat. yeah so there have been some
permanent tax law changes for 2016.these laws were passed by congress at the end of 2015 with the path act andthat's the protecting americans from tax hikes, so what we're going to do is focuson the provisions that are most applicable to staffingcompanies and a big one here is the section 179 expensing. section 179 allowsfor the immediate deduction for purchases of property equipment, sostaffing companies you might buy a lot of furniture, computers, and equipment.before this permanent extension you're only allowed to deductyour first $25,000 of new fixed asset purchases. with thenew path act you're able to deduct $500,000
as long as you spend under $2 million of new purchase and new capital invested duringthe year which most small businesses do. so the strategy here is that if you know you're going to need to buy new computers or early in 2017 new furniture,it might pay to make these purchases in 2016, place them in service and you'llget the full deduction for it now, especially if you think that it lookslike tax rates are going to go up in the coming years, while rates seem to be ashigh as they'll ever be or at any time in the near future it might be worth itto buy furniture and equipment that you know you're going to need in theupcoming year and purchase it now and
get that deduction up front in 2016. andthere's also some other business incentives that were made permanent bythe path act. their first one is shorter recovery period for leaseholdimprovements. leasehold improvements were typically depreciated over 39 years. withthe path act it made it permanent extension that now you can depreciatethese leasehold improvements over a 15-year period of time, so you can take adepreciation expense like twice as fast as you're able to take before. the secondpoint is the recognition period for s corporation's built-in gains tax. this wasa previously a 10-year period and now it's been reduced to 5 years and thisis the period for which an s corporation
must hold its assets following aconversion from a c corporation to avoid this tax, so this really is onlyapplicable if you started out your business as a c corporation and thenlater converted your c corporation to an s corporation. you typically before had to hold on to those assets for at least 10 years or you would have to pay thisadditional built-in gains tax which can be as high as 35%. sothis is an obstacle for a lot of companies but if you were ac corporation that later on became a s corporation, this is something to lookinto and keep in mind. next point is theshareholder's basis reduction for
charitable donations for a s corp. thereused to be a disadvantage in prior years that if you were a shareholder in scorporation and you donated appreciated property, you wouldn't be able to get thefull charitable donation deduction on your personal return due to like at-risklimitations, so this new rule passed in the path act kind of eliminated that so nowshareholders can get a full deduction for this type of charity. andthe last one is the r&d credit. there's many eligible small businesses, you canuse this credit now to offset regular tax as well as payroll tax and in thestaffing world, if you have if you develop your own internal softwarethis will qualify for your r&d credit
for federal purposes. so this is where wesee mostly in our clients that in the staffing industry, any staffing companiesthat develop their own software were eligible for this r&d credit. it wasgoing to expire and with the path act, it extended it permanently so you were stillable to use the r&d credit. so those were some of the key provisions thatwere extended permanently. there are some provisions that they extended for fiveyears and not permanently. the big one for that we see for our clients andstaffing companies is the bonus depreciation. bonus depreciation is theadditional first-year depreciation of purchases of new property and equipmentsuch as computers and furniture, so if
you purchase furniture, equipment in year2016 you would get an immediate 50% deduction on that purchase ofthat equipment. so the 50% rate was... it was going to go to zero and thiswas going to be eliminated, path act extended it for five years but thepercentage goes down. in 2016 and 2017- 50%. in 2018 you only get a 40% deduction and in 2019 it goes down to 30%. and the last one, this slide is the wotc- work opportunity taxcredit. and this has been extended for five years, and this is a big deduction,a big credit for the light industrial staffing companies. this credit wasavailable to employers who hire and
retain veterans and individuals fromother target groups with significant barriers to employment, but what the pathact did was extend this to unemployed workers. so if you hire any unemployedworker they have to have been unemployed for more than 27 weeks to qualify, but ifthey have been unemployed for more than 27 weeks, you're eligible forthis wotc tax credit and this could be as much as $9,600 per employee.that's calculated up to 40% of the first $24,000 ofwages, so you can see if you pay someone $24,000 who's been unemployed, you get acredit for $9,600 against that so it's a huge credit that many lightindustrial staffing companies take
advantage of and that's been extendedfor another five years and this unemployment portion of it has just beenadded for the year 2016. so just to jump in again, to those of you thatmake regular practice of hiring in the light industrial space and other spacesas well, be sure that you are taking advantage of the work opportunity taxcredit. if you're not, you should certainly speak to your accountant aboutit. it's... you know it can be a gold mine and is really important to takeadvantage of if you have a workforce that's eligible. the next thing, the lastslide we have here is just the key business deduction for small businessesstaffing company is the automobile
expense, so we just want to highlight for2016 the standard business mileage rate is 54 cents. it's down a little bit fromthe year before, which was 57.5 cents, so this is whatdeduction you can take on your actual business miles driven during a year oryou can use... if you bought the automobile, you can now take depreciationand with the path act you're allowed to take up to $8,000 bonusdepreciation for a new automobile in the first year, plus with the $3,160 you can take over $11,000 on your automobile in the first year and thatgoes to $5,100 in the second year and in the third year $3,050 and going forward$1,875 for each year, so you see this a lot
in smaller businesses and also a lot ofstaffing companies the vehicle deduction. so these are all items that have beenenacted in law for 2016 and from here we can talk about some planning techniquesand tactics and michael, you can take it from here. thanks bj. this will be theinteresting part of this presentation. so many of our staffing clients, nomatter what size they are, are allowed to be on the cash-method of accounting andjust briefly, cash method of accounting allows you to pick up income whenthe cash is actually received from your customers as opposed to the other methodof accounting, which would be accrual method, where you are forced to in reportincome when you actually send out the
invoice. so as many of you know thedifference between when you send out the invoice and when you receive the cash,can be either a small amount of time or if you're like any of my clients itcould be a long amount of time, so there is some deferral there that youcan take advantage of if you are allowed to be on the cash method and many of ourclients and our staffing clients, fairly large ones, are on the cash-method ofaccounting. so i'm going to speak to those of you that are on the cash-methodof accounting because there's a tremendous amount of flexibility there,what went on the accrual basis is not that much and i'll address some of theplanning techniques for them as well.
so clearly in any time we do taxplanning for anybody and on any method of accounting, in a normal year we always... the golden rule is to defer income and accelerate deductions. the only time thatthat would not be the golden rule is if we are anticipating a tax increase forthe next year and in that case we would want to accelerate income and pay the lower tax in the current year as opposed to deferringit into the future year where the taxes are going to be higher. so based on thebeginning of our presentation where we see there are already taxproposals out for next year to lower income, the income tax rate, we are goingto employ the standard planning which is
defer income and acceleratedeductions. so for those of you on the cash-method of accounting, we alwayslook to try methods of deferring income and so some things we like totalk to our clients is... towards the end of the year... is if you'reable to and if your cash flow allows you to, is to slow down your billing andmaybe instead of billing at the beginning of the month and having peoplepay you at the end of the month and reporting that income, if you set outinvoices towards the end of december fully knowing that any cash that wouldcome in would most likely be in january. so that's one way to do that, however, some businesses need the cash flow and
it doesn't allow for that but certainlysomething that we try to always implement with our clients, and it'ssomething to look at starting now, i don't think it's too early right now tostart looking at invoicing and you pretty much know how your clientsare, their pay schedules, and so if you know a client pays within 15days then you may not want to bill them until late december, so that's somethingto look at. so that's the deferring income piece, now on the otherside you can accelerate deductions and that's very easy because that's totallyunder your control because under the cash-method of accounting you get todeduct expenses when you actually pay
them. on the accrual method it's betterbecause you get to deduct when you receive the invoice, so it's sort ofthe reverse but when the controls are ours, assuming we have the cash topay expenses so here what we would like to do is accelerate our deductions andthat would entail as trying to get our accounts payable as close to zero aspossible every year, fully knowing that we've paid every potential or possibleexpense we could. other things that you may want to lookat is some january expenses that you could pay right at the end of the yearsuch as rent, utilities, anything that you normal monthly expenses to try to takeadvantage of the acceleration the
deductions, definitely would do it thisyear because of the tax again because of the tax rate decrease. so that's sortof how we work with method you know with the cash-method of accounting and so ifwe go to the next slide these are additional tax planning techniques thatwe employ no matter what basis of accounting you're on. so the firstthing is bonuses. now many of you are already on a flow-through type entitywhether you're a partnership, llc, or s corporation, so bonuses to yourselveswon't really make a difference because that's the same income coming to you aswages, as opposed to flow-through income, but you should also... you should look atpaying bonuses to your staff. i'm sure
many of you do that already. if you'redoing it early in 2017 you may want to push it into '16 to get, again, takeadvantage of the higher rates and the better tax benefit in 2016, but for someof you and especially here in philadelphia it's an issue because ofthe city taxes. it's more tax advantageous for us to bonus out profitsto the shareholders or to the partners than it would be to leave it in there asprofit, so even though it's the same income the city treats it differently. iwould hope that you would consult with your tax advisor to make sure there's nothingyou can do with bonuses that could... it may not reduce your federal tax but itcertainly can be advantageous to reduce
state taxes and many local taxesand... i'm sorry, on the bonus sideespecially for staffing firms, many of you with big temporary staffingpractices have a multijurisdictional issues. you cross state lines and youhave many states where your temporary employees are, so by bonusing out yourincome with maybe with w-2 salary and zeroing out your corporate entities' income, youreduce the likelihood, at times, that your overall income will be subjected toother states tax which may or may not be beneficial depending on your individualcircumstances, so i just want to emphasize that bonusing... thenotion of bonusing and tax planning is
more than just the federal tax andpayroll taxes, it really incorporates the state taxes that many of you are subjectto in a variety of states. correct, yeah absolutely true. brett spoke aboutdonating appreciated property, that's always... and that's more at the individuallevel that's always a good technique if you have... especially if you havepublicly traded stock, it's very easy, most organizations willaccept it. the benefit of donating appreciated property is that thededuction that you get is the fair market value of the property that youcontribute and you don't recognize the gain on the difference between what youpurchased the property at and what the
value of it is at the time ofcontribution, so it's a double positive, we don't get many of those in the taxcode so when you see them and they're appropriate for youyou should take advantage of them. recognizing capital losses, that'sa very common technique. i mean that would be something that you wouldlook at your individual level. if you have capital gains either frominvestments or running through from your businesses by the end of the year orduring now, towards the end of the you, should look at your otherholdings. if there's unrealized losses in those holdings certainly think aboutharvesting them and selling and taking
the losses and they'll be able to offsetthe gains. keep in mind that you have to wait 30 days from the sale in order torepurchase that stock if you so desire. if you want to purchase the stock within 30 days, you won't be able to take the loss but a common technique is to either buy acompany that is similar to the one you sold or you know look at etfs or mutualfunds in that industry. retirement contributions are my favorite deduction because you get a deduction and it goes to... and you get the money in most casesand now i know its staffing it's difficult because of the amount ofemployees that are usually
on staff, but to the extent thatthere is a vesting, if you have a tremendous amount of turnover, this mightbe beneficial so this can be a very complicated area for those of you in thestaffing industry, although you should visit... you should look at it becausethere may be ways, methods, and ways to limit the amount of contribution yougive to your employees and the majority of the contribution, if not significantlyall the contribution, could go to you. so something to look at. and then timing of medical expenses, you know that's simply just trying to bunch yourexpenses into one year as opposed to spreading it out over two years and notbeing able to get any deduction at all,
and i think for most of us, includingthose of you or that are on the phone, that's a very difficult deduction to get.i always tell my clients you don't want that deduction because you're either reallysick or you're not making much income because there's a floor there, you haveto have a certain amount of expenses to get a deduction, so ialways hope that nobody gets that deduction because it's bad news eitherway. and then state and local taxes, again you know if you can acceleratedeductions now, you would look at your estimated payments, and for many of youthe fourth quarter estimated payment for states is due january 15th. if you can push it into
december and pay it, you can get thatdeduction in the current year as opposed towaiting till next year. however, as usual, nothing in life is free. for those of youthat are in the amt, we're paying amt that deduction is not good because foramt purposes, that deduction is not allowed and even though you may make the payment you won't get any tax benefit for it, so before you go ahead and do ityou might want to talk to your tax guy and see if there's any benefitfor you at all. if you live in the northeast of the country probably notbut take a look at it anyway. and then you know, just to touch on this lastslide for me just you know we always
tend to view tax planning for one year,however, you know, given what's going on now with the new proposals you reallyshould take a look at your tax strategy or tax planning over a two-year periodbecause you know the aggregation of the two years may be more telling than justlooking at one year at a time, so we always tend to take a broader view atsomebody's tax situation when we're planning and it doesn't always in everycase prove that we should be accelerating deductions and deferringincome. there are situations where it could be reversed but only if you lookout more than one year will you be able to see that, so again and thenlastly, i said it maybe five or seven or
eight times that because there's goingto be a rate decrease in '17 as anticipated, you know again see what youcan do in order to defer income into that year, into '17 and then acceleratedeductions into '16. so with that i'll shoot it over back to you bj.okay, so our last point here that we want to discuss isn't quite a taxplanning or tax related, but it's so critical especially for our staffingclients, we really wanted to cram this in. hopefully you are all aware thatthere are new overtime regulations coming online as of december 1st so ina couple of weeks. i actually did a webinar presentation on the overtimeregulations yesterday. it is beyond the
scope of this presentation to get intothe real minutia of this but i really need you to know a couple ofthings here. first of all, the basics. the new overtime regulations areeffective december 1st and what that means is is that many, many more of youremployees, and not just your temp employees, your internal salaried staffmay very well become eligible for overtime to the extent that they areworking more than 40 hours in a workweek. the basics are to theextent that your employees make less than $47,000 and change annuallyor $900, which breaks down to $913 a week in terms of aweekly salary, if they are below that
threshold in compensation. in alllikelihood, if they work more than 40 hours in a week, you owe them overtimeand that extends again beyond your temporary staff, it extends yourrecruiters, your hr staff, your sales staff. now there's a lot of nuances hereand some exemptions but rule of thumb is is for your internal corporate staff, ifthey're making below $47,000 a year, you need to monitor this closely. now the question is is whether this comes into play. december1st is the the start date for the regulation that was published by thedepartment of labor, however there is a small chance that there's an injunctionbrought... ruled on... there will be a
motion, there's lawsuits on this, thatwill be ruled on out of texas. next week there will be a ruling as to whetherthat these new regulations are postponed orsuspended. it's very unlikely that there's an injunction. there is a chancethat either the new congress in january or trump may set aside these regulationsbut even if that's the case, you'll still need to comply with the regulations fromdecember 1st through the date of any tweaks to this, which could extend 8, 10,12, or more months into 2017, so best be prepared for this and what does it meanessentially? what we're recommending is that you set forth... you get down intothe weeds with either your cfo or your
external accountant, lay out in aspreadsheet all your work force, predominantly your internal work forcesince you're probably paying overtime to your temps where required, but lay outhow often, how many hours typically your employees are working, what their rolesand responsibilities are, what their compensation is, and then you need tofigure out what their hourly rate is. you need to convert their salary to anhourly rate so as to determine what you're going to end up paying them forany hours worked over 40. the major change here is that you need recordsthat capture the time of your salaried employees and many of you are not usedto doing that. you need to have records,
a record-keeping system in place for yoursalaried staff so that you know whether people are working more than 40 hours ornot. now you may say, hey my salaried workforce works from 9-5, fivedays a week over and done with, they work 40 hours, it's rare that they go over, endof story. but what you don't realize is that the department of labor is nowconsidering any time spent by your employees outside of work as potentiallycompensable time, meaning that if you have employees that are answering emailsor phone calls or making sales calls, following up, monitoring activities fromhome, that's compensable time and if that crosses the employee over 40 hours youowe them over time, so this is a really
deal. and if you don't have records, i cantell you that that's a really... time keeping records, that's a really bad factin the event of either a department of labor investigation or a class-actionworkforce lawsuit which have become more prevalent also. you need to have recordsand you need to really address your policies and procedures for yourworkforce so as to delineate whether and how over time will be... whether it'sacceptable or not. for instance, some staffing companies are consideringchanging from a 40-hour typical work week to maybe a 38 or 39 hour work weekso that there may be a built-in hour or two a week for employees that typicallydo work from home. that may shelter
you from exposure to overtime. certainlyyour policies and procedures should indicate to your workforce that anyovertime must be pre-approved. now that's you know, even if the employee goes over40 hours and it's not approved you still have to pay them the overtime but atleast you can hold their feet to the fire and determine how you want todeal with chronic offenders to that policy but really there's a tonof information associated with these regulations that goes beyond the scopeof this presentation, but you need to be aware of this, you need to check withyour accountant, your cfo, and potentially your labor attorneys to help younavigate this really important topic.
with that, that brings to a close the actual presentation that we have for you today. we're certainly happy to answerany questions you may have and amanda if you would like to take it from here andcoordinate that would be fine. sounds good, so if you have anyquestions please go ahead and enter your question into either the chat or the q&asection and then we'll answer the questions as they come in. i do havea question that has come in: if an employee is paid on an hourlybasis, are they automatically eligible for time and a half overtime? welltypically the answer would be yes, although it depends on what thatemployee is doing, again it gets this...
becomes more of a legal question thananything else so before i give you an affirmative answer to that, i'd want toknow more and i'd want to probably rope in, loop in your employment attorney, buttypically the answer is yes. another important piece to that newovertime regulation is the bonuses and the percent of commission salary cancount towards that total $47,000 figure too. is that correct?yeah, so if you look at it on a weekly basis your target compensation is $913of gross pay a week that you want to try and exceed so that you'renot having to pay overtime. you can pay on an ongoing basis, 90%of that figure, so doing the math real
quick, 99% times $913, if youpay at least $821 in gross pay a week but there is a non-discretionarybonus commissions, but it must be non-discretionary and it's paid at leastquarterly, that can get you over that threshold as well, so that's an importantpoint as as well. wonderful. so what should my first step would be withregard to compliance to the overtime regulations? a first step is absolutelylaying out, in a spreadsheet format, your workforce, the typical average hoursworked per person, their roles and responsibilities, and their compensation.you need to convert their salary to at least in an hourly rate so that you canat least make some meaningful decisions
as far as your exposure to overtime.there are tactics that can be taken to sort of minimize that exposure, thatability, in the costs associated with these new regulations, but yourstarting point is getting into the weeds and laying out your workforce and yourcpa or your cfo should be able to help you with this. for accrual and cash-method for the deductions that you spoke about earlier, what is thethe determining factor as if you are on accrual basis or cash-method? so on accrual basis, i'm not sure exactly what the question is, but ifyou're on an accrual basis you would be able to deduct expenses when you receivethe invoice from your vendor, if you're
on the cash basis you woulddeduct the deduction, you would take the deduction when you actually pay the cash,so big difference there. if the question was, how you know whatdetermines whether i'm on the cash basis or accrual basis, you should generally know that most staffing companies are eligible for the cashbasis of accounting, regardless of size, and that is a good fact. and we do see staffing companies that are on the accrual basis of accounting for taxesand that's usually a major error and costs the staffing company or causes thestaffing company to be paying more on an annual basis than they need to be payingfor taxes because you're paying taxes
on receivables instead of yourcollections. i'm not sure again, like michael said, i'm not sure that that wasthe focus of the question but hopefully that answers. i think it does answer that...that looks like that was the question, so thank you. okay, what information should ibe providing to my accountant now to help with year-end tax planning? certainly, you know, clearly if what ialways ask for is a current year profit and loss statement and a current yearbalance sheet and from that point you know that's agreat starting point. what would be very helpful is if you had a good idea as towhat your invoicing is going to be
for the remainder of the year, youranticipated cash collections, as well as a list of expenses you plan on payingfor the remainder of year, and some potential expenses that could beaccelerated into 2016 that are due in early '17. if you gothrough this every year, you start to get a hang of what's needed and itbecomes a fairly easy to start to plan but certainly thoseare the keys to looking at the situation and making the best decisions. and howlikely is it that trump's tax cuts are fully enacted? can you repeat that? howlikely is it that trump's tax cuts are fully enacted? oh i mean, i'll answer, imean those are proposals, i think you
know certainly i would seriously doubtthat a 100% of them will be enacted and if they areenacted, they won't be enacted as proposed, so this is his opening salvo. ithink there's already some resistance from congress as to the extent ofthe tax cuts but it's certainly a starting point and i'm sure they'll betremendous amount of negotiations between the legislative branches untilthey finally come up with something that works but i know there's some seriousconsideration of how much this is going to add to the national deficit andtherefore you know that's why i believe and others believe that this is just astarting point. in your experience, is
there a best practice technique thatstaffing companies should be considering in the tax planning? well iwould say certainly as mentioned before that wotc, that work opportunity tax credit, is a big miss for many staffing companies. they just aren'taware of it or their accountants haven't made them aware, it really is... it can be agold mine. staffing companies also are really... as those with a lot of temps,contract workers, tend to have workers spread over many states and localjurisdictions so i think beyond the federal planning you really need to lookat the state income tax planning element of the whole picture. also the state compliance is an issue
too. we see a lot of companiesthat are in states and not paying taxes in those states so it's a good idea toget an estimate of what your exposure is. now some stateshave... it's rare, but some states have sales tax that applies to staffingrevenues, pennsylvania being one of them, and for those that are operating, youknow, dipping their toe in the water in a particular state, you may not knowexactly what those regulations are in that state and they can be verydifferent. and wotc tax credits, if you have a larger tax creditavailable than you owe in taxes, is it true that you can continue to take thatdeduction the following year and the
remaining amount that you are unable torealize in the current year? yeah, they carry over so you don't lose them, you mightnot get the full credit for it in the current year but you don't lose it, itwill carry forward to eventually when you can use it, when you have the rightbalance of taxable income to use the credits. which is nice that you don't useit or lose it you actually get the chance to take advantage of it and tricom has a great wotc program here too that we can certainly help anystaffing company get started on. if they're interested in doing it, i have a lotof information about the different categories and you can certainly reach out to you
know any of us here on the webinar today. i put my contact information as well as citron's up on the screen now. you can getmore information on how you can take advantage of those tax credits with thatprogram. is there anything else that you'd like to share with the audience beforewe wrap up today? not specifically, just understand again it's a moving target onthe tax rates, watch these overtime regulations in the next week to see ifthere's an injunction. i don't think there will be one. you have a lot of workto do with your cfos and your accountants on these issues but withsome proactive tax planning and some recognition of the new regulations thatare floating out there you should be
well taken care of. and again if you have any questions we're always happy to answer your questions, if youshould come up with something at a later time. absolutely, don't fearreaching out to us. we're happy to...gratis to give you a hand. wonderful. well again, aswe wrap up today i'd like to thank our participants for joining usand bj, michael, and brett, your time today in preparing a year-end planning, a 2016 update for businesses. we will have a recording of the webinarpresentation available on our website under tricom.com and under our resources, industry insider webinars tab. thank you again for your participation and watchfor information on our next webinar
session. have a great afternoon. thank you. thanks a lot. thank you everyone.
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