Is it Time to Review Your Beneficiary Designations?

A will or revocable trust may form the core of your estate plan, but for many people, a substantial amount of wealth bypasses these traditional estate planning tools and is transferred to their loved ones through beneficiary designations. These “nonprobate assets” may include IRAs and certain employer-sponsored retirement accounts, life insurance policies, and some bank or brokerage accounts.

Too often, people designate a beneficiary when they first acquire a nonprobate asset and then forget about it. But over time, these beneficiary designations may become inappropriate or obsolete as a result of changes in life circumstances, estate planning goals or tax laws. So, it’s a good idea to review beneficiary designations periodically — or when circumstances change — and update them if necessary.

As you conduct this review, consider the following best practices and potential pitfalls:

Name a primary beneficiary and at least one contingent beneficiary. Without a contingent beneficiary for an asset, if the primary beneficiary dies before you — and you don’t designate another beneficiary before you die — the asset will end up in your general estate and may not be distributed as you intended. In addition, certain assets, including retirement accounts, offer some protection against your creditors, which would be lost if they’re transferred to your estate. To ensure that you control the ultimate disposition of your wealth and protect that wealth from creditors, it’s important to name both primary and contingent beneficiaries and to avoid naming your estate as a beneficiary.

Update beneficiaries to reflect changing circumstances. Designating a beneficiary isn’t a “set it and forget it” activity. Failure to update beneficiary designations to reflect changing circumstances creates a risk that you will inadvertently leave assets to someone you didn’t intend to benefit, such as an ex-spouse.

It’s also important to update your designation if the primary beneficiary dies, especially if there’s no contingent beneficiary or if the contingent beneficiary is a minor. Suppose, for example, that you name your spouse as primary beneficiary of a life insurance policy and name your minor child as contingent beneficiary. If your spouse dies while your child is still a minor, it’s advisable to name a new primary beneficiary to avoid the complications associated with leaving assets to a minor (court-appointed guardianship, etc.).

Consider the impact on government benefits. If a loved one depends on Medicaid or other government benefits (a disabled child, for example), naming that person as primary beneficiary of a retirement account or other asset may render him or her ineligible for those benefits. A better approach may be to establish a special needs trust for your loved one and name the trust as beneficiary.

Keep an eye on tax developments. Changing tax laws can easily derail your estate plan if you fail to update your plan accordingly. For instance, the SECURE Act, passed in late 2019, changed the rules for inherited IRAs.

To avoid unintended consequences, review your beneficiary designations regularly to make sure they’re still appropriate and that they align with your overall estate planning goals. We’d be pleased to answer any of your questions.

Jordan Bohlinger was recently promoted to manager. Let’s learn about Jordan and his perspective on his career, work/life balance, and what makes being an accountant fun.

What are your roles in the firm?

As a manager in the Assurance Service Line, I specialize in audits of school districts and nonprofits. I also assist with the preparation and review of 990 tax returns for the firm’s nonprofit clients, as well as financial statement preparation. In everything I do, I strive to give our clients confidence that their numbers are being reported accurately while also ensuring they are maintaining compliance and evaluating risks.

Tell us about your career path.

In 2017, I graduated from Northwood University and was looking to start my career. I was hired as an intern in Yeo & Yeo’s Flint office. Over the next six years, I learned a lot and discovered my passion for working with nonprofit and education clients. In 2021, I joined our Education Services Group and was given more opportunities to share my knowledge with clients and staff. It’s been very rewarding to see how I’ve grown in my career from intern to manager and how much I’ve learned along the way.

What do you enjoy most about your career?

I enjoy building relationships with people across the state. Working with the same clients every year allows me to get to know my clients well, and I value the relationships I have made. I also enjoy being involved in the community. Through various Yeo & Yeo events, I’ve volunteered and supported the American Cancer Society, Habitat for Humanity, and our local Humane Society. It is important to give back, and I’m grateful I have the opportunity to do so through Yeo & Yeo.

How do you balance your career, personal life, and passions?

Having a career in public accounting can result in long days and busy times of the year, which means finding a good work/life balance is extremely important. Planning my time well and setting daily and weekly goals for myself keeps me on target to finish my work efficiently. This also means incorporating family time and events into my schedule and sticking to it. I put just as much effort into my family as I do my career to ensure both aspects of my life are successful and fulfilled.

What advice do you have for those considering a career in public accounting?

I would encourage anyone interested in accounting to become a part of any club, group, or committee that will allow them to get to know other people in the profession. Surrounding yourself with like-minded professionals is essential to success. In addition, I would embrace any situation that would put you in a leadership role or would allow you to take on more responsibility. This includes taking professional development classes, volunteering, and attending networking events. Putting yourself out there as being willing to learn, grow, and develop new skills is crucial to advancing your career in this industry. Finally, if you can, find a mentor in the field whom you trust and can go to for advice. Having someone you can reach out to for questions, opinions, or moral support is priceless.

What makes being an accountant fun?

I enjoy solving challenging problems for my clients. While auditing appears to be streamlined on the surface, each audit brings different challenges that I can help my clients overcome.

What do you enjoy doing outside of the office?

I enjoy golfing, collecting Pokémon cards, and cheering on the Lions and Red Wings. I also spend a lot of my time supporting my daughters in their extracurricular activities. With one of my daughters being involved in competitive gymnastics and dance, we get the opportunity to travel all over for competitions. We’re always on the go, and we all enjoy spending time together in warm and sunny places.

Businesses of all shapes and sizes are well-advised to buy various forms of insurance to manage operational risks. But insurance itself is far from risk-free. You might overpay for a policy that you don’t really need. Or you could invest in cheap coverage that does you little to no good when you need it.

Perhaps the most insidious risk associated with insurance, however, is fraud. Dishonest individuals, whether inside your company or outside of it, can exploit a policy to defraud your company. Let’s explore three of the most typical forms of insurance fraud and some best practices for fighting back.

1. Premium diversion

According to the website of the U.S. Federal Bureau of Investigation, this is the most common form of insurance fraud. It occurs when an employee or insurance agent fails to submit premium payments to the underwriter. Rather, the person steals the funds for either personal use or to cover other business expenses.

It might seem like there’s not much you can do to stop an unethical insurance agent from committing this crime. But you can reduce the odds of running into a fraudster by performing a thorough background check on any insurance agent or broker that you choose to work with.

Internally, if possible, segregate the duties of the employee who submits premium payments from the person who accounts for those funds. Don’t allow one employee to control the whole process. In addition, educate all staff members about the danger of premium diversion and the consequences — such as termination and prosecution — of committing it or any type of fraud. Implement a confidential hotline so employees can report suspicious activities.

2. Workers’ compensation schemes

Under one of these scams, an employee exaggerates or fabricates an injury or illness to receive workers’ compensation benefits. For example, a worker might mischaracterize a relatively minor injury suffered at work as a major one. Or an employee could submit a claim for a condition that isn’t related to work.

To help prevent false workers’ comp insurance claims, develop required reporting processes for employees. Staff members should provide detailed information about incidents and any medical treatment they received. Your insurer should be able to provide comprehensive forms and suggest industry-specific measures to ensure employees provide truthful, relevant claims information.

Also, conduct regular audits of workers’ comp claims. Doing so may uncover patterns of fraudulent activity — even long-running schemes. For instance, if one employee repeatedly submits claims but is known to engage in physically demanding or dangerous activities outside of work, it may be appropriate to scrutinize those claims.

3. Health insurance scams

Here, a perpetrator might add a fictitious employee to your company’s plan or use a stolen or “synthetic” (mixture of real and false) identity to enroll a nonexistent dependent. The fraudster then pockets whatever reimbursements come in.

To reduce the risk of such scams, establish strong plan verification procedures. These might include background checks on all participants, including submissions of required documentation such as Social Security and driver’s license numbers. Additionally, conduct regular plan audits to reconcile those enrolled with current payroll records and department headcounts.

Just a few

Unfortunately, these are just a few of the types of insurance fraud that can strike your business. Any one of them can cost you real money, slow down productivity as you deal with the mess, and hurt your reputation in the marketplace and as an employer. We can assist you in tracking your insurance costs and establishing internal controls that help prevent fraud.

Chelsea Meyer, CPA, was recently promoted to senior manager. Let’s learn about Chelsea and her perspective on her career, her keys to success, and what is changing in public accounting.

What are your roles in the firm?

I am a member of the Tax & Consulting Service Line, and I specialize in tax planning and preparation for individuals, businesses, and trusts and estates, as well as business advisory services and financial statement compilations and reviews. As a QuickBooks Certified ProAdvisor, I also assist clients with the implementation and efficient use of their accounting systems. I am a member of the firm’s Nonprofit Services Group and the Trust & Estate Services Group. I serve as a career advocate and mentor for staff across multiple Yeo & Yeo locations, and I also help plan and coordinate the Kalamazoo office’s fun activities.

Tell us about your career path.

I graduated with my Master of Science in accounting from Grand Valley State University in 2013. Shortly after, I joined Yeo & Yeo’s Ann Arbor office full-time as a staff accountant. I worked on a wide variety of clients and projects in my first few years at the firm, and after taking more trust and estate training, I began to develop a focus on the industry. In May 2019, I transferred to the Kalamazoo office to be closer to family as my husband and I were looking to start our own. Once there, I continued to increase my knowledge in trust and estates, as well as complex tax and financial statement projects. Now, as a senior manager, I’m excited to continue managing client engagements and helping staff develop in their careers.

What do you enjoy most about your career?

I enjoy helping people. On the trust and estate side, we are often called in during stressful times. To be the person who can help clients break down a seemingly large mountain of tasks into actionable steps is very rewarding.

How do you balance your career, personal life, and passions?

I strive to maintain a consistent schedule. On days I extend my hours in the office, I will make a point to dedicate extra time in the morning with my kids and family. I also make it a priority to have days that I disconnect to focus on family and do what I need to do at home. I work closely with my supervisors and peers to balance the firm’s needs while satisfying family needs, too.

What is the biggest factor that has helped you be successful?

My dad owned a restaurant, and I worked in restaurants from the time I was in middle school through high school and college. This gave me the baseline skills I needed to interact with a wide variety of personalities. Early in my career, I was open to working on anything, which helped me become well-rounded and learn what I wanted to specialize in. It also gave me the opportunity to apply my people skills to a professional environment, working with many different types of clients.

How is public accounting changing?

Some exciting things are happening with AI and the accounting process. Some companies are developing programs that automate a lot of daily transaction entry, allowing both internal and external accountants to focus more on the high-level info decision makers really want and need. At the same time, there are security and privacy concerns to consider. Too, staffing and work-life balance in public accounting are seeing a shift. More and more firms, including Yeo & Yeo, are exploring ways to offer more flexibility to staff. I think these shifts present a lot of opportunities for companies that are open to change. It’ll be interesting to see how this continues to evolve over the next few years.

What makes being an accountant fun?

Every day is different. Things are constantly changing, which gives you opportunities to learn and grow. We’re constantly talking to clients and other professionals, helping solve problems and overcome challenges. I also work on many special projects, streamlining processes, implementing new processes, or conducting research. I always look forward to these types of engagements, where I can really dive into a client’s business and help them succeed.

The Employee Retention Tax Credit (ERTC) was introduced back when COVID-19 temporarily closed many businesses. The credit provided cash that helped enable struggling businesses to retain employees. Even though the ERTC expired for most employers at the end of the third quarter of 2021, it could still be claimed on amended returns after that.

According to the IRS, it began receiving a deluge of “questionable” ERTC claims as some unscrupulous promotors asserted that large tax refunds could easily be obtained — even though there are stringent eligibility requirements. “We saw aggressive marketing around this credit, and well-intentioned businesses were misled into filing claims,” explained IRS Commissioner Danny Werfel.

Last year, in a series of actions, the IRS began cracking down on potentially fraudulent claims. They began with a moratorium on processing new ERTC claims submitted after September 14, 2023. Despite this, the IRS reports that it still has more than $1 billion in ETRC claims in process and they are receiving additional scrutiny.

Here’s an update of the other compliance efforts that may help your business if it submitted a problematic claim:

1. Voluntary Disclosure Program. Under this program, businesses can “pay back the money they received after filing ERTC claims in error,” the IRS explained. The deadline for applying is March 22, 2024. If the IRS accepts a business into the program, the employer will need to repay only 80% of the credit money it received. If the IRS paid interest on the employer’s ERTC, the employer doesn’t need to repay that interest and the IRS won’t charge penalties or interest on the repaid amounts.

The IRS chose the 80% repayment amount because many of the ERTC promoters charged a percentage fee that they collected at the time (or in advance) of the payment, so the recipients never received the full credit amount.

Employers that are unable to repay the required 80% may be considered for an installment agreement on a case-by-case basis, pending submission and review of an IRS form that requires disclosing a significant amount of financial information.

To be eligible for this program, the employer must provide the IRS with the name, address and phone number of anyone who advised or assisted them with their claims, and details about the services provided.

2. Special withdrawal program. If a business has a pending claim for which it has eligibility concerns, it can withdraw the claim. This program is also available to businesses that were paid money from the IRS for claims but haven’t cashed or deposited the refund checks. The tax agency reported that more than $167 million from pending applications had been withdrawn through mid-January.

Much-needed relief

Commissioner Werfel said the disclosure program “provides a much-needed option for employers who were pulled into these claims and now realize they shouldn’t have applied.”

In addition to the programs described above, the IRS has been sending letters to thousands of taxpayers notifying them their claims have been disallowed. These cases involve entities that didn’t exist or didn’t have employees on the payroll during the eligibility period, “meaning the businesses failed to meet the basic criteria” for the credit, the IRS stated. Another set of letters will soon be mailed to credit recipients who claimed an erroneous or excessive credit. They’ll be informed that the IRS will recapture the payments through normal collection procedures.

There’s an application form that employers must file to participate in the Voluntary Disclosure Program and procedures that must be followed for the withdrawal program. Other rules apply. Contact us for assistance or with questions.

There’s no way around it — owning and operating a business comes with risk. On the one hand, operating under excessive levels of risk will likely impair the value of a business, consume much of its working capital and could even lead to bankruptcy if those risks become all-consuming. But on the other hand, no business can operate risk-free. Those that try will inevitably miss out on growth opportunities and probably get surpassed by more ambitious competitors.

How can you find the right balance? One way to manage your company’s “risk profile” is to implement a formal enterprise risk management (ERM) program.

Optimization, not elimination

Most businesses have internal controls to prevent fraud, maintain compliance and reduce errors. But an ERM program goes much further. It’s a top-down framework that starts at the C-suite and addresses risk at every level of the organization. An effective ERM program helps you and your leadership team not only identify major threats, but also devise feasible strategic, operational, reporting and compliance objectives.

Traditional risk management techniques, which are often informal and ad hoc, use a “siloed” approach. In other words, each department focuses on minimizing its own risks. The efficacy of this approach is limited at best, for a couple reasons. First, it fails to address how risks may arise in the way departments interact — or don’t interact — with each other. Second, it often wrongly assumes that the goal of risk management is to eliminate risk. In truth, the proper goal of risk management is to optimize risk; that is, develop strategic objectives and operate the business under acceptable levels of inevitable risk.

An ERM program takes an integrated approach. It recognizes that many risks are enterprise-wide and interrelated. For example, say a business identifies a new vendor offering substantially reduced prices on key materials. From the accounting department’s perspective, the deal may seem like a no-brainer. But an analysis under an ERM program could reveal that the vendor is situated in a high-risk area for natural disasters or civil unrest. Or the ERM analysis might show that the vendor is a bad match technologically or has poor cybersecurity.

Good starting point

Naturally, every company’s framework for an ERM program will differ depending on factors such as its size and structure. But one tool that’s proven helpful to many businesses is the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO’s) Enterprise Risk Management — Integrated Framework, which was originally published in 2004.

COSO is a joint initiative of five private sector organizations that develop frameworks and guidance on ERM, internal controls and fraud deterrence. The five organizations are the American Accounting Association, the American Institute of Certified Public Accountants, Financial Executives International, the Institute of Internal Auditors and the Institute of Management Accountants.

The original COSO framework covers four categories of objectives: strategic, operations, reporting and compliance. It also sets forth eight key components: 1) internal environment, 2) objective setting, 3) event identification, 4) risk assessment, 5) risk response, 6) control activities, 7) information and communication, and 8) monitoring. Note that, in 2017, COSO published an updated complementary publication entitled Enterprise Risk Management — Integrating with Strategy and Performance.

Perfect framework

Are you tired of putting out fires or having to rethink major strategic decisions because they’re just a little bit off the mark? If so, a formal ERM program may be the solution you’re looking for. We’d be happy to help you build the perfect framework for your business.

Yeo & Yeo is pleased to announce the promotion of three professionals.

Jordan Bohlinger has been promoted to manager. Bohlinger is a member of the firm’s Education Services Group. He specializes in audits of school districts and nonprofit organizations. He holds a Bachelor of Business Administration in accounting from Northwood University and is a member of the Michigan School Business Officials. In the community, he serves as treasurer of the Bay Valley Academy Gymnastics Booster Club. He joined Yeo & Yeo in 2017 and is based in the firm’s Flint office.

Renee Elliott has been promoted to outsourced accounting manager. Elliott specializes in managing bookkeeping and back-office duties for small and midsize businesses. She is a Certified QuickBooks ProAdvisor, and has experience overseeing financial processes, managing client accounts, ensuring compliance with regulations, and providing strategic financial guidance. She holds a Bachelor of Business Administration in finance from Baker College. She joined Yeo & Yeo in 2019 and is based in the firm’s Saginaw office.

Kellen Riker, CPA, has been promoted to manager. Riker is a member of the firm’s Government Services Group. He specializes in audits of for-profit businesses, school districts, and governments. He holds a Master of Business Administration in finance from the University of Michigan-Flint and is a member of the Michigan Government Finance Officers Association. He serves as the Yeo Young Professionals service chair for the Yeo & Yeo Foundation. In 2022, he was recognized as a 40 Under 40 honoree by the Flint & Genesee Group. He joined Yeo & Yeo in 2018 and is based in the firm’s Flint office.

To help you remember the important 2024 deadlines, refer to this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

Date	Deadline for
January 31	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) and paying tax due, to avoid penalties for underpaying the January 16 installment of estimated taxes. Businesses: Providing Form 1098, Form 1099-MISC (except for those that have a February 15 deadline), Form 1099-NEC and Form W-2G to recipients. Employers: Providing 2023 Form W-2 to employees. Employers: Reporting Social Security and Medicare taxes and income tax withholding for fourth quarter 2023 (Form 941) if all associated taxes due weren’t deposited on time and in full. Employers: Filing a 2023 return for federal unemployment taxes (Form 940) and paying any tax due if all associated taxes due weren’t deposited on time and in full. Employers: Filing 2023 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.
February 12	Individuals: Reporting January tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for fourth quarter 2023 (Form 941) if all associated taxes due were deposited on time and in full. Employers: Filing a 2023 return for federal unemployment taxes (Form 940) if all associated taxes due were deposited on time and in full.
February 15	Individuals: Filing a new Form W-4 to continue exemption for another year if you claimed exemption from federal income tax withholding in 2023. Businesses: Providing Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients. Employers: Depositing Social Security, Medicare and withheld income taxes for January if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for January if the monthly deposit rule applies.
February 28	Businesses: Filing Form 1098, Form 1099 (other than those with a January 31 deadline), Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2023. (Electronic filers can defer filing to March 31.)
March 11	Individuals: Reporting February tip income of $20 or more to employers (Form 4070).
March 15	Calendar-year S corporations: Filing a 2023 income tax return (Form 1120-S) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year partnerships: Filing a 2023 income tax return (Form 1065 or Form 1065-B) or requesting an automatic six-month extension (Form 7004). Employers: Depositing Social Security, Medicare and withheld income taxes for February if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for February if the monthly deposit rule applies.
April 1	Employers: Electronically filing 2023 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G.
April 10	Individuals: Reporting March tip income of $20 or more to employers (Form 4070).
April 15	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) or filing for an automatic six-month extension (Form 4868) and paying any tax due. (See June 17 for an exception for certain taxpayers.) Individuals: Paying the first installment of 2024 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. Individuals: Making 2023 contributions to a traditional IRA or Roth IRA (even if a 2023 income tax return extension is filed). Individuals: Making 2023 contributions to a SEP or certain other retirement plans (unless a 2023 income tax return extension is filed). Individuals: Filing a 2023 gift tax return (Form 709) or filing for an automatic six-month extension (Form 8892) and paying any gift tax due. Filing for an automatic six-month extension (Form 4868) to extend both Form 1040 and Form 709 if no gift tax is due. Household employers: Filing Schedule H, if wages paid equal $2,600 or more in 2023 and Form 1040 isn’t required to be filed. For those filing Form 1040, Schedule H is to be submitted with the return and is thus extended to the due date of the return. Calendar-year trusts and estates: Filing a 2023 income tax return (Form 1041) or filing for an automatic five-and-a-half-month extension (Form 7004) (six-month extension for bankruptcy estates) and paying any income tax due. Calendar-year corporations: Filing a 2023 income tax return (Form 1120) or filing for an automatic six-month extension (Form 7004) and paying any tax due. Calendar-year corporations: Paying the first installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for March if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for March if the monthly deposit rule applies.
April 30	Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full.
May 10	Individuals: Reporting April tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
May 15	Employers: Depositing Social Security, Medicare and withheld income taxes for April if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for April if the monthly deposit rule applies. Calendar-year exempt organizations: Filing a 2023 information return (Form 990, Form 990-EZ or Form 990-PF) or filing for an automatic six-month extension (Form 8868) and paying any tax due. Calendar-year small exempt organizations (with gross receipts normally of $50,000 or less): Filing a 2023 e-Postcard (Form 990-N) if not filing Form 990 or Form 990-EZ.
June 10	Individuals: Reporting May tip income of $20 or more to employers (Form 4070).
June 17	Individuals: Filing a 2023 individual income tax return (Form 1040 or Form 1040-SR) or filing for a four-month extension (Form 4868), and paying any tax, interest and penalties due, if you live outside the United States or you serve in the military outside the United States and Puerto Rico. Individuals: Paying the second installment of 2024 estimated taxes (Form 1040-ES) if not paying income tax through withholding or not paying sufficient income tax through withholding. Calendar-year corporations: Paying the second installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for May if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for May if the monthly deposit rule applies.
July 10	Individuals: Reporting June tip income of $20 or more to employers (Form 4070).
July 15	Employers: Depositing Social Security, Medicare and withheld income taxes for June if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for June if the monthly deposit rule applies.
July 31	Employers: Reporting Social Security and Medicare taxes and income tax withholding for first quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full. Employers: Filing a 2023 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or requesting an extension.
August 12	Individuals: Reporting July tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for second quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
August 15	Employers: Depositing Social Security, Medicare and withheld income taxes for July if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for July if the monthly deposit rule applies.
September 10	Individuals: Reporting August tip income of $20 or more to employers (Form 4070).
September 16	Individuals: Paying the third installment of 2024 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficientincome tax through withholding. Calendar-year corporations: Paying the third installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Calendar-year S corporations: Filing a 2023 income tax return (Form 1120-S) and paying any tax, interest and penalties due, if an automatic six-month extension was filed. Calendar-year S corporations: Making contributions for 2023 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year partnerships: Filing a 2023 income tax return (Form 1065 or Form 1065-B) if an automatic six-month extension was filed. Employers: Depositing Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for August if the monthly deposit rule applies.
September 30	Calendar-year trusts and estates: Filing a 2023 income tax return (Form 1041) if an automatic five-and-a-half-month extension was filed and paying any tax, interest and penalties due.
October 10	Individuals: Reporting September tip income of $20 or more to employers (Form 4070).
October 15	Individuals: Filing a 2023 income tax return (Form 1040 or Form 1040-SR) if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States and Puerto Rico) and paying any tax, interest and penalties due. Individuals: Making contributions for 2023 to certain existing retirement plans or establishing and contributing to a SEP for 2023 if an automatic six-month extension was filed. Individuals: Filing a 2023 gift tax return (Form 709) and paying any tax, interest and penalties due if an automatic six-month extension was filed. Calendar-year C corporations: Filing a 2023 income tax return (Form 1120) if an automatic six-month extension was filed and paying any tax, interest and penalties due. Calendar-year C corporations: Making contributions for 2023 to certain employer-sponsored retirement plans if an automatic six-month extension was filed. Calendar-year bankruptcy estates: Filing a 2023 income tax return (Form 1041) if an automatic six-month extension was filed and paying any tax, interest and penalties due. Employers: Depositing Social Security, Medicare and withheld income taxes for September if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for September if the monthly deposit rule applies.
October 31	Employers: Reporting Social Security and Medicare taxes and income tax withholding for third quarter 2024 (Form 941) and paying any tax due if all associated taxes due weren’t deposited on time and in full.
November 12	Individuals: Reporting October tip income of $20 or more to employers (Form 4070). Employers: Reporting Social Security and Medicare taxes and income tax withholding for third quarter 2024 (Form 941) if all associated taxes due were deposited on time and in full.
November 15	Exempt organizations: Filing a 2023 information return (Form 990, Form 990-EZ or Form 990-PF) if a six-month extension was filed and paying any tax, interest and penalties due. Employers: Depositing Social Security, Medicare and withheld income taxes for October if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for October if the monthly deposit rule applies.
December 10	Individuals: Reporting November tip income of $20 or more to employers (Form 4070).
December 16	Calendar-year corporations: Paying the fourth installment of 2024 estimated income taxes, completing Form 1120-W for the corporation’s records. Employers: Depositing Social Security, Medicare and withheld income taxes for November if the monthly deposit rule applies. Employers: Depositing nonpayroll withheld income tax for November if the monthly deposit rule applies.

Yeo & Yeo is pleased to announce the promotion of Chelsea Meyer, CPA, to Senior Manager.

“With a wealth of knowledge and unwavering passion for her work, Chelsea consistently strives to provide top-level attention to her clients,” says David Jewell, Principal and Tax & Consulting Service Line Leader. “Her expertise in trusts and estates, coupled with her proficiency in closely held businesses, positions her as an excellent resource for clients and staff.”

Since joining the firm in 2013 as a staff accountant, Meyer has developed specializations in tax planning and preparation for individuals, businesses, and trusts and estates, as well as business advisory services and financial statement compilations and reviews. She is a member of the firm’s Nonprofit Services Group and the Trust & Estate Services Group. As a QuickBooks Certified ProAdvisor, Meyer also assists clients with implementing and efficiently using their accounting systems. She holds a Master of Science in accounting from Grand Valley State University. She is a member of the Grand Rapids Accounting & Financial Women’s Alliance, Western Michigan Estate Planning Council, and Women in Networking of Kalamazoo. In the community, she is a member of Women Who Care of Kalamazoo County. She is the former treasurer of the Junior League of Ann Arbor and a past member of the Child Care Network finance committee.

“I enjoy helping my clients break a seemingly large number of tasks into actionable steps and make sense of things that can sometimes be very challenging,” Meyer said. “In my role as a senior manager, I am eager to elevate my impact in mentoring staff and assisting clients in aligning their financials to their business goals.”

Engaging in a merger or acquisition (M&A) can help your business grow, but it also can be risky. Buyers must understand the strengths and weaknesses of their intended partners or acquisition targets before entering the transactions.

A robust due diligence process does more than assess the reasonableness of the sales price. It also can help verify the seller’s disclosures, confirm the target’s strategic fit, and ensure compliance with legal and regulatory frameworks — before and after the deal closes. Here’s an overview of the three phases of the due diligence process.

1. Defining the scope

Before the due diligence process begins, it’s important to establish clear objectives. The work during this phase should include a preliminary assessment of the target’s market position and financial statements, as well as the expected benefits of the transaction. You should also identify the inherent risks of the transaction and document how due diligence efforts will verify, measure and mitigate the buyer’s potential exposure to these risks.

2. Conducting due diligence

The primary focus during this step is evaluating the target company’s financial statements, tax returns, legal documents and financing structure. Additionally, contingent liabilities, off-balance-sheet items and the overall quality of the company’s earnings will be scrutinized. Budgets and forecasts may be analyzed, especially if management prepared them specifically for the M&A transaction. Interviews with key personnel and frontline employees can help a prospective buyer fully understand the company’s operations, culture and value.

Artificial intelligence (AI) is transforming how companies conduct due diligence. For example, AI can analyze vast quantities of customer data quickly and efficiently. This can help identify critical trends and risks in large data sets, such as those related to regulatory compliance or fraud.

If a target company maintains an extensive database of customer contracts, AI can analyze every document for the scope of the relationship, contractual obligations, key clauses and the consistency of the terminology used in each document. Sophisticated solutions can analyze the target’s financial records and even produce post-acquisition financial statement forecasts.

3. Structuring the deal

Information gathered during due diligence can help the parties develop the terms of the proposed transaction. For example, issues unearthed during the due diligence process — such as excessive customer turnover, significant related-party transactions or mounting bad debts — could warrant a lower offer price or an earnout provision (where a portion of the purchase price is contingent on whether the company meets future financial benchmarks). Likewise, cultural problems — such as employee resistance to the deal or incongruence with the existing management team’s long-term vision — could cause a buyer to revise the terms or walk away from the deal altogether.

We can help

Comprehensive financial due diligence is the cornerstone of a successful M&A transaction. If you’re thinking about merging with a competitor or buying another company, contact us to help you gather the information needed to minimize the risks and maximize the benefits of a proposed transaction.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act of 2019) and the SECURE 2.0 Act of 2022 (collectively, SECURE) enacted a new mandate that, starting in 2024, long-term, part-time (LTPT) employees must be allowed to make salary deferrals into their employer’s 401(k) plan.

The systems used by many 401(k) plan service providers are not ready for the required implementation starting with the first plan year beginning on or after January 1, 2024 (i.e., January 1, 2024, for calendar year plans).

Some executives may view this change as an issue that does not require their attention and that will be handled by their human resources (HR) staff and the 401(k) plan service providers. But not complying with the rules might be costly for the employer if corrective contributions for LTPT employees who were not allowed to participate are required, along with ancillary costs.

New Mandate

For decades, tax-qualified retirement plans could exclude employees who work fewer than 1,000 hours of service per year, even if the employee worked for the employer for many years. Employees who worked over 1,000 hours generally could not be excluded from the plan (with certain non-hours-based exceptions). To improve access to workplace retirement savings plans, the 2019 SECURE Act required 401(k) plans to allow employees who have worked at least 500 hours in three consecutive years (based on employment with the employer from January 1, 2021, onward) to make elective deferrals to the plan. Thus, if an employee had 500 hours of service in 2021, 2022, and 2023 (but never had 1,000 hours of service per year), that employee must be allowed to make salary deferrals into the employer’s 401(k) plans starting with the first plan year beginning on or after January 1, 2024. For plan years beginning in 2025 and later, SECURE 2.0 of 2022 reduces the three-year measurement period to two years.

On November 27, 2023, the IRS issued proposed regulations that employers can rely on to apply the LTPT employee rules until the final rules are issued.

An Example of How the Rules Work

Let’s assume a calendar year 401(k) plan has a requirement that employees must be age 21 and complete 1,000 of service before being eligible for plan participation that includes making elective deferrals and receiving company matching contributions. Starting in 2024, some employees who do not meet the 1,000-hour service requirement might be eligible to make salary deferrals. The employer is not required to make matching contributions or any other employer contributions for LTPT employees who make salary deferrals.

Counting the hours worked to determine plan eligibility is not new and the rules are essentially the same for counting 1,000 hours and 500 hours. Hours for new employees should be counted for 12 months following their date of hire, but the measurement period can be switched to the plan year for administrative ease. However, while the 1,000-hour requirement is a standalone measure for each year, the 500-hour count is relevant for two or three years, depending on the plan year under evaluation. Therefore, for a calendar year plan beginning January 1, 2024, the hours are counted for 2021, 2022, and 2023. Any employee whose count is 500 or more but less than 1,000 in each of those three years should be allowed to make elective deferrals into the calendar year plan as of January 1, 2024.

As a further example, assume Susan was hired on June 1, 2021, by an employer that sponsors a calendar year 401(k) plan. On December 31, 2021, the first plan year end after Susan’s hire date, the employer switches her hours worked to be measured based on the plan year. Year One for Susan runs from June 1, 2021, through May 31, 2022. Year Two for Susan runs from January 1, 2022, through December 31, 2022, and Year Three for Susan runs from January 1, 2023, through December 31, 2023. Susan worked 500 hours in Year One, 680 hours in Year Two, and 520 hours in Year Three. Therefore, effective January 1, 2024, she should be allowed to make elective deferrals under the plan. Note that the switch from counting hours based on Susan’s date of hire anniversary to using the plan year as her eligibility computation period causes the hours she worked from January 1, 2022, through May 31, 2022, to be double counted in both her first and second year.

Even though vesting schedules have no relevance to Susan’s elective deferrals (since she is always 100% vested in her own contributions), she will receive a year of vesting credit for each year after 2021 that she works at least 500 hours (i.e., Susan has three years vesting credit if she became eligible for employer contributions in 2024). This would be significant if she subsequently becomes eligible to participate in the plan for a reason that is not solely on account of being an LTPT employee. Once an individual is eligible for the plan, they remain eligible and do not have to requalify to participate.

For the 2025 plan year, the period from June 1, 2022, through May 31, 2022, will drop out of the determination. Additionally, the period from January 1, 2022, through December 31, 2022, will drop out of the determination because of the change made by SECURE 2.0 to look back only two years instead of three. Accordingly, Susan’s 2025 plan eligibility as an LTPT employee will be based on her hours worked during the 2023 and 2024 plan years.

The future years’ determination is complicated, especially if the employee’s hours worked fluctuate above and below 1,000 hours.

Why Should I be Concerned?

While employers are not required to match the LTPT employee deferrals and LTPT employees are excluded from the annual tests that otherwise apply to all employees (e.g., coverage, nondiscrimination, and top-heavy requirements), there might be some increased cost to the plan sponsor for including LTPT employees in the 401(k) plan. Employers should consider the following potential increases in plan cost due to the new LTPT employee mandate.

Increased Plan Audit Expense -The additional participants due to LTPT employee status must be counted when determining if the 401(k) plan must have an annual independent audit of the plan’s financials. Starting with the 2023 plan year, 401(k) plans that have more than 100 participant accounts as of the first day of the 2023 plan year must have an annual independent audit. Before 2023, 401(k) plan participants who were eligible to make salary deferrals were counted as participants — even if they did not contribute anything — for purposes of counting the number of participants. The DOL changed the rules starting in 2023, among other things, to include only those with account balances as participants. Keep in mind that the number of participants can be decreased by taking advantage of rules that allow distributions of small account balances (accounts valued at less than $7,000 starting in 2024) to former participants.
Increased Plan Administration Costs – The time spent internally and by plan service providers increases as the number of plan participants increases, particularly if recordkeeping for a new category of participants is necessary. The LTPT employee rules raise unique recordkeeping challenges necessitating new programing and new procedures to stay in compliance.
Costly Corrective Actions – The employer must take steps to correct any instance of when an employee that is eligible to make elective deferrals was not notified of being eligible. Increasing the number of eligible employees increases the possibility of someone being missed. But the immediate concern is based on feedback that many administration systems are not ready for the implementation of the LTPT rules as early as January 1, 2024 (for calendar year plans). Any delay in communicating the eligibility to LTPT employees that causes a delay of payroll deductions of elective deferrals beyond their eligibility date would be an operational failure that would need correction under the IRS’s Employee Plans Compliance Resolution System (EPCRS). While corrective contributions to make up the employee’s missed contribution are not always required, notices would need to be provided to any participant that had a missed deferral period to advise them that their future retirement savings might need adjustment due to the delay in making elective deferrals.
Decreased Forfeitures – LTPT employees earn vesting credit for each year after 2021 during which they work at least 500 hours but less than 1,000 hours. While the vested percentage has no impact on the years the employer does not make contributions on the employee’s behalf, vesting as an LTPT employee carries over to any years that the employee becomes eligible for employer contributions.
Operational Compliance Before Plan Amendment Deadline – For a 401(k) plan to be “qualified” (that is, eligible for favorable tax treatment), it must comply with the statutory requirements in both form and in operation. SECURE provides that the written plan document is not required to be amended until the end of the 2025 plan year. However, the plan must operate in compliance with the applicable changes in the law for all plan years, starting with the effective date of the change. Since the LTPT rules took effect for plan years beginning on or after January 1, 2024, the 401(k) plan would need to be operated with those rules starting in 2024, even though a formal, written plan amendment is not required until the end of the 2025 plan year. Therefore, any decisions regarding compliance with the LTPT employee provisions should be documented and the proper procedures and controls put in place.

While plan sponsors might rely on their 401(k) plan service providers to identify eligible LTPT employees, liability for noncompliance remains on the employer. The risk associated with not allowing LTPT employees to make elective deferrals to a 401(k) plan can be avoided if the plan lowers the 1,000-hour requirement to not more than 500 hours or determines eligibility on the elapsed time method instead of the counting hours method of determining eligibility to make salary deferrals under the plan.

SECURE provides numerous exceptions from coverage, nondiscrimination, and top heaviness tests for employees who participate in the plan solely on account of the LTPT employee provisions. Any employee that satisfies the more generous plan document provisions will not qualify for the confusing rules that otherwise apply to LTPT employees. Still, avoiding LTPT employee status altogether might be cost effective.

While much of your estate plan focuses on actions that take place after death, it’s equally important to have a plan for making critical financial or medical decisions if you’re unable to make them for yourself during your lifetime. This is why including a power of attorney in your estate plan is a must.

Defining a power of attorney

A power of attorney is defined as a legal document authorizing another person to act on your behalf. This person is referred to as the “attorney-in-fact” or “agent” — or sometimes by the same name as the document, “power of attorney.” Generally, there are separate powers of attorney for health care and property.

Be aware that a power of attorney is no longer valid if you become incapacitated. For many people, this is actually when the authorization is needed the most. Therefore, to thwart dire circumstances, you can adopt a “durable” power of attorney.

A durable power of attorney remains in effect if you become incapacitated and terminates only on your death. Thus, it’s generally preferable to a regular power of attorney. The document must include specific language required under state law to qualify as a durable power of attorney.

Naming your power of attorney

Despite the name, your power of attorney doesn’t necessarily have to involve an attorney, although that’s an option. Typically, in the case of a power of attorney for property, the designated agent is either a professional, such as an attorney, CPA or financial planner, or a family member or close friend. In any event, the person should be someone you trust implicitly and who is adept at financial matters. In the case of a health care power of attorney, a family member or close friend is the most common choice.

Regardless of whom you choose, it’s important to name a successor agent in case your top choice is unable to fulfill the duties or predeceases you.

Usually, the power of attorney will simply continue until death. However, you may revoke it — whether it’s durable or not — at any time and for any reason. If you’ve had a change of heart, notify the agent in writing about the revocation. In addition, notify other parties who may be affected.

Time is of the essence

To ensure that your health care and financial wishes are carried out, prepare and sign health care and financial powers of attorney as soon as possible. Don’t forget to let your family know how to gain access to the documents in case of emergency. Note that health care providers and financial institutions may be reluctant to honor a power of attorney that was executed years or decades earlier. Sign new documents periodically. Contact us with questions.

Since July 2023, the IRS has taken a series of actions in response to what it has termed a “flood of ineligible claims” for the Employee Retention Tax Credit (ERTC). Most recently, it launched a Voluntary Disclosure Program (VDP). The program presents a valuable, but temporary, opportunity for eligible employers.

Flood of invalid ERTC claims

The ERTC is a refundable tax credit intended for businesses that 1) continued paying employees while they were shut down due to the pandemic in 2020 and 2021, or 2) suffered significant declines in gross receipts from March 13, 2020, to December 31, 2021.

With the credits worth up to $26,000 per retained employee, fraudulent promoters and marketers quickly pounced, offering to help employers file claims in exchange for large upfront fees or percentages of the money received. But the requirements for the credit are stringent, and many employers were misled into filing claims that have proven to be invalid, leaving those claimants at risk of liability for credit repayment, penalties and interest, as well as other tax problems.

IRS’s response

In the face of the deluge of invalid claims, the IRS intensified audits and criminal investigations of both promoters and businesses filing suspect claims. As of December 2023, it had more than 300 criminal cases underway with claims worth nearly $3 billion, and thousands of ERTC claims had been referred for audit.

The IRS also has instituted a moratorium on the processing of new ERTC claims. And, in October 2023, the agency began offering a withdrawal option for eligible employers that filed a claim but haven’t yet received, cashed or deposited a refund. Withdrawn claims will be treated as if they were never filed, so taxpayers need not fear repayment, penalties or interest.

In late December 2023, the IRS announced another ERTC relief initiative, the VDP. The program is intended for employers that claimed and received credit money but weren’t entitled to it.

VDP nuts and bolts

Employers that participate in the VDP may benefit in several ways. For example, they’re required to repay only 80% of the credit received (if repayment in full isn’t possible, the IRS may authorize an installment plan). They also aren’t required to repay any interest received on an ERTC refund or amend their income tax returns to reduce wage expense.

These employers won’t be subject to penalties or underpayment interest if the 80% repayment is made before the signed closing agreement is returned to the IRS. The 20% reduction won’t be treated as taxable income, and the IRS won’t audit the ERTC on employment tax returns for the tax periods covered by the closing agreement.

An employer can apply for the VDP for each tax period in which:

Its ERTC claim was 1) processed and paid as a refund that has been cashed or deposited, or 2) paid in the form of a credit applied to that or another tax period,
It believes it wasn’t entitled to the ERTC,
It isn’t under IRS audit for employment taxes,
It isn’t under IRS criminal investigation, and
The IRS hasn’t reversed, or notified the employer of its intent to reverse, the ERTC to zero (for example, with a letter or notice disallowing the credit).

Notably, the IRS is sending up to 20,000 letters with proposed tax adjustments for the 2020 tax year to recover ineligible claims, in addition to 20,000 denial letters it sent earlier. The agency continues to work on the 2021 tax year, with more mailings to come. When an employer is identified through this work as receiving excessive or erroneous ERTCs, the IRS will pursue normal tax assessment and collection procedures.

If a third-party payer filed an employment tax return that reported an employer’s ERTC-related wages and credits, the employer can participate in the VDP only through the third-party payer. It’ll be rejected if it applies with its own employer identification number.

Act now

Bear in mind that not every ERTC claim was invalid. If you’re at all uncertain about the validity of your claim, regardless of whether you’ve received payment, we can help you navigate this increasingly complex area of your tax liability. The VDP is open only until March 22, 2024, though, so don’t delay.

Join us in welcoming Carrie Lapka, CPA, CPPM, back to the firm as a senior manager. Let’s learn about Carrie and her perspective on her career, the best advice she’s ever received, and giving back.

What are your roles in the firm?

As a member of the Tax & Consulting Service Line, I specialize in consulting and practice management for healthcare organizations. I am a Certified Physician Practice Manager, and I have experience in revenue cycle management, human resources, healthcare billing and compliance, and general business processes. I also have a background in business consulting, preparation and analysis of financial statements, and tax planning and preparation.

Tell us about your career path.

I began my career at Yeo & Yeo in 2004 and built a lot of great relationships along the way. In my last few years at the firm, I closely managed a client’s medical practice and obtained the Certified Physician Practice Manager credential. Shortly after that, I went to work directly for that client as the Practice Manager while remaining a client of Yeo & Yeo over the years. I am returning to the firm with more than ten years of experience managing a medical practice and much more healthcare industry knowledge. I am now a senior manager in the Tax & Consulting Service Line, based in the Saginaw office. I look forward to serving as a valuable resource to our team.

What causes or organizations are you passionate about?

I serve as treasurer and board member of my local school district, Caseville Public Schools. I also chair our Finance and Sports Committees and was instrumental in passing a recent school bond proposal to fund some major security updates and improvements to our school’s campus.

What was the best advice you ever received?

“Surround yourself with a trusted circle of advisors.” As a business manager, you should always have a good relationship and close contact with your insurance agent, attorney, CPA, banker, and mentor. I’ve relied on each of these over the years, and routinely pass that advice on to anyone currently in business or thinking about going into business.

What do you enjoy doing outside of the office?

Playing volleyball is a passion of mine. I always enjoyed playing throughout my grade school years and was reintroduced to it a couple of years ago when my daughter showed interest in it. We have a co-ed group that I play with each week. I am also a volleyball coach at Caseville Elementary.

Share a story about a time when you positively impacted someone’s life, personally or professionally.

I restarted the volleyball program for our elementary girls last year, which rekindled my love for the sport. The league had been dormant for a few years following COVID, and the girls really wanted to play. We now offer the program to our third-, fourth-, and fifth-grade girls. It’s definitely a time investment, but I’m always reminded of why I do it when I watch their excitement build as they hit the ball over the net for the first time. I know they’re starting a love for a sport they’ll most likely continue to enjoy throughout their lives.

An Irrevocable Life Insurance Trust (ILIT) is a tool that can be utilized to transfer wealth and avoid including life insurance assets in your taxable estate upon death. By setting up an ILIT, you can also protect assets in the irrevocable trust from creditors for you and your beneficiaries. The primary limitation of an ILIT is that once the trust is established, it is irrevocable and cannot be changed. In this article, we explore the advantages and considerations associated with ILITs, emphasizing their role in minimizing estate taxes, sidestepping gift taxes, and securing assets for the benefit of future generations.

Benefits of an ILIT

Establishing an ILIT presents many advantages, making it an attractive option for individuals seeking to transfer wealth seamlessly to the next generation. Key benefits include:

Estate tax minimization: ILITs serve as a strategic tool to minimize potential estate taxes, ensuring a more efficient wealth transfer process.
Gift tax exclusion: Through ILITs, one can navigate gift tax implications by utilizing the annual gift tax exclusion, provided beneficiaries are duly notified of their withdrawal rights.
Creditor protection: Assets held within an ILIT are shielded from creditors, offering a robust layer of protection for both the grantor and beneficiaries.
Strategic asset management: ILITs allow for meticulous management of distributions, empowering trustees to control how assets are distributed among beneficiaries based on the trust document.
Legacy planning: With the irrevocable nature of ILITs, they become a reliable tool for legacy planning, ensuring a structured and controlled distribution of assets over time.

Considerations for ILIT setup

While ILITs offer substantial benefits, it’s crucial to note that once established, these trusts become irrevocable and cannot be altered, underscoring the importance of careful planning and consideration.

Gifts to ILIT and the Crummey letter: The process involves the insured making annual gifts to the ILIT for premium payments on the life insurance. To qualify for the annual gift tax exclusion, beneficiaries must be notified of their withdrawal rights through a Crummey letter. A Crummey letter is a written document explaining the withdrawal right of the gift to the beneficiary. The letter, which must be sent to each beneficiary, must indicate the amount of the gift and the length of time they have to exercise their withdrawal right. It must also let the beneficiaries know that if they do not exercise their withdrawal right, the assets will remain in the trust. If the beneficiary does not exercise their withdrawal right, the gift made to the ILIT will be available for the life insurance premiums to be paid on the life of the insured. The trustee is responsible for drafting and distributing the Crummey letters to the beneficiaries. Without this acknowledgement of the gift, the gift is not determined to be “completed” and would not be eligible for the annual gift exclusion amount.
Gift tax considerations: Grantors must be mindful of total gifts to beneficiaries throughout the year. If other gifts are being given to the beneficiaries, the giver must consider the total gifts given when considering if there is a taxable gift situation. If more than the annual exclusion is gifted to any one beneficiary, it will trigger a gift tax filing for that tax year.
Strategic non-exercise of withdrawal right: Beneficiaries may find it beneficial not to exercise their withdrawal right, allowing assets to remain in the ILIT for life insurance premium payments. This strategic move ensures a consistent funding source for the policy.
Controlled distributions and legacy planning: Upon the insured’s death, ILITs provide flexibility in distributing life insurance proceeds. Trustees can manage distributions based on the trust document, preventing young beneficiaries from receiving a lump sum and instead allowing for structured payments over time.

In conclusion, using an ILIT is just one way to exclude the proceeds upon death from a taxable estate. ILITs are a strategic and effective tool for wealth transfer, providing benefits such as estate tax minimization, gift tax exclusion, asset protection, and controlled legacy planning. Careful consideration, proper documentation, and strategic planning are essential elements in harnessing the full potential of ILITs for long-term financial success.

Understanding and adhering to Human Resources (HR) compliance is paramount for employers. Beyond the complexities of daily operations, employers must be well-versed in the intricacies of employment laws, regulations, and ethical standards. In this article, we will explore 10 key aspects that employers should know about HR compliance to foster a healthy, legally sound, and thriving work environment.

Legal Foundation: Employers must establish a robust legal foundation by familiarizing themselves with local, state, and federal employment laws. From wage and hour regulations to workplace safety standards, a comprehensive understanding of the legal framework is essential for avoiding legal pitfalls.
Documented Policies and Procedures: Clear and comprehensive documentation of company policies and procedures is a cornerstone of HR compliance. Employers should ensure that their organizations have well-documented guidelines covering areas such as anti-discrimination policies, code of conduct, and employee benefits. This documentation not only serves as a reference for employees but also protects the organization in legal matters.
Employee Classification: Properly classifying employees as exempt or non-exempt is critical for compliance with wage and hour laws. Employers should understand the criteria that determine employee classifications, including factors such as job duties, salary, and overtime eligibility.
Workplace Diversity and Inclusion: In the era of inclusivity, employers should be cognizant of the importance of workplace diversity and inclusion. Compliance extends to fostering an environment free from discrimination and harassment. Employers should have policies in place to promote diversity and inclusion and address any issues promptly.
Health and Safety Compliance: Providing a safe and healthy work environment is not only an ethical responsibility but also a legal requirement. Employers must adhere to Occupational Safety and Health Administration (OSHA) standards, conduct regular safety training, and implement protocols to minimize workplace hazards.
Employee Rights: Employers should be well-versed in employee rights, including but not limited to the right to privacy, accommodation for disabilities, and protection against retaliation. Knowledge of these rights is essential for preventing legal disputes and maintaining a positive workplace culture.
Data Privacy and Security: With the increasing reliance on technology, employers should prioritize data privacy and security. Compliance with data protection laws, such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA), is crucial for safeguarding employee information.
Training and Development: Providing ongoing training for employees and managers is essential for staying compliant. This includes regular updates on changes in policies, laws, and industry standards. Training ensures that employees are aware of their rights and responsibilities, reducing the risk of inadvertent non-compliance.
Recordkeeping: Maintaining accurate and up-to-date records is not only good business practice but also a legal requirement. Employers should keep records related to employee hours, payroll, tax filings, and other relevant documentation to demonstrate compliance in the event of an audit.
Seeking Professional Guidance: When in doubt, employers should not hesitate to seek professional guidance. Consulting with HR professionals, legal professionals, or engaging with an HR service provider can provide valuable insights and ensure that the organization remains on solid legal ground.

To help you stay on top of compliance requirements and meet regulatory deadlines, view our 2024 HR Compliance Calendar. Download a copy to save for your ongoing reference in 2024.

View Our 2024 HR Compliance Calendar