Five Last-Minute Moves to Lower Your 2015 Tax Bill

Tax Day is right around the corner. Have you filed your federal tax return yet? The filing deadline to submit 2015 individual federal income tax returns is Monday, April 18, 2016, rather than the traditional April 15 date. Washington, D.C., will celebrate Emancipation Day on Friday, April 15, which pushes the deadline to the following Monday for most of the nation.

Fortunately, there’s still time to take steps to reduce your 2015 federal tax liability. Here are five last-minute ideas for individuals and small businesses.

1. Individuals Can Choose to Deduct State and Local Sales Taxes

Congress recently made permanent the option to claim a federal income tax deduction for general state and local sales taxes as opposed to deducting state and local income taxes. The option is now available for 2015 and beyond. This is good news for individuals who live in states with low or no personal income taxes, as well as for those who owe little or no state taxes.

If you choose the sales tax option, you can use a table provided by the IRS to calculate your sales tax deduction. Your deduction will vary based on your state of residence, income, and personal and dependent exemptions.

If you use the IRS table, you can also add on actual sales tax amounts from major purchases, such as:

Motor vehicles, including motorcycles, off-road vehicles, and RVs,
Boats,
Aircraft, and
Home improvements.

In other words, you can deduct actual sales taxes for these major purchases on top of the predetermined amount from the IRS table. Alternately, if you saved receipts from your 2015 purchases, you can add up the actual sales tax amounts and deduct the total if that gives you a bigger write-off.

2. Qualified Individuals Can Make Deductible IRA Contributions

If you haven’t made the maximum deductible traditional IRA contribution for the 2015 tax year, you can still make a contribution between now and the tax filing deadline and claim the resulting write-off on your 2015 return. The maximum deductible contribution for 2015 was $5,500 per taxpayer — or $6,500 if you or your spouse was age 50 or older as of December 31, 2015.

However, there are a couple of catches. First, you must have enough 2015 earned income from jobs, self-employment or alimony received to equal or exceed your IRA contributions for the 2015 tax year. If you are married, either spouse (or both) can provide the necessary earned income.

Second, deductible IRA contributions are gradually phased out if your income was too high last year. (See “Ground Rules for Deductible Contributions to Traditional IRAs” at right.) Fortunately, the phase-out ranges are much higher than they were a few years ago.

3. Business Owners Can Establish SEPs

If you work for your own small business and haven’t yet set up a tax-favored retirement plan for yourself, you can establish a simplified employee pension (SEP). Unlike other types of small business retirement plans, a SEP can be created this year and still generate a deduction on last year’s return.

Important note. If you are self-employed and extend the filing deadline for your 2015 Form 1040 until October 17, you’ll have until that late date to take care of the paperwork and make a deductible contribution for 2015.

The deductible contribution to a SEP can be up to 20% of your 2015 self-employment income or up to 25% of your 2015 salary if you work for your own corporation. The absolute maximum amount you can contribute for the 2015 tax year is $53,000. If you have the cash on hand to fund a SEP contribution, the tax savings can be substantial.

For example, if you’re self-employed and in the 28% federal income tax bracket, a $30,000 SEP contribution could lower your 2015 federal income tax bill by $8,400 (plus any state income tax savings). In many cases, the tax savings could fund a big chunk of your contribution.

Establishing a SEP is simple. Your bank or financial adviser can help you complete the required paperwork. But don’t jump the gun if your business has employees. Your SEP will likely have to cover them and make contributions to their accounts, which could be cost prohibitive. Your tax and financial advisers can help you decide whether establishing a SEP is a smart move for your business.

4. Small Business Owners Can Claim Section 179 Deduction for Real Property Expenditures

Section 179 provides a federal income tax break that allows eligible small businesses to deduct the entire cost of qualifying asset purchases (including software) in the year they’re placed in service (rather than depreciating them over their useful lives). Real property improvement costs have traditionally been ineligible for the Sec. 179 deduction. But there’s an exception for qualified real property improvements placed in service in tax years beginning in 2015.

You can claim a Sec. 179 deduction for real property expenditures of up to $250,000 for:

Interiors of leased nonresidential buildings,
Restaurant buildings, and
Interiors of retail buildings.

The Sec. 179 allowance for real estate had previously expired at the end of 2014, but recent legislation made it permanent for 2015 (and beyond). Additional rules and restrictions may apply, so consult your tax adviser before claiming Sec. 179.

5. Businesses Can Take Advantage of Favorable Provisions in Tangible Property Regulations

In general, IRS regulations require most tangible property costs to be capitalized and depreciated over their useful lives, rather than deducted in the tax year that they’re placed in service. But there are a few taxpayer-friendly exceptions, including:

Small businesses can elect to immediately deduct items costing up to $2,500 that would otherwise have to be capitalized and depreciated over a number of years. The deduction allowance was increased to the current $2,500-per-item amount by IRS Notice 2015-82. Previously, the allowance was only $500. Larger businesses that have an applicable financial statement for the 2015 tax year (generally, those required to file Form 10-K with the SEC and those with audited financial statements) can deduct items costing up to $5,000. The election to take advantage of these deduction allowances can be made with the 2015 return or form for your business.
Expenditures for incidental materials and supplies can be deducted in the year they’re paid or incurred. These expenditures include non-inventory items: 1) worth $200 or less, or 2) with useful economic lives of 12 months or less.

Consult with a Michigan Accountant

These are some of the more common last-minute tax-saving maneuvers that individuals and small business owners can take before Tax Day. As always, Yeo & Yeo tax professionals can advise you on the optimal tax-saving strategies for your specific situation.

If there was a college student in your family last year, you may be eligible for some valuable tax breaks on your 2015 return. To max out your education-related breaks, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one break per student, and, for some breaks, only one per tax return.

Credits vs. deductions

Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed. A couple of credits are available for higher education expenses:

The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.

But income-based phaseouts apply to these credits.

If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, the Lifetime Learning credit isn’t necessarily the best alternative.

Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.

How much can your family save?

Keep in mind that, if you don’t qualify for breaks for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the credits and deduction, however. To learn which breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — please contact us.

While preparing your succession or estate plan, it can be helpful to value your family business both internally and externally.

You might wonder what that means — because you think your company has just one value. In fact, it can have multiple values depending on the valuation standard used. The different results can help you determine whether to keep the family business, pass it on to the next generation or sell it to an outsider.

Two common standards used in valuing a family business are:

1. Investment value. This gauges internal value, which represents the value to a particular investor based on individual investment requirements and expectations. In layman’s terms, it is what the business is worth to the current owner(s).

2. Fair market value. This is the external value and refers to the price in terms of cash equivalents at which the property would change hands between hypothetical willing-and-able buyers and sellers if:

They are acting at arm’s length in an open and unrestricted market;
Neither is under any compulsion to buy or sell; and
Both have reasonable knowledge of the relevant facts.

In layman’s terms, this is what you can expect to get when you place your business on the market to sell to a qualified buyer.

The relevance of these two valuations lies in their differences. The investment value of an operating business could be higher or lower than the fair market value. That difference is driven by the actions that “control owners” take in their best interests. As examples, owners controlling a family business can often take advantage of:

Compensation. Owners have the flexibility to pay themselves higher-than-market compensation. A buyer in a fair market transaction has to pay only what the market requires to replace the owner’s compensation. In a family business, family members are on the payroll and also may receive more than market compensation. In addition, these family members may be employed only because the business is held in the family. If the business is sold, the new owners might not retain any family members or pay their high salaries, if they are kept on.
Fringe benefits. Owners in control of a family business can also manipulate fringe benefits. For example, they and family members may have life insurance, disability insurance, or health insurance that the company pays for. A new owner may not be able or willing to match that benefit. The business might also own an airplane and or a vacation home and offer a liberal expense policy. These ownership benefits are not likely to be retained by a buyer and that creates a difference between the investment value and the fair market value.
Related-party relationships and transactions. A family business might rent its business property from a related party, often for an amount higher or lower than the fair market rent. If the business is sold, the property might be at some economic risk. The attractiveness of the property to an outside buyer should be taken into account as these related-party transactions can have an impact on fair market value.
Changes in capital structure. Owners controlling the business have the power to maintain or change the capital structure of the business. In many cases, the capital structure is not ideal for the business. It often under–utilizes debt and that deflates value on a fair market basis.

The bottom line is that these variations generate a difference in the value to the current owner (the investment value) and the value to a potential buyer (the fair market value).

You need to account for these differences in arranging succession, exit and estate plans. The values can help you decide what to do with the family business. Keep in mind that the effect of suddenly not owning a business can be considerable, both on you and family members, especially if you have not considered the different valuations. This needs to be part of planning your estate, as well as the estates of relatives involved in the business as partners.

Your business and estate planning advisers can be a valuable asset in making the assessments and determining the effect of selling compared with retaining ownership within the family.

Are you interested in more information on succession and estate planning?

Read, Succession Planning Requires Smart Strategies. Also, learn how Yeo & Yeo’s Business Valuation specialists can assist you in proving the financial condition of your business here.

Today it’s becoming more common to work from home. But just because you have a home office space doesn’t mean you can deduct expenses associated with it.

Eligibility requirements

If you’re an employee, your use of your home office must be for your employer’s convenience, not just your own. If you’re self-employed, generally your home office must be your principal place of business, though there are exceptions.

Whether you’re an employee or self-employed, the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with that space.

A valuable break

If you are eligible, the home office deduction can be a valuable tax break. You may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space.

Or you can take the simpler “safe harbor” deduction in lieu of calculating, allocating and substantiating actual expenses. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

More considerations

For employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI).

If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.

Finally, be aware that we’ve covered only a few of the rules and limits here. If you think you may be eligible for the home office deduction, contact us for more information.

Most Americans hate receiving unsolicited telemarketing calls. Inevitably, they seem to happen at the worst possible times — when you’re sitting down to dinner, tuning in to your favorite television show or drifting off to sleep. Fortunately, the Federal Trade Commission (FTC) allows you to sign up for the Do Not Call (DNC) registry.

In general, this free service makes it illegal for telemarketers to contact you, but there are a number of exceptions and rules that must be followed. Here are 10 facts about the registry that you should know to protect yourself from unsolicited interruptions to your daily grind.

1. The Purpose

The FTC created the national DNC Registry in January 2003 when it issued final amendments to the Telemarketing Sales Rule. It’s intended to provide consumers with a choice about whether to receive telemarketing calls at home.

The FTC’s biennial report about the DNC Registry for 2014-2015 reveals that more than 222 million people are currently using this free service. In general, unsolicited calls to people on this registry are illegal, unless the caller falls under one of the exemptions (see below).

There’s no deadline for adding your phone number to the DNC list. FTC rules require callers that aren’t exempt from the rules to stop telemarketing calls 30 days after you register a number.

Important note. Business-to-business calls are not covered under the DNC rules.

2. Re-Registration

When the DNC list was created, registrations expired and consumers had to renew their listing every five years. However, that’s no longer the case. Now your number stays on the DNC registry until you cancel your registration or discontinue service.

If you move within the same geographic area and keep the same phone number, you probably won’t need to re-register with the FTC. Such “ported” numbers are removed from the DNC list only if both the address and name on the account change.

Important note. People who move and retain the same phone number may need to re-register if they also change names. For example, newlyweds who change their names and then move in together may want to verify that their phone numbers are still on the list.

3. Fees for Business Access

Most legitimate companies don’t call consumers on the DNC registry. But some businesses intentionally sidestep the registry — or are unaware of the DNC rules.

Before calling a personal phone number, businesses are supposed to reference the DNC registry and remove registered numbers from their calling lists (unless the caller qualifies for an exemption).

The annual fee for businesses to access the registry is $60 per area code for 2015 and 2016. But the first five area codes are available for free to provide relief to smaller businesses and startups. The maximum annual fee for accessing the entire DNC list is $16,482 in 2015 and 2016. More than 23,000 organizations accessed the registry last year, including 2,504 businesses that paid more than $13.3 million to the FTC.

Failure to follow the DNC rules could result in consumer complaints, FTC investigations and fines of up to $16,000 per call. Wrongdoers also may be required to pay redress to injured consumers.

4. Exemptions

Some organizations are exempt from the government’s DNC rules, including:

Charities or certain Non-Profit organizations,
Organizations engaged in political solicitations or surveys, or
Sellers or telemarketers that have an “established business relationship” or have obtained the express written agreement to call a customer on the DNC registry.

Last year, 521 exempt organizations voluntarily chose to access the registry to honor the wishes of people on the list. When exempt organizations make calls to phone numbers on the list, it can create “bad will” for the organization making the call. The FTC allows exempt organizations to access the DNC registry for free.

Important note. Because it’s a presidential election year, expect an unusually high volume of calls from political candidates and pollsters this summer and fall. Unfortunately, these callers generally qualify as exempt organizations, so there’s nothing you can do to prevent them from calling your home.

5. “Existing Business Relationship” Exception

Telemarketers can legitimately call people on the DNC registry if they can prove an “established business relationship.” Relationships that meet this exception include:

Existing customers. Consumers who purchase, rent or lease goods or services from the specific seller (or engage in a financial transaction with the seller) within the 18 months immediately preceding the date of a telemarketing call.

Prospective customers. Consumers who inquire about or apply for a product or service offered by the specific seller within the three months immediately preceding the date of a telemarketing call.

In November 2015, the Telemarketing Sale Rule was amended to shift the burden of proving the existence of established business relationships to the seller.

Important note. This exemption does not apply if the person has asked to be on the seller’s entity-specific DNC list by telling the caller that he or she doesn’t want to receive telemarketing calls from the seller. Other types of exempt organizations, including charities, may not be required to keep an entity-specific DNC list, but many do as a courtesy to consumers.

6. Related Party Rules

Does the established business relationship exception extend to related parties, such as affiliates or subsidiaries? That’s a gray area in the DNC rules, so the FTC looks at two primary factors to answer that question: 1) the degree of similarity between the products and services offered by the seller and its affiliate or subsidiary, and 2) the degree of similarity between the entities’ names. Greater similarity generally equates with greater likelihood that a call will fall within the scope of this exception.

In addition, affiliates and subsidiaries must maintain separate entity-specific DNC lists. Just requesting a company to put you on its DNC list doesn’t result in that request being extended to related parties. If an affiliate or a subsidiary calls, you will have to request to be placed on that company’s list, too.

7. Lead Generators and Sweepstakes

Some companies try to exploit the established business relationship exception. For example, lead generators may try to find customers who are interested in a product or service through Web advertisements, free offers or cold calling campaigns. Then they may sell customer information to other companies who sell similar products and services.

Before using a list obtained from lead generators, businesses must access the DNC registry and remove registered numbers from their calling list. Under FTC rules, the lead generator might have a relationship with a consumer, but that relationship doesn’t automatically pass to the purchaser of the list of leads. The relationship transfers only if the consumer inquired about the offerings of the specific seller or the lead generator told the consumer to expect calls from the specific seller.

Likewise, some companies may try to use sweepstakes to demonstrate an established business relationship. But entry in a sweepstakes contest alone doesn’t allow companies to circumvent the DNC registry.

8. Technology Issues

Technological advances have made telemarketing campaigns cheaper and easier to implement. Most telemarketers routinely use automatic telephone dialing systems or prerecorded messages (commonly referred to as “robocalls”), instead of calling consumers directly. In October 2013, the Federal Communications Commission eliminated the established business relationship exception that applied to prerecorded telemarketing calls to residential lines.

These technologies — along with equipment that allows callers to fake their identities on caller ID — make it harder for the FTC to find and prosecute scammers. The problems related to technology-driven DNC rule violations are pervasive. In 2015, the FTC received an average of more than 175,000 complaints about robocalls each month.

9. FTC Contests

The FTC is working with industry groups, academic professionals and other government agencies to encourage new technologies to combat illegal telemarketing calls. It’s even held contests to spur technological solutions from the private sector. A contest in 2012 led to the development of Nomorobo, a free service that’s helped stop over 65 million robocalls. Additional contests were held in 2014 and 2015.

10. Getting Help

If you’d like to register your phone number for the DNC list or verify that your number is already included, visit the registry at www.donotcall.gov or call (888) 382-1222 from the phone number you’re registering.

If you receive an illegal call on a registered phone line, the FTC warns not to interact in any way. Don’t press buttons to be taken off the call list or to talk to a live person. Doing so could lead to more unwanted calls. Instead, hang up and file a complaint immediately. Complaints may be filed online, by phone or by mail with either the FTC or Federal Communications Commission (for illegal calls to cell phones).

Contact your legal or financial advisers for additional information about how these rules, as well as any applicable state DNC rules, affect you — or your business, if you sell products or services using telemarketing campaigns.

Hot Topic for you? Check out, Debunking the Myths about Telemarketing Calls to Cell Phones.

For the last several years, taxpayers have been allowed to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes. This break can be valuable to those residing in states with no or low income taxes or who purchase major items, such as a car or boat. But it had expired December 31, 2014. Now the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) has made the break permanent.

So see if you can save more by deducting sales tax on your 2015 return. Don’t worry — you don’t have to have receipts documenting all of the sales tax you actually paid during the year to take full advantage of the deduction. Your deduction can be determined by using an IRS sales tax calculator that will base the deduction on your income and the sales tax rates in your locale plus the tax you actually paid on certain major purchases.

Questions about this or other PATH Act breaks that might help you save taxes on your 2015 tax return? Contact us — we can help you identify which tax breaks will provide you the maximum benefit.

If your organization receives federal funds, whether from a pass-through entity, such as the State of Michigan, or directly from the federal government, you need to be aware that the Uniform Grant Guidance 2 CFR 200 is now applicable. Watch our video to learn about those things you need to verify are in place now, before your auditor comes asking questions. Even if federal funds are below the threshold requiring an audit, the compliance requirements of the Uniform Grant Guidance, including many required policies and procedures, still apply.

We encourage you to watch Yeo & Yeo’s Uniform Grant Guidance Webinar to stay informed. Our webinar will provide you with answers you have been searching for about Uniform Grant Guidance.

Other resources you can review for further information on how to comply with the Uniform Grant Guidance:

Download a PDF of the Uniform Grant Guidance Webinar here.
OMB: Office of Federal Financial Management
OMB: Office of Management and Budget
Uniform Grant Guidance Administrative Requirements, Cost Principals and Audit Requirements for Federal Awards
Council on Financial Assistance Reform 2 C.F.R. 200: Uniform Grant Guidance
Federal Audit Clearinghouse Internet Data Entry System
OMB M 13-17 (Evidence and innovation agenda)

If you have additional questions, contact a Yeo & Yeo professional.

Bonus depreciation allows businesses to recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extended 50% bonus depreciation through 2017.

The break had expired December 31, 2014, for most assets. So the PATH Act may give you a tax-saving opportunity for 2015 you wouldn’t otherwise have had. Many businesses will benefit from claiming this break on their 2015 returns. But you might save more tax in the long run if you forgo it.

What assets are eligible

For 2015, new tangible property with a recovery period of 20 years or less (such as office furniture and equipment) qualifies for bonus depreciation. So does off-the-shelf computer software, water utility property and qualified leasehold-improvement property.

Acquiring the property in 2015 isn’t enough, however. You must also have placed the property in service in 2015.

Should you or shouldn’t you?

If you’re eligible for bonus depreciation and you expect to be in the same or a lower tax bracket in future years, taking bonus depreciation (to the extent you’ve exhausted any Section 179 expensing available to you) is likely a good tax strategy. It will defer tax, which generally is beneficial.

But if your business is growing and you expect to be in a higher tax bracket in the near future, you may be better off forgoing bonus depreciation. Why? Even though you’ll pay more tax for 2015, you’ll preserve larger depreciation deductions on the property for future years, when they may be more powerful — deductions save more tax when you’re in a higher bracket.

We can help

If you’re unsure whether you should take bonus depreciation on your 2015 return — or you have questions about other depreciation-related breaks, such as Sec. 179 expensing — contact us.

By purchasing stock in certain small businesses, you can not only diversify your portfolio but also enjoy preferential tax treatment. And under a provision of the tax extenders act signed into law this past December (the PATH Act), such stock is now even more attractive from a tax perspective.

100% exclusion from gain

The PATH Act makes permanent the exclusion of 100% of the gain on the sale or exchange of qualified small business (QSB) stock acquired and held for more than five years. The 100% exclusion is available for QSB stock acquired after September 27, 2010. (Smaller exclusions are available for QSB stock acquired earlier.)

The act also permanently extends the rule that eliminates QSB stock gain as a preference item for alternative minimum tax (AMT) purposes.

What stock qualifies?

A QSB is generally a domestic C corporation that has gross assets of no more than $50 million at any time (including when the stock is issued) and uses at least 80% of its assets in an active trade or business.

Many factors to consider

Of course tax consequences are only one of the many factors that should be considered before making an investment. Also, keep in mind that the tax benefits discussed here are subject to additional requirements and limits. Consult us for more details.

The latest manufacturing industry statistics are generally encouraging and most observers remain cautiously optimistic as 2016 approaches.

But news coverage usually focuses on output. What about handling inventory in this environment of varying supply and demand? This is a constant concern for manufacturers, and possibly you’re among them. By improving inventory management, you may be able to brighten your firm’s immediate outlook by maintaining good customer service and trimming costs.

Potential Problem Areas

Naturally, different sorts of problems arise in different markets, whether its pharmaceuticals, packaged goods or some other industry. But there are common indicators. Here are several examples.

Data management: What is especially troubling in this area is that firms often have the means to achieve better results, but managers either take no action or incorrectly analyze information. For instance, inaccurate procurement and manufacturing lead times will often result in poor inventory judgments. End result: The company ends up with overstocked shelves in anticipation of needs that never come up.
Coordination of activities: Many managers emphasize that cutting down the manufacturing cycle time and filling orders faster will provide a competitive advantage. While that is true, individual elements of overall cycle time must be coordinated to meet overall objectives.
Lack of communication: Similarly, a lack of communication within the firm or between supply chain partners can create inventory-related problems. Departments must remain in close and frequent contact. Gaps in information can lead to overstocking.

The following five steps can help improve inventory management at your firm:

1. Assess business functions and processes. Be sure you understand the current order-to-delivery (OTD) process. Identify any significant gaps or improvement opportunities to accelerate change among cross-functional teams, including sourcing, planning, commercial operations, stockroom and manufacturing. Some of the key elements are:

Question individuals who perform the same job within each function of the OTD process, hold follow-up meetings with others from each function to clarify their roles and duties and obtain input that can be used to measure current processes and share responsibilities.
Use a scoring system encompassing several planning and execution categories to summarize your findings and seek third-party help for a broader and more objective view.
Prepare for the transition by gradually migrating toward the new processes.
Find ways to make the new processes more palatable to long-term workers, who may resist change and ensure that everyone within the business is informed about pending improvements and how the changes will be integrated.

2. Develop the plan. Ensure that the data being used to create the inventory plan is complete, accurate and up-to-date. Fill in any gaps. Next, establish the operational definitions for effective inventory controls. These definitions are critical for standardization and improvements, especially if your firm has expanded through acquisitions and is using multiple data sources.

The plan may be driven by data relating to on-hand inventory, open orders, lead time, standard or average costs and your bill of materials (BOM). Typically it could feature these steps:

Independent planning for each manufacturing segment,
Classifying into raw materials, work-in-process or sub-assembly, and finished goods,
Categorizing into stock and non-stock categories,
Calculating minimum order quantities by parts to optimize inventory and transaction costs,
Identifying initial inventory impact and investment, and
Planning for transitional changes to transactional systems.

3. Execute the plan. Although the plan doesn’t have to be etched into stone, management should approve any deviations. This requires discipline from both managers and floor workers. The following steps will help:

Adhere to inventory planning and ordering policies for each segment.

Install strict controls to ensure data quality and consistency.
Link production schedules with materials.
Establish a supplier performance management process that captures effective contract management, provides metrics and reviews performance.
Simplify and standardize processes for routine tasks. Delegate authority needed to ensure consistent best practices.

4. Measure the results. It’s virtually impossible to improve inventory management without some measurement. To sustain improvements, your firm may establish key performance indicators and metrics for each process during periodic reviews.

Metrics can provide insights into performance for service levels, safety stock investment, ordering costs and total excess inventory value. Grade your firm’s suppliers based on delivery, costs, quality, responsiveness and reliability. Search for ways to minimize rework and related wastes. Encourage workers to document and share successes and failures.

5. Keep improving. If this methodology provides results, continue to seek improvement. Conduct periodic reviews to discuss potential changes, review agreements with key suppliers, minimize ordering quantities and train workers to operate at maximum efficiency.

Optimal Timing

Don’t accept the status quo for inventory management. With another new year rapidly approaching, this is an optimal time to consider these five steps. They can lead to a more profitable operation in 2016.

The Affordable Care Act (ACA) seems to be making Health Savings Accounts (HSAs) more popular than ever. A recent report issued by Devenir, an HSA industry participant, highlights two key findings:

1. As of June 30, 2015, the number of HSAs climbed 23% from the previous year to 14.5 million, and

2. Account balances jumped 25% to approximately $28.4 billion over the same time period.

In 2010, the Employee Benefit Research Institute reported that there were 5.7 million HSAs with balances totaling $7.7 billion. Clearly, these accounts are becoming more popular.

ACA Effect

Under the ACA, health insurance plans are categorized as bronze, silver, gold or platinum. Bronze plans have the highest deductibles and least-generous coverage, so they’re the most affordable. At the opposite end of the spectrum, platinum plans have no deductibles and more coverage, but they’re also much more expensive. In many cases, the ACA has led to significant premium increases — even for those who prefer more basic (and economical) plans.

Fortunately, some of the more basic plans also can make you eligible to make tax-saving HSA contributions. Those tax savings partially offset premium increases and skimpier coverage, leading to a surge in the popularity of HSAs.

HSA Basics

An HSA is an IRA-like trust or custodial account that you can set up at a bank, insurance company or any other entity the IRS declares suitable, such as brokerage firms or credit unions. (You can find suitable HSA trustees with a simple Internet search.)

HSAs must be intended exclusively for paying qualified medical expenses. In other respects, they’re subject to rules similar to those that apply to IRAs. HSAs also may offer the same investment options as IRAs (stocks, mutual funds, bonds, certificates of deposit and so forth). But some HSA trustees may limit investment choices to more conservative options.

For the 2016 tax year, you can make a deductible HSA contribution of as much as $3,350 if you have qualifying high-deductible self-only coverage or as much as $6,750 if you have qualifying high-deductible family coverage. If you are age 55 or older as of the end of 2016, the maximum deductible contribution goes up by $1,000.

For 2015, the contribution caps are the same, except the maximum deductible contribution for family coverage is $6,650. These amounts are increased by $1,000 if you were 55 or older as of December 31, 2015. You have until April 18, 2016, to make an HSA contribution for the 2015 tax year.

You must have a qualifying high-deductible health insurance policy — and no other general health coverage — to be eligible for this HSA contribution privilege. For 2015 and 2016, a high-deductible policy is defined as one with a deductible of at least $1,300 for self-only coverage or $2,600 for family coverage.

For 2016, qualifying high-deductible policies can have out-of-pocket maximums of as much as $6,550 for self-only coverage and $13,100 for family coverage. For 2015, these amounts are $6,450 and $12,900, respectively.

If you are eligible to make an HSA contribution for a tax year, the deadline is April 15 of the following year (adjusted for weekends and holidays) to open an account and make a contribution for the earlier year. This is the same deadline as for IRA contributions. So there’s still time to make a contribution for the 2015 tax year.

The write-off for HSA contributions is an above-the-line deduction, so you needn’t itemize to benefit. Also, the HSA contribution privilege isn’t lost if you are a high earner.

Tax Treatment of Distributions

HSA distributions used to pay qualified medical expenses of the HSA owner and his or her spouse or dependents are free from federal income tax. You may build up a balance in the account if contributions plus earnings exceed withdrawals.

Any income earned is also free of federal income taxes. So, if you are in very good health, you can use your HSA to build up a substantial medical expense reserve fund over the years while collecting deductions and earning tax-free income along the way.

If you still have an HSA balance after reaching Medicare eligibility age, you can drain the account at any time. You will owe federal income tax on the withdrawals, but there’s no penalty. Alternatively, you can keep your HSA open and continue using it to pay medical expenses with tax-free withdrawals.

Thus, an HSA can function like an IRA if you stay healthy. Even if you have to empty the account every year to pay medical expenses, the HSA arrangement allows you to pay those expenses with pretax dollars. But there are some important caveats to bear in mind:

HSA funds cannot be used for tax-free reimbursements of medical expenses that were incurred before you opened the account.
If money is taken out of an HSA for any reason other than to cover qualified medical expenses, it will trigger a 20% penalty tax, unless you are eligible for Medicare.

Contribution Eligibility

According to the general rule, eligibility to make HSA contributions is determined on a monthly basis. So, when you have qualifying high-deductible health coverage for only part of the year, you can contribute and deduct one-twelfth of the annual limit for each month that qualifying coverage is in effect.

Under an exception to this rule, if you are eligible to make HSA contributions as of the last month of the year, you can be treated as eligible for the entire year and thus contribute the maximum for that year. While being able to make a full HSA contribution based on end-of-year eligibility is helpful, a harsh recapture rule may apply if you become ineligible for HSA contributions during the subsequent 12-month testing period.

The testing period begins with the last month of the tax year and ends on the last day of the twelfth month following that month. Any recapture amount must be included in your taxable income and incurs a 10% penalty. The risk of falling under the recapture provision may make it inadvisable to use the exception in order to make a bigger HSA contribution.

Contribution Deadlines

HSAs can provide a smart tax-saving opportunity for individuals with qualifying high-deductible health plans. If you’re eligible to make an HSA contribution for the 2015 tax year, you have until April 18, 2016, to open an account and make a deductible contribution. (For the 2016 tax year, you’ll have until April 17, 2017.) Completing the necessary forms takes only a few minutes. Consult with your tax adviser for more information about HSAs.

The research credit isn’t the only tax break available for research activities. Section 174 of the tax code allows taxpayers to elect to either: 1) deduct “research or experimental expenditures” or 2) amortize the costs over a period of not less than 60 months. Qualified expenses are limited to the following:

In-house wages and supplies attributable to qualified research,
Certain time-sharing costs for computer use in qualified research, and
65% of contract research expenses, that is, amounts paid to outside contractors in the U.S. for conducting qualified research on the taxpayer’s behalf.

Important note. The Sec. 174 deduction must be reduced if you claim the research credit for the same expenses. Consult with your tax adviser to determine the best approach for your situation. Contact a Yeo & Yeo Tax Advisor for assistance.

In 2015, FASB finalized the long-awaited revenue recognition project. This impacts GAAP financial statements for all for-profits and any Non-Profit entities that have exchange transaction revenues (non-contribution revenues.) Non-public companies must adopt the revenue recognition standard for years beginning after December 15, 2018. FASB is still working through implementation questions that have come up and additional guidance is still being issued.

Why the long implementation period? It’s simple; many entities will need to make changes in their accounting and other computer systems to properly track and aggregate the data needed to implement these changes.

What should you do now? You need to familiarize yourself with the new five-step process now. We encourage you to watch Yeo & Yeo’s Revenue Recognition on-demand webinar to help navigate the steps. Walk through your revenue streams and understand how the five steps will impact them. Some entities may have no changes in revenue recognition, while others may see substantial changes in the timing of revenue recognition.

Download a PDF of Revenue Recognition Webinar here.

If you have questions, contact a Yeo & Yeo professional.

Don’t believe the rumors you’ve heard about telemarketers calling your cell phone. Placing telemarketing calls to wireless phones is illegal in most cases. The government doesn’t maintain a registry for wireless numbers — and it has no plans to establish one in the future — so compiling lists of wireless numbers is expensive and time consuming. And the Federal Communications Commission (FCC) promises that most calls to cell phones will continue to be illegal even if a 411 phone directory is established for wireless numbers.

FCC regulations prohibit telemarketers from using automated dialers to call cell phone numbers. Most telemarketers use automated dialers, so they’re generally barred from calling consumers on their cell phones without their consent. Consumers do not have to register wireless phones with the Do Not Call (DNC) Registry, although many cell phone users register for the list anyway.

Unfortunately, the rules don’t prevent exempt organizations — such as charities, researchers and pollsters — from calling your cell phone manually. In fact, many exempt organizations plan to increase the calls they make to cell phones to keep pace with people’s changing habits.

Nearly half of U.S. adults have only a cell phone, according to a recent Pew Research study. In general, these individuals tend to be younger, have lower income and education levels, and are more likely to live in urban areas than people with landlines. Reasons for opting out of landline telephone services include cost savings and frustration with unsolicited calls from telemarketing companies and researchers.

Interested in learning more? Read, 10 Facts You Should Know about the Do Not Call Registry.

The Governmental Accounting Standards Board (GASB) issued two new statements that are very similar to the pension standards GASB 67 and 68. The two new statements are GASB 74 and 75.

GASB 74 – Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans

Establishes new accounting and financial reporting requirements for school districts whose employees are provided with other postemployment benefits (OPEB).
Includes defined benefit and defined contribution plans administered through trusts.
Effective for financial statements for fiscal years beginning after June 15, 2016.

What does this mean for school districts? Just like GASB 67, this new standard requires enhanced footnote disclosures and additional schedules for the required supplementary information section of the financial statements. GASB 74 requires the net OPEB liability to be measured as follows: total OPEB liability less the amount of the OPEB plan’s fiduciary net position. This is usually determined through an actuarial valuation. If the OPEB plan has fewer than 100 plan members, both active and inactive, the school district can use a specified alternative measurement method. A new change in this standard requires these valuations or alternative measurements to be performed at least every two years. In the past, this was required every three years. However, the most significant changes will not occur until the implementation of GASB 75.

GASB 75 – Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions

Establishes standards for recognizing and measuring liabilities, deferred outflows and inflows of resources and expenses and expenditures.
For defined benefit OPEB, this pronouncement applies to post-retirement healthcare provided to employees, which is generally provided through the Michigan Public Schools Employee Retirement System (MPSERS). This statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service.
Effective for financial statements for fiscal years beginning after June 15, 2017.

Similar to the calculation of the “net pension liability” for GASB 68, GASB 75 will require school districts to record their “net OPEB liability” in their financial statements, specifically on the district-wide statements for the difference between the total OPEB liability and the OPEB plan net position. There are no significant changes to the accounting for OPEB in the modified accrual statements (governmental/fund level statements). The significant increase in the information required in the footnote disclosures will likely add an additional six to seven pages. GASB 75 also requires changes to the required supplementary information.

The changes in the net OPEB liability are recorded in a similar fashion as the changes in the net pension liability. The changes in interest on the total OPEB liability, terms of the OPEB benefits, and service costs are included in OPEB expense in the period of the change. The actual changes in the economic and demographic assumptions and changes in actual and expected experience differences are amortized over the expected remaining service lives of all employees who are provided with benefits through the Plan (both active and inactive), beginning in the current period. The difference between the projected earnings on the OPEB plan investments and the actual experience with regard to those earnings is amortized over five years, beginning in the year of implementation. Just like GASB 68, this statement also requires that employer contributions made to the OPEB plan subsequent to the measurement date be reported as deferred outflows of resources.

The impact of the changes of these two new OPEB accounting standards will be very similar to the changes seen with the pension standards. It is likely that the net OPEB liability could be larger than the net pension liability as the OPEB plans were never required to be funded like the pension plans were. A good thing to remember is that these plans are not new; most school districts have had these plans for many years and they have been disclosed in the footnotes. What is new, is that they are now required to report them on the full-accrual (district-wide) statements in the financial statements. This statement enhances the transparency and accountability by way of changes and updates to the footnotes and required supplementary information (RSI) schedules.

If you have questions about these new financial reporting requirements, please contact your local Yeo & Yeo office. As implementation gets closer, Yeo & Yeo Michigan accountants will communicate on this standard with clients. We will also provide further updates and key information that you need to know as it becomes available.

Kicking off February 1, organizations around the country will support American Heart Month, and Yeo & Yeo is joining in by being casual for a cause. Firm employees will dress in red shirts and wear jeans on Fridays throughout February. The Michigan accounting firm is proud to support the cause by promoting and providing opportunities for firm-wide support to unite in life-saving awareness-to-action movements.

Stay tuned throughout February to hear from David Schaeffer, managing principal of the firm’s Saginaw office, survivor of a “widow maker” heart attack and a truly positive light in his community. Also shared will be the heart-healthy stories of James Kuch, Jill Uhrich and Mark Kunitzer. Each one of the spotlights will highlight what has inspired them to be fit and healthy, as well as what motivates them to continue to make healthy lifestyle choices.

Read Yeo & Yeo’s Health & Wellness Stories here.

Yeo & Yeo was named one of Michigan’s Best and Brightest Companies in Wellness in 2014 and 2015, an initiative that recognizes and celebrates quality and excellence in worksite health. The program highlights companies that promote a culture of wellness.

“We are committed to the health and wellness of our employees, and our goal is to help them be empowered to make real changes in their health and lifestyle behaviors,” said Thomas E. Hollerback, president and CEO of Yeo & Yeo.

Yeo & Yeo supports the wellness of its employees by providing an AED for every office and encouraging life-saving training. The Michigan accounting firm offers a gold level healthcare plan, relieving its employees of a large portion of premiums. In addition to keeping healthcare costs low, the firm has a high percentage of participation in its wellness plan which includes a further healthcare premium reduction incentive. Another initiative is the firm’s Fitbit Fitness Program. Monthly, themed challenges for individuals and teams, along with prizes and friendly competition, have resulted in a high level of involvement. The firm also provides free flu shots for all employees who elect to participate.

Please join Yeo & Yeo in recognizing American Heart Month.

The research credit is back — this time for good — and it’s better than ever for some small companies. The Protecting Americans from Tax Hikes (PATH) Act of 2015, signed into law by the president on December 18, does much more than extend this credit. Under the PATH Act, the research credit is restored retroactive to January 1, 2015, and has finally been made permanent. The new law also provides two additional tax benefits that take effect in 2016 for certain employers.

What Is the Research Credit?

The research credit was introduced in 1981 to encourage spending on research and experimentation activities by cutting-edge companies. But it was enacted on a temporary basis, and subsequent extensions — generally lasting only a year or two — have also been temporary. The last extension, approved by Congress as part of the Tax Increase Prevention Act of 2014, was the 16th extension of the credit and applied only for one year before the credit expired again on January 1, 2015.

Over the years, the research credit has been modified several times. Currently, the credit equals the sum of the following items:

20% of the excess of qualified research expenses for the year over a base amount,
The university basic research credit (that is, 20% of the basic research payments), and
20% of the qualified energy research expenses undertaken by an energy research consortium.

The base amount used in this calculation is a fixed-base percentage (not to exceed 16%) of the average annual receipts from a U.S. trade or business, net of returns and allowances, for four years prior to the year in which you claim the credit. It can’t be less than 50% of the annual qualified research expenses. In other words, the minimum credit equals 10% of qualified research expenses (50% of the 20% credit).

For an expense to qualify for the research credit, it must meet the following criteria:

It qualifies as a “research and experimentation expenditure” under Section 174 of the tax code. See, “Another Tax Break for Research Expenses” for more information.
It relates to research undertaken for the purpose of discovering information that’s technological in nature and the application of which is intended to be useful in developing a new or improved business component, and
Substantially all of the activities of the research constitute elements of a process of experimentation that relates to new or improved functionality, performance, reliability or quality.

Is There a Simpler Way to Calculate the Research Credit?

In lieu of claiming the basic research credit as described above, Congress has authorized an alternative simplified credit (ASC). Currently, the ASC equals 14% of the amount by which qualified expenses exceed 50% of the average for the three preceding tax years.

The ASC may be preferable to the regular research credit for some companies. For example, your company possibly may opt for the ASC, rather than the regular credit, under the following conditions:

You have a high base amount for the regular calculation,
You lack detailed records to support qualified expenses during the base period years,
You’ve experienced significant growth in receipts in recent years, or
You have a complex history of organizational activity (such as a recent merger or disposition of a business line).

The ASC, which first became available in 2007, replaced the alternative incremental research credit (AIRC).

How Does the New-and-Improved Research Credit Measure Up?

The practice of periodically allowing the research credit to expire and then be reinstated, often on a retroactive basis, has made it especially difficult for companies to plan ahead. Previously, managers frequently made decisions about incurring expenses and authorizing projects without knowing whether those expenditures would be eligible for the research credit. This likely had a dampening effect on the research and experimentation activities at companies that heavily rely on the credit to help defray the costs.

Now that uncertainty is over. The research credit has finally been made permanent by the PATH Act, without any interruption since it was last extended in 2014. The new law also improves the credit for some small companies in the following two ways:

1. AMT liability. Effective for 2016 and thereafter, a qualified small business may claim the research credit against its alternative minimum tax (AMT) liability. For this purpose, a qualified small business is one with $50 million or less in annual gross receipts.

2. Payroll taxes. Also effective for 2016 and thereafter, a qualified startup company may claim the research credit against up to $250,000 in FICA taxes annually for up to five years. For this purpose, the company must have less than $5 million in gross receipts.

It’s important to note that the bill that worked its way through Congress also included a provision to increase the base figure for the ASC from 14% to 20%. Although this particular modification didn’t make it into the final version of the PATH Act, it’s likely that supporters of such an increase will renew their efforts to have the ASC modified in subsequent legislation.

Take Advantage of This Tax Planning Opportunity

Now qualifying companies can count on claiming the research credit when they plan for their research and development projects. Before doing so, meet with your tax adviser to develop a plan that maximizes the benefits allowed under the new law.

Yeo & Yeo is excited to announce the launch of its new Advisor eNewsletters. The eNewsletters provide us with an exciting way to communicate insightful articles, industry-specific news, and developments within our Michigan accounting firm that may impact your business or organization. We are confident the articles and announcements included in our Advisor eNewsletters will be a respected and a valuable source of information for you.

Our new eNewsletter will help you stay current within your industry. We offer several industry and service-focused Advisor eNewsletters covering timely regulatory information, management and operational insight, human resource issues and best practices, business and personal tax planning, succession planning and more.

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We welcome you to refer the eNewsletters to anyone you feel may benefit from the topics included in each issue. The robust features allow you to easily refer a colleague. They also feature the capability to quickly and easily share the insightful articles on your social media networks providing you an accountable tool to be a thought leader in your industry. You can also archive articles for future reference, update your personal information and quickly contact a Yeo & Yeo professional.

We hope you find our new Advisor eNewsletters to be a valuable source of information for your business and personal planning.

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Action required if your district filed claims with the IRS regarding Michigan Public Act 300 of 2012

At the end of December, the Office of Retirement Services (ORS) sent notification that the Internal Revenue Service (IRS) will soon issue determinations on certain protective claims (Form 941-X*) filed by individual districts in regard to the federal tax treatment of the retiree healthcare contributions (HCC) remitted under Public Act 300 of 2012. While no official determinations have been issued, the IRS has informally indicated that it will be considering the retiree HCC under both Public Act 75 of 2010 and Public Act 300 of 2012 as exempt from federal income taxes. Furthermore, ORS announced that although the IRS had informally indicated that Public Act 75 of 2010 retiree HCC will be considered as exempt from FICA taxes, conversely, the final informal indication from the IRS is that the judgements on the protective claims will state that Public Act 300 of 2012 retiree HCC are subject to FICA taxes.

What’s next?

At this time the presumption of the judgment of the IRS on the protective claims is informal.

The ORS stated they are planning to file a Private Letter Ruling request with the IRS seeking a final determination on behalf of the Michigan Public School Employees’ Retirement System (MPSERS) regarding the federal tax treatment of the retiree HCC provided under both Public Act 75 of 2010 and Public Act 300 of 2012.

What does this mean for you?

If your district filed protective claims with the IRS regarding Public Act 300 of 2012 retiree HCC, you should notify ORS and the Michigan School Business Officials of the status of those claims. If you have questions, please contact a member of Yeo & Yeo’s Education Services Group.

History of the 3% healthcare contribution

Public Act 75 of 2010 required each active member of MPSERS to contribute up to 3% of their compensation to the Retiree Healthcare Fund to help the cost of retiree healthcare (which became the HCC discussed above). Those contributions, being mandatory in nature and “picked up” by the district as “employer contributions,” were collected from July 1, 2010, until September 3, 2012. The retiree HCC remitted thereunder continue to be held in escrow awaiting a final determination regarding the legality of Public Act 75 of 2010.

On September 4, 2012, in response to the Michigan Court of Appeals’ decision with respect to Public Act 75, the Governor signed into law Public Act 300 which obligated all active members of the MPSERS, as of September 3, 2012, to elect one of two options regarding their retirement healthcare, within a limited window of time:

1. Active members hired on or before September 3, 2012, could select to continue having the 3% deduction.

2. Members hired on or before September 3, 2012, could elect to participate in a two-part retirement program.

Whereas the courts have yet to issue a final ruling on the legality of Public Act 75 of 2010, on April 8, 2015, the Michigan Supreme Court released its opinion holding that the optional healthcare contributions under Michigan Public Act 300 of 2012 (“PA 300”) do not violate the Michigan Constitution.

In view of the fact that the Michigan Supreme Court has upheld the constitutionality of Public Act 300 of 2012, the IRS has indicated that it is preparing to issue rulings on the protective claims that have been made by individual districts regarding the treatment of the retiree HCC under Public Act 300 of 2012. As discussed above, the IRS has informally indicated that, for federal tax treatment purposes, it views a distinction between the retiree HCC remitted under Public Act 75 of 2010 and Public Act 300 of 2012, respectively. Accordingly, it is expected that the IRS’s ruling will recognize that the retiree HCC remitted under Public Act 300 of 2012 (i.e., from September 4, 2012, to present) are subject to FICA taxes.

*Form 941-X is the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, which was filed if your district subjected the 3% healthcare contributions to FICA taxes between July 1, 2010, and September 3, 2012. This form was completed for each quarter that a claim was made for.

Chip-enabled cards are now available in the United States after years of use in other countries around the world. EMV, the new credit card payment standard, is meant to make credit transactions more secure. “EMV” stands for Europay, MasterCard, and Visa, who are the developers of this standard. Although EMV does not represent Discover or American Express in its name, the two are also participants in the new payment standard.

On October 1, 2015, all credit card companies transitioned to chip-enabled cards and have made them available to their users. In the past, liability risk for fraudulent transactions was placed upon the credit card issuer. However, after October 1, 2015, if the merchant has not updated their card reading technology, the merchant will assume all fraud liability for payments made using a magnetic stripe card reader with a chip-enabled card.

For our QuickBooks clients who utilize the Intuit GoPayment, Intuit has announced they will extend the EMV liability shift by six months for its QuickBooks Payments customers. The extension is intended to allow additional technology transition time. Intuit will cease to assume fraud liability for any purchase administered by a chip card processed via a magnetic stripe on March 31, 2016, and the merchant will then assume all fraud liability.

EMV cards feature “smart chips,” which encrypt data for every sale, making card transactions more secure. The cards are designed to be inserted into the reader and remain in place throughout the entire transaction. Rather than utilizing a magnetic stripe which can be easily cloned, the chip provides a one-time transaction code, decreasing the simplicity of duplication. When processing a transaction by means of a chip-enabled card, payment details are stored and can be referenced by noting their unique code.

While magnetic stripe cards are not extinct, nor will they be in the near future, their modern counterpart is significant. EMV cards require updated processing technology in order to avoid the transfer of fraud liability from the credit card issuer to the merchant.

For assistance with ordering a new EMV chip card reader, contact a member of the Yeo & Yeo Client Accounting Software Team.