Plan Ahead for the 3.8% Net Investment Income Tax

High-income taxpayers face a 3.8% net investment income tax (NIIT) that’s imposed in addition to regular income tax. Fortunately, there are some steps you may be able to take to reduce its impact.

The NIIT applies to you only if modified adjusted gross income (MAGI) exceeds:

$250,000 for married taxpayers filing jointly and surviving spouses,
$125,000 for married taxpayers filing separately,
$200,000 for unmarried taxpayers and heads of household.

The amount subject to the tax is the lesser of your net investment income or the amount by which your MAGI exceeds the threshold ($250,000, $200,000, or $125,000) that applies to you.

Net investment income includes interest, dividend, annuity, royalty, and rental income, unless those items were derived in the ordinary course of an active trade or business. In addition, other gross income from a trade or business that’s a passive activity is subject to the NIIT, as is income from a business trading in financial instruments or commodities.

There are many types of income that are exempt from the NIIT. For example, tax-exempt interest and the excluded gain from the sale of your main home aren’t subject to the tax. Distributions from qualified retirement plans aren’t subject to the NIIT. Wages and self-employment income also aren’t subject to the NIIT, though they may be subject to a different Medicare surtax.

It’s important to remember the NIIT applies only if you have net investment income and your MAGI exceeds the applicable thresholds above. But by following strategies, you may be able to minimize net investment income.

Investment choices

If your income is high enough to trigger the NIIT, shifting some income investments to tax-exempt bonds could result in less exposure to the tax. Tax-exempt bonds lower your MAGI and avoid the NIIT.

Dividend-paying stocks are taxed more heavily as a result of the NIIT. The maximum income tax rate on qualified dividends is 20%, but the rate becomes 23.8% with the NIIT.

As a result, you may want to consider rebalancing your investment portfolio to emphasize growth stocks over dividend-paying stocks. While the capital gain from these investments will be included in net investment income, there are two potential benefits: 1) the tax will be deferred because the capital gain won’t be subject to the NIIT until the stock is sold and 2) capital gains can be offset by capital losses, which isn’t the case with dividends.

Qualified plans

Because distributions from qualified retirement plans are exempt from the NIIT, upper-income taxpayers with some control over their situations (such as small business owners) might want to make greater use of qualified plans.

These are only a couple of strategies you may be able to employ. You also may be able to make moves related to charitable donations, passive activities and rental income that may allow you to minimize the NIIT. If you’re subject to the tax, you should include it in your tax planning. Consult with us for tax-planning strategies.

If you’re a business owner and you hire your children this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, spend time with you, save for college and learn how to manage money. And you may be able to:

Shift your high-taxed income into tax-free or low-taxed income,
Realize payroll tax savings (depending on the child’s age and how your business is organized), and
Enable retirement plan contributions for the children.

A legitimate job

If you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in order for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s salary must be reasonable.

For example, let’s say you operate as a sole proprietor and you’re in the 37% tax bracket. You hire your 16-year-old daughter to help with office work on a full-time basis during the summer and part-time into the fall. Your daughter earns $10,000 during 2021 and doesn’t have any other earnings.

You save $3,700 (37% of $10,000) in income taxes at no tax cost to your daughter, who can use her 2021 $12,550 standard deduction to completely shelter her earnings.

Your family’s taxes are cut even if your daughter’s earnings exceed her standard deduction. Why? The unsheltered earnings will be taxed to the daughter beginning at a rate of 10%, instead of being taxed at your higher rate.

How payroll taxes might be saved

If your business isn’t incorporated, your child’s wages are exempt from Social Security, Medicare and FUTA taxes if certain conditions are met. Your child must be under age 18 for this to apply (or under age 21 in the case of the FUTA tax exemption). Contact us for how this works.

Be aware that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes nonparent partners. And payments for the services of your child are subject to income tax withholding, regardless of age, no matter what type of entity you operate.

Begin saving for retirement

Your business also may be able to provide your child with retirement benefits, depending on the type of plan you have and how it defines qualifying employees. And because your child has earnings from his or her job, he can contribute to a traditional IRA or Roth IRA and begin to build a nest egg. For the 2021 tax year, a working child can contribute the lesser of his or her earned income, or $6,000, to an IRA or a Roth.

Keep accurate records

As you can see, hiring your child can be a tax-smart idea. Be sure to keep the same records as you would for other employees to substantiate the hours worked and duties performed (such as timesheets and job descriptions). Issue your child a Form W-2. Contact us if you have questions about how these rules apply to your situation.

Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance child tax credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021.

How have child tax credits changed?

The ARPA temporarily expanded and made CTCs refundable for 2021. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold.

Advance payments will receive up to $300 monthly for each child under 6, and up to $250 monthly for each child 6 and older. The increased credit amount will be reduced or phased out, for households with modified adjusted gross income above the following thresholds:

$150,000 for married taxpayers filing jointly and qualifying widows and widowers;
$112,500 for heads of household; and
$75,000 for other taxpayers.

Under prior law, the maximum annual CTC for 2018 through 2025 was $2,000 per qualifying child but the income thresholds were higher and some of the qualification rules were different.

Important: If your income is too high to receive the increased advance CTC payments, you may still qualify to claim the $2,000 CTC on your tax return for 2021.

What is a qualifying child?

For 2021, a “qualifying child” with respect to a taxpayer is defined as one who is under age 18 and who the taxpayer can claim as a dependent. That means a child related to the taxpayer who, generally, lived with the taxpayer for at least six months during the year. The child also must be a U.S. citizen or national or a U.S. resident.

How and when will advance payments be sent out?

Under the ARPA, the IRS is required to establish a program to make periodic advance payments which in total equal 50% of IRS’s estimate of the eligible taxpayer’s 2021 CTCs, during the period July 2021 through December 2021. The payments will begin on July 15, 2021. After that, they’ll be made on the 15th of each month unless the 15th falls on a weekend or holiday. Parents will receive the monthly payments through direct deposit, paper check or debit card.

Who will benefit from these payments and do they have to do anything to receive them?

According to the IRS, about 39 million households covering 88% of children in the U.S. “are slated to begin receiving monthly payments without any further action required.” Contact us if you have questions about the child tax credit.

The IRS recently released guidance providing the 2022 inflation-adjusted amounts for Health Savings Accounts (HSAs).

Fundamentals of HSAs

An HSA is a trust created or organized exclusively for the purpose of paying the “qualified medical expenses” of an “account beneficiary.” An HSA can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan.” In addition, a participant can’t be enrolled in Medicare or have other health coverage (exceptions include dental, vision, long-term care, accident and specific disease insurance).

A high deductible health plan (HDHP) is generally a plan with an annual deductible that isn’t less than $1,000 for self-only coverage and $2,000 for family coverage. In addition, the sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan for covered benefits (but not for premiums) can’t exceed $5,000 for self-only coverage, and $10,000 for family coverage.

Within specified dollar limits, an above-the-line tax deduction is allowed for an individual’s contribution to an HSA. This annual contribution limitation and the annual deductible and out-of-pocket expenses under the tax code are adjusted annually for inflation.

Inflation adjustments for next year

In Revenue Procedure 2021-25, the IRS released the 2022 inflation-adjusted figures for contributions to HSAs, which are as follows:

Annual contribution limitation. For calendar year 2022, the annual contribution limitation for an individual with self-only coverage under a HDHP will be $3,650. For an individual with family coverage, the amount will be $7,300. This is up from $3,600 and $7,200, respectively, for 2021.

High deductible health plan defined. For calendar year 2022, an HDHP will be a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage (these amounts are unchanged from 2021). In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) won’t be able to exceed $7,050 for self-only coverage or $14,100 for family coverage (up from $7,000 and $14,000, respectively, for 2021).

Many advantages

There are a variety of benefits to HSAs. Contributions to the accounts are made on a pre-tax basis. The money can accumulate tax free year after year and be can be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term care insurance. In addition, an HSA is “portable.” It stays with an account holder if he or she changes employers or leaves the workforce. If you have questions about HSAs at your business, contact your employee benefits and tax advisors.

Strategic investments — such as expanding a plant, purchasing a major piece of equipment or introducing a new product line — can add long-term value. But management shouldn’t base these decisions on gut instinct. A comprehensive, formal analysis can help minimize the guesswork and maximize your return on investment.

Forecasting cash flows

Financial forecasts typically start with the most recent income statement. Then assumptions are made about 1) how much revenue (or cost savings) will the project generate, and 2) what incremental expenses will the project incur. In some cases, a project may create special tax savings (for example, first-year bonus depreciation or Section 179 deductions) that may need to be factored into the decision.

Strategic investments will also affect your company’s balance sheet and statements of cash flows. For example, they may require additional working capital and fixed assets. Preparing comprehensive financial forecasts helps management evaluate how much cash the project will need each period and whether internal resources will be sufficient to finance it. Some projects will require the company to tap into the company’s line of credit — or require additional loans or capital contributions.

Comparing investment alternatives

Company resources are limited. So, once cash flows have been forecasted, it’s time to analyze the results and prioritize competing investment alternatives. For example, you might have $50,000 to invest in either a new machine or IT upgrades. Which alternative is better from a financial perspective?

Three financial tools that are used to evaluate such decisions include:

1. Accounting payback period. This tells you how long it will take for a project to recoup its initial investment and start generating positive net cash flow — without considering the time value of money. For example, suppose a new machine that costs $48,000 is expected to generate $12,000 of incremental cash flow annually. Its accounting payback period would be four years ($48,000 divided by $12,000).

2. Net present value (NPV). This is a tool that discounts each period’s forecasted cash flow into its present value. The sum of the present values for all the periods equals the project’s NPV. If NPV is greater than zero, the project will generate positive cash flow and it’s worth considering. If not, the project may not be worthwhile. Typically, management uses the company’s cost of capital — or possibly a rate based on the risk of the investment — to discount forecasted cash flow.

3. Internal rate of return (IRR). This tool estimates a project’s expected return on investment. This is the point at which a project’s NPV equals zero. Management typically has a preset hurdle rate that a project must exceed to be considered. For example, if management sets its hurdle rate at 13%, any project with an IRR below 13% will be on the chopping block.

These financial tools may sometimes conflict with one another. So, it’s important to consider qualitative factors, too. For example, IT upgrades might also protect against cyberattacks and reputational harm, which may be difficult to quantify in financial forecasts.

Need help?

Contact us to evaluate the quantitative and qualitative effects of strategic investment alternatives. We can help determine what’s right for your situation.

The Internal Revenue Service (IRS) has provided guidance on tax breaks under the American Rescue Plan Act of 2021 for continuation health coverage under COBRA while also updating Form 7200 for advance payment of employer credits due to COVID-19.

IRS Notice 2021-31 guides employers, plan administrators, and health insurers regarding the new credit available to them for providing continuation health coverage to certain individuals under COBRA.

The American Rescue Plan provides a temporary 100% reduction in the premium that individuals would have to pay when they elect COBRA continuation health coverage following a reduction in hours or involuntary termination of employment. The new law provides a corresponding tax credit for the entities that maintain group health plans, such as employers, multiemployer plans, and insurers. The 100% reduction in the premium and the credit are also available concerning continuation coverage provided for those events under comparable state laws.

Notice 2021-31 provides information regarding the credit calculation, the eligibility of individuals, the premium assistance period, and other information vital to employers, plan administrators, and insurers to understand the credit.

COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state, or local governments. State mini-COBRA laws often provide similar benefits for insured small employers not subject to federal COBRA.

Employers, even those with insured coverage, will have to cover the cost of the premium and request a rebate from the federal government. The IRS has also released Form 7200 and its instructions, which provide additional details on how to request the rebate. The IRS will continue to update information related to health plans on IRS.gov. Find more information about Form 7200 here:

Contact us with questions about COBRA coverage and completing Form 7200.

If your business is organized as a sole proprietorship or as a wholly-owned limited liability company (LLC), you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by conducting business as an S corporation.

Fundamentals of self-employment tax

The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($142,800 for 2021) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases.

What if you conduct your business as a partnership in which you’re a general partner? In that case, in addition to income tax, you’re subject to the self-employment tax on your distributive share of the partnership’s income. On the other hand, if you conduct your business as an S corporation, you’ll be subject to income tax, but not self-employment tax, on your share of the S corporation’s income.

An S corporation isn’t subject to tax at the corporate level. Instead, the corporation’s items of income, gain, loss and deduction are passed through to the shareholders. However, the income passed through to the shareholder isn’t treated as self-employment income. Thus, by using an S corporation, you may be able to avoid self-employment income tax.

Keep your salary “reasonable”

Be aware that the IRS requires that the S corporation pay you reasonable compensation for your services to the business. The compensation is treated as wages subject to employment tax (split evenly between the company and the employee), which is equivalent to the self-employment tax. If the S corporation doesn’t pay you reasonable compensation for your services, the IRS may treat a portion of the S corporation’s distributions to you as wages and impose Social Security and Medicare taxes on the amount it considers wages.

There’s no simple formula regarding what’s considered reasonable compensation. Presumably, reasonable compensation is the amount that unrelated employers would pay for comparable services under similar circumstances. There are many factors that should be taken into account in making this determination.

Converting from a C corporation

There may be complications if you convert a C corporation to an S corporation. A “built-in gains tax” may apply when you dispose of appreciated assets held by the C corporation at the time of the conversion. However, there may be ways to minimize its impact.

Many factors to consider

Contact us if you’d like to discuss the factors involved in conducting your business as an S corporation, and how much the business should pay you as compensation.

Even after your 2020 tax return has been successfully filed with the IRS, you may still have some questions about the return. Here are brief answers to three questions that we’re frequently asked at this time of year.

Are you wondering when you will receive your refund?

The IRS has an online tool that can tell you the status of your refund. Go to irs.gov and click on “Get Your Refund Status.” You’ll need your Social Security number, filing status and the exact refund amount.

Which tax records can you throw away now?

At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2017 and earlier years. (If you filed an extension for your 2017 return, hold on to your records until at least three years from when you filed the extended return.)

However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You should hang on to certain tax-related records longer. For example, keep the actual tax returns indefinitely, so you can prove to the IRS that you filed legitimate returns. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.)

When it comes to retirement accounts, keep records associated with them until you’ve depleted the account and reported the last withdrawal on your tax return, plus three (or six) years. And retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. (You can keep these records for six years if you want to be extra safe.)

If you overlooked claiming a tax break, can you still collect a refund for it?

In general, you can file an amended tax return and claim a refund within three years after the date you filed your original return or within two years of the date you paid the tax, whichever is later.

However, there are a few opportunities when you have longer to file an amended return. For example, the statute of limitations for bad debts is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless.

Year-round tax help

Contact us if you have questions about retaining tax records, receiving your refund or filing an amended return. We’re not just here at tax filing time. We’re available all year long.

WASHINGTON – The Internal Revenue Service and the U.S. Department of the Treasury announced today that the first monthly payment of the expanded and newly-advanceable Child Tax Credit (CTC) from the American Rescue Plan will be made on July 15. Roughly 39 million households—covering 88% of children in the United States—are slated to begin receiving monthly payments without any further action required.

IRS and Treasury also announced the increased CTC payments will be made on the 15^th of each month unless the 15^th falls on a weekend or holiday. Families who receive the credit by direct deposit can plan their budgets around receipt of the benefit. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.

The American Rescue Plan increased the maximum Child Tax Credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children between ages 6 and 17. The American Rescue Plan is projected to lift more than five million children out of poverty this year, cutting child poverty by more than half.

Households covering more than 65 million children will receive the monthly CTC payments through direct deposit, paper check, or debit cards, and IRS and Treasury are committed to maximizing the use of direct deposit to ensure fast and secure delivery. While most taxpayers will not be required to take any action to receive their payments, Treasury and the IRS will continue outreach efforts with partner organizations over the coming months to make more families aware of their eligibility.

Today’s announcement represents the latest collaboration between the IRS and Bureau of the Fiscal Service—and between Treasury and the White House American Rescue Plan Implementation Team—to ensure help quickly reaches Americans in need as they recover from the COVID-19 pandemic. Since March 12, the IRS has also distributed approximately 165 million Economic Impact Payments with a value of approximately $388 billion as a part of the American Rescue Plan.

Additional information for taxpayers on how they can access the Child Tax Credit will be available soon on at IRS.gov/childtaxcredit2021.

In recent years, the accounting rules for certain balance sheet items have transitioned from historical cost to “fair value.” Examples of assets that may currently be reported at fair value are asset retirement obligations, derivatives and intangible assets acquired in a business combination. Though fair value may better align your company’s financial statements with today’s market values, estimating fair value may require subjective judgment.

GAAP definition

Under U.S. Generally Accepted Accounting Principles (GAAP), fair value is “the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.” Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, explains how companies should estimate the fair value of assets and liabilities by using available, quantifiable market-based data.

Topic 820 provides the following three-tier valuation hierarchy for valuation inputs:

Quoted prices in active markets for identical assets or liabilities,
Information based on publicly quoted prices, including older prices from inactive markets and prices of comparable stocks, and
Nonpublic information and management’s estimates.

Fair value measurements, especially those based on the third level of inputs, may involve a high degree of subjectivity, making them susceptible to misstatement. Therefore, these estimates usually require more auditor focus.

Auditing estimates

Auditing standards generally require auditors to select one or a combination of the following approaches to substantively test fair value measurements:

Test management’s process. Auditors evaluate the reasonableness and consistency of management’s assumptions, as well as test whether the underlying data is complete, accurate and relevant.

Develop an independent estimate. Using management’s assumptions (or alternate assumptions), auditors come up with an estimate to compare to what’s reported on the internally prepared financial statements.

Review subsequent events or transactions. The reasonableness of fair value estimates can be gauged by looking at events or transactions that happen after the balance sheet date but before the date of the auditor’s report.

Outside input

Measuring fair value is outside the comfort zone of most in-house accounting personnel. Fortunately, an outside valuation expert can provide objective, market-based evidence to support the fair value of assets and liabilities. Contact us for more information.

“Sales tax” is a phrase that fills many nonprofits with dread, especially when they try to determine whether or not to collect or remit it. The rules last changed in 2018. However, in December 2020, the Michigan Department of Treasury issued Revenue Administrative Bulletin (RAB) 2020-25, without any fanfare, which “clarifies” some things that may change how nonprofits operate.

Exemption for the first $10,000 of sales

Fundraising sales tend to be the biggest sales tax question in the nonprofit world. In Michigan, 501(c)(3), (4), and (19) have some leeway with fundraising sales. Those entities with total sales at retail of $25,000 or less can claim exemption from sales tax on the first $10,000 of sales. The exemption does not apply if the nonprofit already specifically collected the sales tax; all sales tax collected must be remitted. But if the nonprofit was going to do algebra to determine what amount of the gross price was sales tax versus sales price, they do not need to remit taxes on the first $10,000 as long as they keep total sales at retail below $25,000. Once $25,000 is met, all retail sales are taxable (subject to standard sales tax rules).

New developments – who carries the risk?

This RAB goes on to explain several nuances that may be different from how things have operated in the past. The RAB gives several examples where a nonprofit (a school in the example, but it could be any 501(c)(3), or (4)) purchases goods from a for-profit to sell for fundraising purposes. Whether or not these sales are considered sales at retail for the nonprofit or the for-profit is dependent on the entity bearing the risk. If the nonprofit simply takes orders on the front end (through the nonprofit itself or volunteers, including students) and then uses the orders to purchase the fundraising items from the for-profit, the nonprofit has no risk. In that case, the for-profit is the one making the sale because the for-profit is fulfilling the orders. Yes, the school pays the for-profit, but there is no risk to the nonprofit since they only ordered what they had sold. The for-profit must collect and remit the sales tax on the transaction; the nonprofit does not remit sales tax on the transaction.

If instead the nonprofit purchases the goods first, and after purchasing the goods enlists volunteers to sell them, now the nonprofit bears the risk that they may not sell all the items. The sale at retail is the nonprofit’s sale at retail; thus, the amounts are subject to sales tax collection and remittance by the nonprofit but could meet the nonprofit exemption described above. Similarly, suppose a nonprofit school operates their cafeteria themselves. In that case, meals sold to students are not taxable, but if the nonprofit outsources to a for-profit (who really makes the sales to the students), they are taxable.

What is not subject to exemption?

What is not subject to the exemption on the first $10,000 of sales at retail? If a 501(c)(19) sells tangible personal property that is not for the purpose of raising funds for the benefit of an active duty service member or a veteran, that is a taxable transaction for sales tax. However, fundraising by the 501(c)(19) that is for the benefit of the active duty or veterans would be subject to the exemption using the same rules as a 501(c)(3) or (4). In addition, non-fundraising retail sales (such as a gift shop at a nonprofit) are all taxable.

The RAB goes on to explain the tax base for retail sales as well. Just because the nonprofit paid sales tax on a purchase they made from the vendor does not cover their requirement for the nonprofit to charge sales tax on the sale. For example, if a nonprofit pays $10 for a t-shirt and sells it at $15, the nonprofit should not pay any sales tax when purchasing the t-shirt for $10 and should claim a resale exemption. Then the nonprofit would charge the final customer sales tax on the $15. If the nonprofit mistakenly paid tax on the $10 shirt, they still must remit on the $15 of sales and then request a refund on the $10 shirt.

Prepared food at events

Many fundraising events have prepared food. In determining the amount of sales tax required to be remitted, the nonprofit first must determine if the food is part of the fundraising event (not an optional payment and not separately stated) or if it is a separate deliverable (such as a cash bar that is optional to purchase.) If it is a separate deliverable, the nonprofit must remit sales tax on the sales and not simply pay sales tax when purchasing the food from the vendor. If the food is part of the fundraising event, there are two options. If they pay fair value to a vendor for the food, they can pay sales tax to the vendor and have the sales tax requirements complete; this only applies to prepared food sales at fundraising events. Otherwise, the taxable amount is the total fundraising event fee, unless the client can substantiate a lower fair value of the food (in which case the food’s fair value is the taxable amount). Note that in no case do they look at the cost of the food, but rather the fair value. If the event has a $25 admission fee and provides dinner with a fair value of $20, but the food was donated, $20 of the $25 is still subject to sales tax (the fair value).

Auctions and raffles

Auctions and raffles are other areas that can be confusing. If the entity is a 501(c)(3) or (4), then the taxable amount of the auction item is the lesser of the fair value or the proceeds received. However, other entities, including 501(c)(19) entities, must pay sales tax on the proceeds received, regardless of the fair value. The RAB also indicates raffle proceeds are not subject to sales tax, but if the nonprofit purchases a good to be raffled, the nonprofit owes use tax on that purchase. Donated items for the raffle have no use tax requirement (although for the auction, they have a sales tax requirement).

Sales tax license

Generally, nonprofit organizations making retail sales are required to obtain a sales tax license, even if they expect to meet the exemption. The RAB clarifies that a nonprofit entity that makes retail sales at two or fewer events in a calendar year does not have to obtain a sales tax license or register for use tax. Instead, the nonprofit may report and remit tax on Form 3421 Sales Tax Return for Special Events or Form 5089 Concessionaire’s Sales Tax Return.

Conclusion

Nonprofit sales tax has always been – and will always be – complex in the State of Michigan. However, this new RAB changes certain areas, especially fundraisers where the nonprofit does not have the risk, and prepared food sales where the nonprofit sells the food separately. Make sure your nonprofit is calculating sales tax correctly.

For more information, refer to the Treasury’s Revenue Administrative Bulletin 2020-25, Sales and Use Tax Treatment of Nonprofit Entities. Contact your Yeo & Yeo professional if you need assistance.

Management must formally adopt a budget to adhere to the law.

The legislative body must pass a budget for the general fund and each special revenue fund to comply with the Uniform Budget Manual issued by the Michigan Department of Treasury.

Treasury requires that specific requirements be reflected in local governments’ budgets. Although this may sound like a daunting task, adopting and monitoring the budget helps guide decision-making, all while meeting requirements set by the State. In this article, you will find how a budget can help your government and which approach may be best according to your needs.

Budgetary requirements of a local government

State the total mills to be levied and the purpose for each millage levied (truth in budgeting act).
Include amounts appropriated for expenditures and amounts to meet liabilities for the ensuing fiscal year in each fund.
Include estimated revenues by source in each fund for the ensuing fiscal year.
Be consistent with the Uniform Chart of Accounts issued by the State Treasurer (or by the Michigan Department of Education for school districts, intermediate school districts and public school academies).
The budgeted expenditures, including an accrued deficit, shall not exceed budgeted revenues, including available surplus and the proceeds from bonds or other obligations issued under the Fiscal Stabilization Act (Act 80 of 1981 MCL 141.1001).

The budget is sometimes viewed as tedious work when really it is management’s greatest tool.

The budget serves several vital functions for the government, such as a planning, control and communication, and it can also be a motivational tool.

More detailed benefits of proper budgeting procedures include:

A means of opening your eyes to the ongoing and future needs of the government
A control over frivolous spending and waste of government resources
A means to identify and project shortfalls in revenues
A tool to assist leadership in making sound decisions

Budget-to-actual activities should be shared with the finance or other committees regularly, and management must always have the most recent board-approved budget reflected in their financial reporting system. If the correct budget is not reflected in the financial reporting system, how can finance appropriately monitor activities within the budget? This can result in a deficiency in internal controls and noncompliance.

Which budgeting methodology is best for your local government?

Line item budget – identifies expenditures into groupings such as salaries, professional services, insurance, postage, etc. Preparation is simple, but this method makes it difficult to determine if goals are achieved or if programs are adequately funded.
Program budget – identifies expenditures by program accompanied by a narrative description of the services to be provided. Each program budget must detail line item amounts. Slightly more complex in nature, program budgets allow for the program itself to be evaluated.
Program performance budget – identifies the relationship between the dollars spent and units of service performed to determine a cost per unit. This approach is useful in measuring the success of a program but is typically avoided as difficulties arise in allocating unit costs appropriately. Like all the other budget approaches, line-item allocations of costs are necessary.
Management by objectives budget – identifies the specific programs or objectives to be accomplished during the budget year. This approach will allow management to establish target dates and costs for specific objectives and provide a means for the legislative body to measure the performance of the various departments and the management structure.
Zero-based budget – a method in which each department administrator must justify every dollar of their respective budget during each budget cycle.

When correctly approving and adhering to a sound budget, expect deviations from the respective budget. The budget is a benchmarking tool and will rarely equate to actual outcomes of the government’s ongoing activities. However, the legislative body must amend the budget as soon as a deviation is apparent to comply with Treasury guidelines. The budget should be dynamic and represent the financial needs and projections of the government at any point in time and should be amended not only at fiscal year-end.

Contact your Yeo & Yeo professional if you need assistance with your government entity’s budget process.

It’s been an interesting year, to say the least. School districts have been affected dramatically by the pandemic regarding virtual learning, safety protocols and funding. The 2020/2021 audit season is approaching quickly, and preparing for an audit year that had so many changes and uncertainties can be nerve-wracking. Below are some tips to help with your 2020/2021 audit preparation:

1. Identify your federal funds. New funding was pouring in during the year. Identifying for your auditor which revenues and expenses were federal will be essential. Preparing an accurate schedule of expenditures of federal awards (SEFA) will be more important than ever before. Some of these new funding sources may need to be tested for the single audit, so providing correct information up-front will result in the proper programs being tested. Also, if you are providing your auditor with a preliminary SEFA before year-end, correctly estimating expenditures through the end of the year will be very important as well.

2. Document changes in key controls. Many districts had periods during the year where administrative staff were working remotely. Perhaps procedures for your internal controls had to change as a result. Were invoices being approved electronically rather than via signature? Were individuals being paid even though they weren’t working their full FTEs? Documenting changes to your processes and controls in your main transaction cycles because of COVID-19 will be imperative for auditors to evaluate and assess your internal control structure during the audit.

3. Avoid double-dipping. With COVID-19 funding added on top of usual funding sources, a significant emphasis will be placed on verifying that expenditures were not “double-dipped” between grants. Some of the COVID-19 grants allowed for expenditures to be charged back from the 2019/2020 year. Auditors may be looking to verify that those expenditures weren’t first charged to one federal grant during 2019/2020 and then charged to a COVID-19 grant in 2020/2021. Make sure expenditures journaled to COVID-19 grants were not charged elsewhere and are clearly identified and supported.

4. Analyze Budgets. Budgeting hasn’t been easy. In many cases, school districts have had to create various scenarios for the budgets. Changing factors regarding virtual learning, funding cuts, new funding, allowable expenditures, and allowable periods for expenditures have made budgeting a constant concern. Be sure to evaluate the budget to actual results closely towards year-end. Districts will need to make the necessary amendments to keep from incurring expenditures in excess of budgets.

5. Prepare for GASB 84. School districts had the option in 2019/2020 to implement or delay the adoption of GASB 84. If you are one of those districts that delayed, implementation will need to occur in 2020/2021. Districts will be required to evaluate their fiduciary funds and determine whether student activity funds are now special revenue funds based on whether the district has administrative or direct involvement. Those deemed special revenue funds will be moved, and a new fund (Fund 29) must be set up on the district’s books. Don’t forget that this new fund also requires a budget.

Properly preparing for these items will result in a more successful audit in the upcoming year. Yeo & Yeo’s Education Services Group is here to help with questions or concerns you have about the audit or other matters.

For businesses, so much has changed over the past year or so. The COVID-19 pandemic hit suddenly and companies were forced to react quickly — sending many employees home to work remotely and making myriad other tweaks and revisions to their processes.

Understandably, you may not have fully documented all the changes you’ve made. But you should; and among the ideal places to do so is in your employee handbook. Now that optimism is rising for a return to relative normalcy, why not look at your handbook with fresh eyes and ensure it accurately represents your company’s policies and procedures.

Legal considerations

Among the primary reasons companies create employee handbooks is protection from legal challenges. Clearly written HR policies and procedures will strengthen your defense if an employee sues. Don’t wait to test this theory in court: Ask your attorney to review the legal soundness of your handbook and make all recommended changes.

Why is this so important? A supervisor without a legally sound and updated employee handbook is like a coach with an old rulebook. You can’t expect supervisors or team members to play by the rules if they don’t know whether and how those rules have changed.

Make sure employees sign a statement acknowledging that they’ve read and understood the latest version of your handbook. Obviously, this applies to new hires, but also ask current employees to sign a new statement when you make major revisions.

Motivational language

Employee handbooks can also communicate the total value of working for your company. Workers don’t always appreciate the benefits their employers provide. This is often because they, and maybe even some managers, aren’t fully aware of those offerings.

Your handbook should express that you care about employees’ welfare — a key point to reinforce given the events of the past year. It also should show precisely how you provide support.

To do so, identify and explain all employee benefits. Don’t stop with the obvious descriptions of health care and retirement plans. Describe your current paid sick time and paid leave policies, which have no doubt been transformed by federal COVID relief measures, as well as any work schedule flexibility and fringe benefits that you offer.

Originality and specificity

One word of caution: When updating their handbooks, some businesses acquire a “best in class” example from another employer and try to adopt it as their own. Doing so generally isn’t a good idea. That other handbook’s tone may be inappropriate or at least inconsistent with your industry or organizational culture.

Similarly, be careful about downloading handbook templates from the Internet. Chances are you’ll have no idea who wrote the original, let alone if it complies with current laws and regulations.

Document and guide

Your employee handbook should serve as a clearly written document for legal purposes and a helpful guide for your company’s workforce. Our firm can help you track your employment costs and develop solutions to any challenges you face.

Before the COVID-19 pandemic hit, the number of people engaged in the “gig” or sharing economy had been growing, according to several reports. And reductions in working hours during the pandemic have caused even more people to turn to gig work to make up lost income. There are tax consequences for the people who perform these jobs, which include providing car rides, delivering food, walking dogs and providing other services.

Bottom line: If you receive income from freelancing or from one of the online platforms offering goods and services, it’s generally taxable. That’s true even if the income comes from a side job and even if you don’t receive an income statement reporting the amount of money you made.

Basics for gig workers

The IRS considers gig workers as those who are independent contractors and conduct their jobs through online platforms. Examples include Uber, Lyft, Airbnb and DoorDash.

Unlike traditional employees, independent contractors don’t receive benefits associated with employment or employer-sponsored health insurance. They also aren’t covered by the minimum wage or other protections of federal laws and they aren’t part of states’ unemployment insurance systems. In addition, they’re on their own when it comes to retirement savings and taxes.

Pay taxes throughout the year

If you’re part of the gig or sharing economy, here are some tax considerations.

You may need to make quarterly estimated tax payments because your income isn’t subject to withholding. These payments are generally due on April 15, June 15, September 15 and January 15 of the following year. (If a due date falls on a Saturday or Sunday, the due date becomes the next business day.)
You should receive a Form 1099-NEC, Nonemployee Compensation, a Form 1099-K or other income statement from the online platform.
Some or all of your business expenses may be deductible on your tax return, subject to the normal tax limitations and rules. For example, if you provide rides with your own car, you may be able to deduct depreciation for wear and tear and deterioration of the vehicle. Be aware that if you rent a room in your main home or vacation home, the rules for deducting expenses can be complex.

Keeping records

It’s important to keep good records tracking income and expenses in case you are audited by the IRS or state tax authorities. Contact us if you have questions about your tax obligations as a gig worker or the deductions you can claim. You don’t want to get an unwanted surprise when you file your tax return.

President Biden recently announced his $1.8 trillion American Families Plan (AFP), the third step in his Build Back Better policy initiative. The announcement followed the previous releases of the proposed $2.3 trillion American Jobs Plan and the Made in America Tax Plan. These plans propose major investments in various domestic initiatives, such as expanded tax credits for families, offset with tax increases on high-income individual taxpayers and corporations.

Proposed tax changes for the wealthy

The AFP would reverse many of the provisions in 2017’s Tax Cuts and Jobs Act and other parts of the tax code that benefit higher-income taxpayers. These taxpayers could be hit by changes to the following:

Individual tax rates. The plan proposes to return the tax rate for the top income bracket to Obama administration levels, going from the current 37% to 39.6%. It’s not clear whether the income tax brackets will be adjusted. For 2021, the top tax rate begins at $523,601 for single taxpayers and $628,301 for married taxpayers filing jointly.

Capital gains and qualified dividend income. For those with income of more than $1 million in a tax year, the AFP would tax long-term capital gains and qualified dividend income as ordinary income — in other words, at 39.6%. Long-term capital gains currently are taxed at a maximum rate of 20% (effectively 23.8%, when combined with the net investment income tax), depending on taxable income and filing status.

Net investment income tax (NIIT). This tax applies to net investment income to the extent that a taxpayer’s modified adjusted gross income (MAGI) exceeds $200,000 for single tax filers, $250,000 for joint filers and $125,000 for married taxpayers filing separately. If a taxpayer meets the applicable MAGI threshold and has net investment income, the amount of NIIT liability is 3.8% of the lesser of 1) the amount by which the MAGI exceeds the threshold or 2) the net investment income.

The AFP proposes to broaden the NIIT by applying it to all types of income greater than $400,000, rather than only investment income. On top of the hike in capital gains, these taxpayers would face a tax of 43.4% at the federal level. With state and local capital gains taxes, high-income individuals could face an overall capital gains tax rate that tops 50%.

Stepped-up basis. Under existing law, the income tax basis of an inherited asset is the asset’s fair market value at the time of the deceased’s death, not the deceased’s original cost for it. This is referred to as “stepped-up basis.” As a result of this rule, the gain on appreciated assets isn’t subject to taxation if the heir disposes of the assets at death.

To reduce the incentive to hold appreciated assets until after death — rather than subjecting them to capital gains taxes — the AFP imposes limits on stepped-up basis. Specifically, it ends the practice for gains that exceed $1 million, or $2.5 million per couple when combined with existing real estate exemptions. The Biden administration has indicated that it would carve out exceptions for property donated to charities and family-owned businesses and farms.

Carried interest. A “carried interest” is a hedge fund manager’s contractual right to a share of a partnership’s profits. Currently, it’s taxable at the capital gains rate if certain conditions are satisfied. The Biden administration would tax carried interests at ordinary tax rates.

Like-kind exchanges. Also known as Section 1031 exchanges, like-kind exchanges allow a taxpayer to defer the recognition of a gain on the exchange of real property held for use in a business or for investment if the property is exchanged solely for similar property. The AFP would end such deferrals for gains of more than $500,000.

Tax relief for individuals and families

While the AFP would increase the tax liability of high-net-worth individuals, it’s also designed to help those less well off. It would do so through a variety of tools, including the following:

Child Tax Credit (CTC). The American Rescue Plan Act (ARPA), passed in March 2021, temporarily increased the CTC from $2,000 to $3,000 for eligible taxpayers for each child age six through 17, with credits of $3,600 for each child under age six. It also makes the credit fully refundable in most cases.

The current $2,000 credit is subject to a phaseout when income exceeds $400,000 for joint filers and $200,000 for other filers, and it’s generally refundable up to $1,400 per qualifying child. The ARPA continues the typical phaseout treatment for the first $2,000 of the credit in 2021 but applies a separate phaseout for the increased amount — $75,000 for single filers, $112,500 for heads of household and $150,000 for joint filers. Under the ARPA, the U.S. Treasury Department will make monthly advance payments for the CTC beginning in July and running through December 2021, based on taxpayers’ most recently filed tax returns.

The AFP would extend these CTC increases through 2025 and make the credit fully refundable on a permanent basis. The proposed extension would include the regular advance payments from the U.S. Treasury Department.

Child and dependent care tax credit. The ARPA expands this credit for 2021. Taxpayers can claim a refundable 50% credit for up to $8,000 in care expenses for one child or dependent and up to $16,000 in expenses for two or more children or dependents — making the credit ultimately worth up to $4,000 or $8,000. It begins phasing out when household income levels exceed $125,000; for households with income over $400,000, the credit can be reduced below 20%.

The AFP would leave this increase in place permanently. Families with an income between $125,000 and $400,000 would receive a partial credit.

Health insurance tax credit. The ARPA also increases the availability and the amount of premium tax credits (PTCs) under the Affordable Care Act (sometimes referred to as ACA subsidies or cost-sharing), retroactive to January 1, 2021. It extends PTCs to anyone who receives, or was approved to receive, unemployment benefits in 2021. It also limits the amount that anyone who obtains insurance through the federal or state marketplaces must pay for premiums to 8.5% of their MAGI — regardless of their income. The AFP would make this expansion permanent.

Corporate tax proposals

In addition to the individual tax proposals, the Biden administration has proposed a swath of changes in the taxation of businesses. For example, the AFP would make permanent the limit on excess business loss deductions.

The Made in America Tax Plan contains many more provisions relevant to businesses. Among other things, it proposes to raise the corporate tax rate to 28%, the midpoint between the 21% rate enacted during the Trump administration and the Obama administration level of 35%. The plan also proposes several changes to international taxation rules, including raising the tax rate on global intangible low-taxed income to 21%.

The Made in America Tax Plan would also impose a 15% minimum tax on book income (as opposed to the income reported on corporate tax returns) on large companies that report high profits with little or no taxable income. Note, too, that Treasury Secretary Janet Yellen has stated that the United States is working with other countries to set a global minimum tax rate.

The American Jobs Plan, on the other hand, provides several tax incentives and other support for businesses. For example, it would provide $52 billion to promote domestic manufacturing and $31 billion for small business programs to expand access to credit, venture capital, and research and development funding. It proposes targeted credits related to clean energy generation and storage and expanding the Section 45Q carbon credit. And it would provide an expanded credit for employers that provide workplace childcare facilities.

IRS-related proposals

In a recent study, the IRS found that the top 1% of individual taxpayers failed to report 20% of their income and failed to pay nearly $175 billion in taxes owed annually. The Biden administration proposes providing the IRS with the resources and information it needs to address the “tax gap” (that is, the difference between the tax owed by taxpayers and the amount that’s actually paid on time).

The AFP calls for a significant boost in the funding of IRS tax enforcement — $80 billion over 10 years, which, on an annual basis, nearly doubles the agency’s 2021 enforcement budget. The closer scrutiny would focus on large corporations, partnerships and wealthy individuals. It also would require financial institutions to report information on balances and account flows to better track earnings from investment and business activities. The Biden administration has stated that the enforcement efforts won’t target households with less than $400,000 in annual income.

The path forward

The Biden administration and the slim Democratic majority in Congress have already demonstrated with the ARPA their willingness to use the budget reconciliation process to pass fiscal policy legislation on a majority basis in the U.S. Senate. That approach, however, requires unanimous Democratic support.

Moderate Democrats in Congress could demand the trimming of certain proposals regarding tax increases or reject them altogether (for example, the higher taxes on investment income and changes to the step-up in basis). We’ll keep you up to date on the provisions that survive and any that might be added during negotiations, such as an elimination of the limit on the state and local tax deduction.

Many businesses use independent contractors to help keep their costs down. If you’re among them, make sure that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be a costly error.

It can be complex to determine whether a worker is an independent contractor or an employee for federal income and employment tax purposes. If a worker is an employee, your company must withhold federal income and payroll taxes, pay the employer’s share of FICA taxes on the wages, plus FUTA tax. A business may also provide the worker with fringe benefits if it makes them available to other employees. In addition, there may be state tax obligations.

On the other hand, if a worker is an independent contractor, these obligations don’t apply. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if it’s $600 or more).

What are the factors the IRS considers?

Who is an “employee?” Unfortunately, there’s no uniform definition of the term.

The IRS and courts have generally ruled that individuals are employees if the organization they work for has the right to control and direct them in the jobs they’re performing. Otherwise, the individuals are generally independent contractors. But other factors are also taken into account including who provides tools and who pays expenses.

Some employers that have misclassified workers as independent contractors may get some relief from employment tax liabilities under Section 530. This protection generally applies only if an employer meets certain requirements. For example, the employer must file all federal returns consistent with its treatment of a worker as a contractor and it must treat all similarly situated workers as contractors.

Note: Section 530 doesn’t apply to certain types of workers.

Should you ask the IRS to decide?

Be aware that you can ask the IRS (on Form SS-8) to rule on whether a worker is an independent contractor or employee. However, be aware that the IRS has a history of classifying workers as employees rather than independent contractors.

Businesses should consult with us before filing Form SS-8 because it may alert the IRS that your business has worker classification issues — and it may unintentionally trigger an employment tax audit.

It may be better to properly treat a worker as an independent contractor so that the relationship complies with the tax rules.

Workers who want an official determination of their status can also file Form SS-8. Disgruntled independent contractors may do so because they feel entitled to employee benefits and want to eliminate self-employment tax liabilities.

If a worker files Form SS-8, the IRS will notify the business with a letter. It identifies the worker and includes a blank Form SS-8. The business is asked to complete and return the form to the IRS, which will render a classification decision.

These are the basic tax rules. In addition, the U.S. Labor Department has recently withdrawn a non-tax rule introduced under the Trump administration that would make it easier for businesses to classify workers as independent contractors. Contact us if you’d like to discuss how to classify workers at your business. We can help make sure that your workers are properly classified.

“Tax day” is just around the corner. This year, the deadline for filing 2020 individual tax returns is Monday, May 17, 2021. The IRS postponed the usual April 15 due date due to the COVID-19 pandemic. If you still aren’t ready to file your return, you should request a tax-filing extension. Anyone can request one and in some special situations, people can receive more time without even asking.

Taxpayers can receive more time to file by submitting a request for an automatic extension on IRS Form 4868. This will extend the filing deadline until October 15, 2021. But be aware that an extension of time to file your return doesn’t grant you an extension of time to pay your taxes. You need to estimate and pay any taxes owed by your regular deadline to help avoid possible penalties. In other words, your 2020 tax payments are still due by May 17.

Located in a combat zone

Military service members and eligible support personnel who are serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any tax due. This includes taxpayers serving in Iraq, Afghanistan and other combat zones.

These extensions also give affected taxpayers in a combat zone more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of time available to taxpayers.

Outside the United States

If you’re a U.S. citizen or resident alien who lives or works outside the U.S. (or Puerto Rico), you have until June 15, 2021, to file your 2020 tax return and pay any tax due.

The special June 15 deadline also applies to members of the military on duty outside the U.S. and Puerto Rico who don’t qualify for the longer combat zone extension described above.

While taxpayers who are abroad get more time to pay, interest applies to any payment received after this year’s May 17 deadline. It’s currently charged at the rate of 3% per year, compounded daily.

We can help

If you need an appointment to get your tax return prepared, contact us. We can also answer any questions you may have about filing an extension.

Many companies are continuing to struggle financially during the COVID-19 pandemic. If cash is tight, what can your business do to shorten its cash cycle? The answer could lie in your outstanding accounts receivable. Here are five strategies to help convert receivables into cash ASAP.

1. Apply for a line of credit. A line of credit can help bridge the “cash gap” between making a sale and getting paid. Often credit lines are collateralized by unpaid invoices, just like equipment and property are pledged for conventional term loans. Banks typically charge fees and interest for securitized receivables.

Each financial institution sets its own rates and conditions. Typically, these arrangements provide immediate loans for up to 90% of the value of an outstanding debt and are repaid as customers pay their bills.

2. Encourage early payment. Your company may be able to expedite collections if customers are given a financial incentive to pay their bills early. For example, you might give a 3% discount to customers who pay with 14 days of receiving their invoices. Online and autopayment options often work in tandem with these discounts.

3. Consider factoring. This option allows companies to monetize their unpaid — but not yet delinquent — receivables. Here, receivables are sold to a third-party factoring company for immediate cash.

Costs associated with receivables factoring can be much higher than those for collateral-based loans. And factoring companies are likely to scrutinize the creditworthiness of your customers. But selling receivables for upfront cash may be advantageous, especially for smaller businesses, because it reduces the burden on accounting staff and saves time.

4. Renegotiate with customers. Before you write off stale receivables that are more than 90 days outstanding, call the customer and ask what’s going on. Sometimes you might be able to negotiate a lower amount or installment payments — which might be better than a write-off if your customer is facing bankruptcy.

5. Focus on collections. Some small companies haven’t historically needed to dedicate specific resources to collections, because customers have generally paid in a timely matter. However, if significant collection issues have built up during the pandemic, it may be time to pick a customer service rep to be in charge of making collections calls. For more serious issues, you might prefer hiring a seasoned, in-house collections professional or reaching out to an external commission-based collection agency.

If slow-to-pay customers are adversely affecting your company’s cash flow, contact us. We’ve helped many businesses implement creative solutions to convert receivables into fast cash.

Yeo & Yeo CPAs & Business Consultants is pleased to announce that A.J. Licht, CPA, has earned the Certified Construction Industry Financial Professional (CCIFP) credential. Licht joins an exclusive group of 1,150 professionals nationwide who have met the Institute of Certified Construction Industry Financial Professionals’ rigorous standards in the practice of construction financial management.

“I have devoted much of my career to serving clients in the construction industry,” Licht said. “The CCIFP credential formally recognizes my expertise in construction accounting and further equips me to help my clients strengthen their financial position and achieve their business goals.”

The CCIFP designation raises the standards for construction financial professionals by giving special recognition to those who demonstrate skill and proficiency in their field. To attain the certification, an applicant must serve in a professional financial role for a construction contractor or an accounting and/or financial service provider to the industry and pass a comprehensive exam. The CCIFP exam covers accounting and reporting, income recognition, budgeting and planning, risk management, taxes, human resources, legal issues and information technology. In addition, certified professionals must complete continuing education requirements.

Licht is a senior manager and leader of the firm’s Construction Services Group. He is a member of the Associated Builders & Contractors Greater Michigan Chapter, the Home Builders Association of Saginaw, and the Construction Industry CPAs/Consultants Association. In addition to his work at Yeo & Yeo, Licht is a member of the Saginaw Valley Young Professionals Network and the Saginaw Valley State University Stevens Center for Family Business.