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A refresher on the trust fund recovery penalty for business owners and executives
One might assume the term “trust fund recovery penalty” has something to do with estate planning. It’s important for business owners and executives to know better.
In point of fact, the trust fund recovery penalty relates to payroll taxes. The IRS uses it to hold accountable “responsible persons” who willfully withhold income and payroll taxes from employees’ wages and fail to remit those taxes to the federal government.
A matter of trust
The trust fund recovery penalty applies to employees’ share of payroll taxes, including withheld federal income taxes and the employee share of Social Security and Medicare taxes.
These monies are considered trust funds because they’re the property of the federal government, held in trust by the employer. The penalty amount is 100% of the unpaid taxes plus interest — it essentially serves as an alternative tax-collection method.
A responsible person
The trust fund recovery penalty is particularly dangerous because it can ensnare persons who ordinarily are protected against personal liability for business debts. As stated in the tax code, the penalty provides that:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
The IRS and courts take a broad view of who may be a responsible person under this provision. It has been interpreted to include a range of individuals, within or outside the business, who possess significant control or influence over the company’s finances.
Whether someone is a responsible person depends on the facts and circumstances of the case, but factors that may support that conclusion include ownership interest, title, check-signing authority, control over bank accounts or payment of debts, hiring and firing authority, control over payroll, and power to make federal tax deposits.
Thus, responsible persons may include shareholders, partners, and members of a limited liability company; officers; other employees; and directors. Responsible “persons” can also be payroll service providers and professional employer organizations, including individuals employed by those entities. Outside advisors may be deemed responsible persons as well.
Important note: If several responsible persons are identified, each may be held liable for the full amount of the penalty assessed.
Willful failure
As noted in the quote above, failure to pay trust fund taxes must be willful to trigger the trust fund recovery penalty. The IRS interprets this term broadly to include not only intentional acts but also a reckless disregard of obvious or known risks that taxes won’t be paid. The courts have described various scenarios that reflect a reckless disregard, including:
Relying on statements of a person in control of finances, despite circumstances showing that this person was known to be unreliable,
Failing to investigate or correct mismanagement after receiving notice that taxes weren’t paid, and
Knowing that the company is in financial trouble but continuing to pay other creditors without making reasonable inquiries into the status of payroll taxes.
Simply put, delegating the handling of payroll taxes to a certain individual or outside provider may not be enough to avoid liability.
Risky circumstances
Few business owners or executives wake up one morning and decide to disregard payroll taxes. However, circumstances can develop that put you at risk. Your FMD advisor is happy to explain the rules further and help you stay in compliance.
© 2023
Are you considering moving to a new state to minimize estate tax?
With the gift and estate tax exemption amount of $12.92 million for 2023, only a small percentage of families are subject to federal estate tax. While that’s certainly a relief, state estate tax also must be considered in estate planning.
Although many states tie their exemption amounts to the federal exemption, several states have exemptions that are significantly lower — in some cases $1 million or less. You may be considering retiring to a state with no (or a lower) state estate tax. However, doing so may not net the result you’re after.
Severing ties with your former state
Moving to a tax-friendly state doesn’t necessarily mean you’ve escaped taxation by the state you left. Unless you’ve sufficiently cut ties with your former state, there’s a risk that the state will claim you’re still a resident and subject to its estate tax.
Even if you’ve successfully established residency in a new state, you may be subject to estate tax on real estate or tangible personal property located in the old state (depending on that state’s tax laws). And don’t assume that your estate won’t be taxed on this property merely because its value is less than the exemption amount. In some states, estate tax is triggered when the value of your worldwide assets exceeds the exemption amount.
Taking steps to establish residency
If you’re relocating to a state with low or no estate tax, consult your estate planning advisor about the steps you can take to terminate residency in your old state and establish residency in the new one. Examples include acquiring a home in the new state, obtaining a driver’s license and registering to vote there, receiving important documents at your new address, opening bank accounts in the new state and closing the old ones, and moving cherished personal possessions to the new state.
If you own real estate in the old state, consider transferring it to a limited liability company or other entity. In some states, interests in these entities may be treated as nontaxable intangible property.
The bottom line
Before putting up the “For Sale” sign and moving to lower-tax pastures, consult with us. FMD can help you address your current and future state estate tax in your estate plan.
© 2023
What are the pros and cons of custodial accounts for minors?
Setting up an investment account for your minor child can be a tax-efficient way of saving for college or other expenses. And one of the simplest ways to invest on your child’s behalf is to open a custodial account under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA).
These accounts — which are available through banks, brokerage firms, mutual fund companies and other financial institutions — are owned by the child but managed by the parent or another adult until the child reaches the age of majority (usually age 18 or 21).
Custodial accounts can be a convenient way to transfer assets to a minor without the expense and time involved in setting up a trust, but bear in mind that they have downsides, too. Let’s take a closer look at the pros and cons.
Pros
Convenience and efficiency. Establishing a custodial account is like opening a bank account. So it’s quicker, easier and cheaper to set up and maintain than more complex vehicles, such as trusts.
Flexibility. Unlike some savings vehicles, such as Coverdell Education Savings Accounts (ESAs), anyone can contribute to a custodial account, regardless of their income level. In addition, there are no contribution limits. Also, there are no restrictions on how the money is spent. In contrast, funds invested in ESAs and 529 plans must be spent on qualified education expenses, subject to stiff penalties on unqualified expenditures. (However, beginning in 2024, limited amounts held in a 529 plan may be rolled over to a Roth IRA for certain beneficiaries.)
Variety of investment options. Custodial accounts typically offer a broad range of investment options, including most stocks, bonds, mutual funds and insurance-related investments. UTMA accounts may offer even more options, such as real estate or collectibles. ESAs and 529 plans often have more limited investment options.
Estate and income tax benefits. Gifts to a custodial account reduce the size of your taxable estate. Keep in mind, however, that gifts in excess of the $17,000 annual exclusion ($34,000 for married couples) may trigger gift taxes or may tap some of your lifetime gift and estate tax exemption. Contributions to custodial accounts can also save income taxes: A child’s unearned income up to $2,500 per year is usually taxed at low rates (income above that threshold is taxed at the parents’ marginal rate).
Cons
Other vehicles offer greater tax benefits. Although custodial accounts can reduce taxes, ESAs and 529 plans allow earnings to grow on a tax-deferred basis, and withdrawals are tax-free provided they’re spent on qualified education expenses. In addition, 529 plans allow you to accelerate five years of annual exclusion gifts and make a single tax-free contribution of up to $85,000 for 2023 ($170,000 for married couples making joint gifts).
Impact on financial aid. As the child’s property, a custodial account can have a negative impact on financial aid eligibility. ESAs and 529 plans are usually treated as the parents’ assets, which have less impact on financial aid eligibility.
Loss of control. After the child reaches the age of majority, he or she gains full control over the assets and can use them as he or she sees fit. If you wish to retain control longer, you’re better off with an ESA, a 529 plan or a trust.
Inability to change beneficiaries. Once you’ve established a custodial account for a child, you can’t change beneficiaries down the road. With an ESA or parent-owned 529 plan, however, you can name a new beneficiary if your needs change and certain requirements are met.
Weigh your options
A custodial account can be an effective savings tool, but it’s important to understand the pros and cons. We can help you determine which tool or combination of tools is right for you given your financial circumstances and investment goals.
© 2023
Businesses must electronically file Form 8300, Report of Cash Payments Over $10,000, beginning January 1, 2024
The Internal Revenue Service today announced that starting Jan. 1, 2024, businesses are required to electronically file (e-file) Form 8300, Report of Cash Payments Over $10,000, instead of filing a paper return. This new requirement follows final regulations amending e-filing rules for information returns, including Forms 8300.
Businesses that receive more than $10,000 in cash must report transactions to the U.S. government. Although many cash transactions are legitimate, information reported on Forms 8300 can help combat those who evade taxes, profit from the drug trade, engage in terrorist financing, or conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on Form 8300 that are timely filed, complete, and accurate.
The new requirement for e-filing Forms 8300 applies to businesses mandated to e-file certain other information returns, such as Forms 1099 series and Forms W-2. Electronic filing and communication options will be simpler and will make it easier to interact with the IRS. Beginning with calendar year 2024, businesses must e-file all Forms 8300 (and other certain types of information returns required to be filed in a given calendar year) if they're required to file at least 10 information returns other than Form 8300.
For example, if a business files five Forms W-2 and five Forms 1099-INT, then the business must e-file all their information returns during the year, including any Forms 8300. However, if the business files fewer than 10 information returns of any type, other than Forms 8300, then that business does not have to e-file the information returns and is not required to e-file any Forms 8300. However, businesses not required to e-file may still choose to do so.
Waivers
A business may file a request for a waiver from electronically filing information returns due to undue hardship. For more information, businesses can refer to Form 8508, Application for a Waiver from Electronic Filing of Information Returns PDF. If the IRS grants a waiver from e-filing any information return, that waiver automatically applies to all Forms 8300 for the duration of the calendar year. A business may not request a waiver from filing only Forms 8300 electronically.
The business must include the word "Waiver" on the center top of each Form 8300 (Page 1) when submitting a paper-filed return.
If a business is required to file fewer than 10 information returns, other than Forms 8300, during the calendar year, the business may file Forms 8300 in paper form without requesting a waiver.
If a business files less than 10 information returns, it can still choose to e-file Forms 8300 electronically if it chooses to do so.
Exemptions
If using the technology required to e-file conflicts with a filer's religious beliefs, they are automatically exempt from filing Form 8300 electronically. The filer must include the words "RELIGIOUS EXEMPTION" on the center top of each Form 8300 (page 1) when submitting the paper filed return.
Late returns
A business must self-identify late returns. A business must file a late Form 8300 in the same way as a timely filed Form 8300, either electronically or on paper. A business filing a late Form 8300 electronically must include the word "LATE" in the comments section of the return. A business filing a late Form 8300 on paper must write "LATE" on the center top of each Form 8300 (page 1).
Recordkeeping
A business must keep a copy of every Form 8300 it files, as well as any supporting documentation and the required statement it sends to customers, for five years from the date filed.
Filing electronically will provide a confirmation that the form was filed; however, e-file confirmation e-mails alone don't meet the record-keeping requirement. When e-filing, filers must also save a copy of the form prior to finalizing the form submission. They should associate the confirmation number with the saved copy. Prior to finalizing the form for submission, businesses should save a copy of the form electronically or print a copy of the form.
E-filing
Many businesses have already found the free and secure e-filing system to be a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free email acknowledgment of receipt of the form when they e-file. Businesses can batch e-file their reports, which is especially helpful to those required to file many forms.
To file Forms 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network's BSA E-Filing System. The IRS will ensure the privacy and security of all taxpayer data.
For more information, call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at bsaefilinghelp@fincen.gov. For more information about the BSA E-Filing System, businesses can complete a technical support request at Self Service Help Ticket. The help desk is available Monday through Friday from 8 a.m. to 6 p.m. EST.
For more information about the reporting requirement, see E-file Form 8300: Reporting of large cash transactions on IRS.gov.
To help businesses prepare and file reports, the IRS created a video - How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.
Look carefully at three critical factors of succession planning
The day-to-day demands of running a business can make it difficult to think about the future. And by “future,” we’re not necessarily talking about how your tax liability will look at year-end or how you might grow the bottom line over the next five years. We’re referring to the future in which you no longer own your company.
Succession planning is an important task for every business owner. And it’s never too early to start thinking about three of the most critical factors.
1. The involvement of your family
Among the primary questions you’ll need to answer is whether you want to transfer ownership of the company to a family member or sell it to either someone already in the business or to an outside party.
If your children are involved in the business, or there’s another logical successor from within the family, you’ll want to start mentoring this person long before you want to step down. An intrafamily successor should be someone who objectively has the education, training, experience, and temperament to fill your shoes. Depending on the amount of support your replacement needs, it may take years for this individual to be truly ready.
Also, bear in mind that succession planning and estate planning are linked. You’ll want to create a clear, legally defensible ownership transfer plan while you also fund your retirement or next stage of life. In addition, you need an estate plan that equitably divides your wealth among family members who participate in the business and those who don’t.
2. The market for your company
If it appears unlikely that you’ll transfer ownership to a family member, you’ll probably want to sell your company. The primary question then becomes: Will there be a market for it when you’re ready to leave? If mergers and acquisitions are relatively common in your industry, you may have little to worry about. But if companies like yours tend to be a tough sell, you might be in for a long and perhaps frustrating process.
To put yourself in a better position, start developing a list of potential buyers well before you’re ready to depart. These may include competitors, business associates, and private equity firms. Essentially, you need to get a good idea of the “size and shape” of the market for your company so you can fine-tune your succession plan.
3. The structure of the transfer or sale
If you do decide to name a family member as your successor, you’ll need to work with an attorney, your FMD CPA, and perhaps other advisors to transfer ownership in a legally secure, tax-savvy manner that also accounts for your estate plan.
On the other hand, if you’re going to sell the company (or ownership shares) to someone outside your family, you’ll need to structure the deal carefully. One option is to sell the business to your employees over time via an employee stock ownership plan (ESOP). But ESOPs come with many rules and complexities.
Alternatively, you might set up a purchase via an internal buy-sell agreement that stipulates your partners (if you have them) must buy your shares. Or you could sell to one of the potential buyers mentioned above — again, typical parties include competing businesses, perhaps someone you know through networking or private equity firms.
The specifics of stepping down
Granted, these three factors are general in nature. There will be many specifics that your succession plan will need to cover as you get closer to stepping down. Contact your FMD Advisor for further information.
© 2023
Life insurance can be a powerful estate planning tool for nontaxable estates
For years, life insurance has played a critical role in estate planning, providing a source of liquidity to pay estate taxes and other expenses. It’s been particularly valuable for business owners, whose families might not have the liquid assets they need to pay estate taxes without selling the business.
Because the federal gift and estate tax exemption has climbed to $12.92 million (for 2023), estate tax liability generally is no longer a concern for the vast majority of families. But even for nontaxable estates, life insurance continues to offer significant estate planning benefits.
Replacing income and wealth
If you die unexpectedly, life insurance can protect your family by replacing your lost income. It can also be used to replace wealth in a variety of contexts. For example, suppose you own highly appreciated real estate or other assets and wish to dispose of them without generating current capital gains tax liability. One option is to contribute the assets to a charitable remainder trust (CRT).
CRTs are irrevocable trusts that work like this: You contribute property to a CRT during your life or upon your death and the trust makes annual distributions to you or your beneficiary (typically, your spouse) for a specified period of time. When that period ends, the remainder goes to a charity of your choice.
These instruments are particularly useful when you contribute highly appreciated assets and want to reduce capital gains tax exposure. Because the CRT is tax-exempt, it can sell the assets and reinvest the proceeds without currently triggering the entire capital gain.
Here’s where life insurance comes in. Because CRT assets eventually go to charity — usually after both you and your spouse have died — you won’t have as much to leave to your children or other heirs. A life insurance policy can replace that “lost” wealth in a tax-advantaged way.
Treating your children equally
If much of your wealth is tied up in a family business, treating your children fairly can be a challenge. It makes sense to leave the business to those children who work in it, but what if your remaining assets are insufficient to provide an equal inheritance to children who don’t? For many families, the answer is to purchase a life insurance policy to make up the difference.
Protecting your assets
Depending on applicable state law, a life insurance policy’s cash surrender value and death benefit may be shielded from creditors’ claims. For additional protection, consider setting up an irrevocable life insurance trust to hold your policy.
Finding the right policy
These are just a few examples of the many benefits provided by life insurance. FMD can help determine which type of life insurance policy is right for your situation.
© 2023
What businesses can expect from a green lease
With events related to climate change continuing to rock the news cycle, many business owners are looking for ways to lessen their companies’ negative environmental impact. One move you may want to consider, quite literally, is relocating to a commercial property with a “green lease.”
Increasing demand
Green leases are sometimes also known as “aligned,” “energy-efficient” or “high-performance” leases. Whatever the label, they generally use financial incentives to promote sustainable property management and energy usage. The leases typically include provisions related to cost recovery, submeters, data sharing, and minimum efficiency standards. Done right, they can cut energy costs, conserve critical resources, and improve building operations — offering benefits to property owners and tenants alike.
Businesses that sign on to green leases may gain several competitive advantages. Many customers and investors now prioritize visible commitments to environmentally friendly business practices. More and more job candidates do, too. Sustainability is particularly important to Millennials and members of Generation Z, who together now make up the largest subset of the U.S. workforce.
In addition, the pandemic boosted interest in so-called “healthy buildings,” which are often available through green leases. Healthy buildings feature more efficient lighting as well as pathogen-fighting heating, ventilation, and air conditioning (HVAC) systems. For example, they draw in fresh air, as opposed to recirculating indoor air. Some even use ultraviolet germicidal irradiation to kill bacteria and mold, as well as reduce the number of viral particles in the air.
A research study published by Harvard University in 2021 found that working in an office with higher air quality and better ventilation can raise employees’ cognitive functioning. Indeed, subjects’ decision-making performance improved when they were exposed to higher ventilation rates and lower chemical and carbon dioxide levels.
Lease provisions
If your company decides to explore environmentally friendly commercial properties, you’ll likely encounter standardized green leases. However, you may want to negotiate or at least double-check provisions regarding:
Certification. Many commercial properties are certified green under various standards, the most well-known of which is Leadership in Energy and Environmental Design (LEED). The standards usually require periodic recertification. To ensure renewal, property owners may require commercial tenants to use sustainable design components, construction materials, and office equipment.
Improvements. Property owners don’t want to jeopardize their buildings’ certifications with noncompliant tenant improvements. To substantially improve a property, you’ll need to ensure the project satisfies the relevant lease terms. If you install energy-saving improvements that benefit both you and the property owner, the lease should provide for how costs will be shared.
Renewable energy. If applicable, the lease should address how a conversion to a renewable energy source, such as solar panels, will be handled. For example, which party will be responsible for installation and maintenance? Who will receive any revenue from selling excess output to local utilities (where allowed)?
Green leases also may contain provisions related to:
HVAC system design and components,
Water usage,
Energy management and monitoring,
Irrigation and landscaping,
Air quality,
Lighting,
Waste management and recycling, and
Maintenance, including cleaning products used.
A lease may even include transportation components, such as requiring a tenant to provide bike racks or public transportation passes for employees.
Many positives
There are many positive reasons to consider signing a green lease. However, the costs of relocating and ongoing expenses related to the lease still must make sense for your business. FMD can assist you in analyzing the decision, including projecting the financial impact.
© 2023
Beneficial Ownership Reporting Required Under the Corporate Transparency Act
The Corporate Transparency Act (CTA) became law on January 1, 2021, as part of the National Defense Authorization Act for Fiscal Year 2021 (P.L. 116-283). Effective January 1, 2024, certain U.S. and foreign entities doing business in the United States will be required to report their beneficial owners to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
Comment: The CTA is generally intended to increase transparency, and thus discourage the use of shell companies, which is an important step in the fight against money laundering, terrorist finance, corruption, and other criminal behavior.
The Secretary of the Treasury has issued regulations implementing these reporting requirements effective January 1, 2024. The information reported under the CTA will not be available to the general public and may only be used for law enforcement, national security, or intelligence purposes.
Entities Subject to Beneficial Ownership Reporting
All corporations, S Corporations, limited liability companies, and partnerships or other similar entities created under the law of a State or Indian Tribe, or formed under foreign law and registered to do business in the United States (reporting companies) must disclose information regarding their beneficial owners to FinCEN.
Entities Exempt from Reporting
Certain entities do not have to report beneficial ownership under the CTA. These are generally heavily regulated entities that already report such information to other federal agencies or companies with real business activities that are not perceived to be a high risk for money laundering. Exempt entities include, among others:
Companies that employ more than 20 people, report more than $5 million of revenue on their tax returns, and have a physical presence in the United States
Public companies
Financial institutions such as banks, bank holding companies, and credit unions
Insurance companies
Investment companies
Broker-dealers
Pooled investments
Tax-exempt organizations
Information required to be reported
Reporting companies must disclose the identity of each beneficial owner of the company and each applicant with respect to the company. The reported information must include:
Full legal name
Date of birth
Current residential or business street address
Unique identifying number from an acceptable identity document (such as a driver’s license or passport) or a unique identity number generated by FinCEN.
Beneficial owner and applicant
A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise:
exercises substantial control over the entity, including CEO, CFO, and COO, OR
owns or controls not less than 25% of the ownership interests of the entity.
The following individuals are not beneficial owners for this purpose:
an individual acting as a nominee, intermediary, custodian, or agent of another individual
an individual acting solely as an employee of the entity
an individual whose only interest in the entity is through a right of inheritance
a creditor of the entity, unless the creditor is also a beneficial owner
a minor child if the parent or guardian’s information is reported
An applicant with respect to a company is an individual who files an application to form an entity in the United States or to register a foreign entity to do business in the United States.
Effective date of reporting
The CTA reporting requirements take effect as of January 1, 2024. The initial report is due no later than January 1, 2025.
Entities formed or registered after January 1, 2024, must report beneficial ownership to FinCEN at the time of formation or registration. Existing entities must file a report within 30 days of any change to their beneficial ownership information.
Penalties
Failure to report or update beneficial ownership information or providing false information may result in civil penalties of up to $500 per day and criminal penalties of up to $10,000 and/or imprisonment of up to two years. An exemption may apply if an individual acting in good faith corrects any inaccurate information within 90 days of submitting the inaccurate report.
The unauthorized disclosure of reported information may also lead to a $500-per-day civil penalty and a criminal penalty of up to $250,000 and/or imprisonment of up to five years.
Contact the FMD team for more information.
Did your spouse’s estate make a portability election? If not, there may still be time.
Portability helps minimize federal gift and estate tax by allowing a surviving spouse to use a deceased spouse’s unused gift and estate tax exemption amount. Currently, the exemption is $12.92 million, but it’s scheduled to return to an inflation-adjusted $5 million on January 1, 2026.
Unfortunately, portability isn’t automatically available; it requires the deceased spouse’s executor to make a portability election on a timely filed estate tax return (Form 706). And many executors fail to make the election because the estate isn’t liable for estate tax and, therefore, isn’t required to file a return.
The numbers don’t lie
When there’s a surviving spouse, estates that aren’t required to file an estate tax return should consider filing one for the sole purpose of electing portability. The benefits can be significant, as the following example illustrates:
Bob and Carol are married. Bob dies in 2023, with an estate valued at $3.92 million, so his unused exemption is $9 million. His estate doesn’t owe estate tax, so it doesn’t file an estate tax return.
Carol dies in 2026, with an estate valued at $15 million. For this example, let’s say the exemption amount in 2026 is $6 million. Because the exemption has dropped to $6 million, her federal estate tax liability is $3.6 million [40% x ($15 million – $6 million)].
Had Bob’s estate elected portability, Carol could have added his $9 million unused exemption to her own for a total exemption of $15 million, reducing the estate tax liability on her estate to zero. Note that, by electing portability, Bob’s estate would have locked in the unused exemption amount in the year of his death, which wouldn’t be affected by the reduction in the exemption amount in 2026.
Take action before time expires
If your spouse died within the last several years and you anticipate that your estate will owe estate tax, consider having your spouse’s estate file an estate tax return to elect portability. Ordinarily, an estate tax return is due within nine months after death (15 months with an extension), but a return solely for purposes of making a portability election can usually be filed up to five years after death. Contact your trusted FMD advisor with any questions regarding portability.
© 2023
Cost containment: An important health care benefits objective for businesses
As the Fed continues to battle with inflation, and with fears of a recession not quite going away, companies have been keeping a close eye on the costs of their health insurance and pharmacy coverage.
If you’re facing higher costs for health care benefits this year, it probably doesn’t come as a big surprise. According to the National Survey of Employer-Sponsored Health Plans, issued by HR consultant Mercer in 2022, U.S. employers anticipated a 5.6% rise in medical plan costs in 2023. The actual percentage may turn out to be even higher, which is why cost containment should be one of the primary objectives of your benefits strategy.
Really get to know your workforce
To succeed at cost containment, you’ve got to establish and maintain a deep familiarity with two things: 1) your workforce, and 2) the healthcare benefits marketplace.
Starting with the first point, the optimal plan design depends on the size, demographics, and needs of your workforce. Rather than relying on vendor-provided materials, actively manage communications with employees regarding their health care benefits. Determine which offerings are truly valued and which ones aren’t.
If you haven’t already, explore the feasibility of a wellness program to promote healthier diet and lifestyle choices. Invest in employee education so your plan participants can make more cost-effective healthcare decisions. Many companies in recent years have turned to high-deductible health plans coupled with Health Savings Accounts to shift some of the cost burden to employees.
As you study your plan design, keep in mind that good data matters. Business owners can apply analytics to just about everything these days — including health care coverage. Measure the financial impacts of gaps between benefits offered and those employees actually use. Then adjust your plan design appropriately to close these costly gaps.
Consider expert assistance
Now let’s turn to the second critical thing that business owners and their leadership teams need to know about: the health care benefits marketplace. As you’re no doubt aware, it’s hardly a one-stop convenience store. Many companies engage a consultant to provide an independent return-on-investment analysis of an existing benefits package and suggest some cost-effective adjustments. Doing so will entail some expense, but an external expert’s perspective could help you save money in the long run.
Another service a consultant may be able to provide is an audit of medical claims payments and pharmacy benefits management services. Mistakes happen — and fraud is always a possibility. By re-evaluating claims and pharmacy services, you can identify whether you’re losing money to inaccuracies or even wrongdoing.
Regarding pharmacy benefits, as the old saying goes, “Everything is negotiable.” The next time your pharmacy coverage contract comes up for renewal, explore whether your existing vendor can give you a better deal and, if not, whether one of its competitors is a better fit.
It’s doable … really
Cost containment for health care benefits may seem like a Sisyphean task — that is, one both laborious and futile. But it’s not: Many businesses find ways to lower costs by streamlining benefits to eliminate wasteful spending and better-fit employees’ needs. The FMD Team can help you identify and analyze each and every cost associated with your benefits package.
© 2023
To avoid confusion after your death, have only an original, signed will
The need for a will as a key component of your estate plan may seem obvious, but you’d be surprised by the number of people — even affluent individuals — who don’t have one. In the case of the legendary “Queen of Soul” Aretha Franklin, she had more than one, which after her death led to confusion, pain and, ultimately, a court trial among her surviving family members.
Indeed, a Michigan court recently ruled that a separate, handwritten will dated 2014, found in between couch cushions superseded a different document, dated 2010, that was found around the same time.
In any case, when it comes to your last will and testament, you should only have an original, signed document. This should be the case even if a revocable trust — sometimes called a “living trust” — is part of your estate plan.
Living trust vs. a will
True, revocable trusts are designed to avoid probate and distribute your wealth quickly and efficiently according to your wishes. But even if you have a well-crafted revocable trust, a will serves several important purposes, including:
Appointing an executor or personal representative you trust to oversee your estate, rather than leaving the decision to a court,
Naming a guardian of your choosing, rather than a court-appointed guardian, for your minor children, and
Ensuring that assets not held in the trust are distributed among your heirs according to your wishes rather than a formula prescribed by state law.
The last point is important because for a revocable trust to be effective, assets must be titled in the name of the trust. It’s not unusual for people to acquire new assets and put off transferring them to their trusts or they simply forget to do so. To ensure that these assets are distributed according to your wishes rather than a formula mandated by state law, consider having a “pour-over” will. It can facilitate the transfer of assets titled in your name to your revocable trust.
Although assets that pass through a pour-over will must go through probate, that result is preferable to not having a will. Without a will, the assets would be distributed according to your state’s intestate succession laws rather than the provisions of your estate plan.
Reason for an original will
Many people mistakenly believe that a photocopy of a signed will is sufficient. In fact, most states require that a deceased’s original will be filed with the county clerk and, if probate is necessary, presented to the probate court. If your family or executor can’t find your original will, there’s a presumption in most states that you destroyed it with the intent to revoke it. That means the court will generally administer your estate as if you died without a will.
It’s possible to overcome this presumption — for example, if all interested parties agree that a signed copy reflects your wishes, they may be able to convince a court to admit it. But to avoid costly, time-consuming legal headaches, it’s best to ensure that your family members can locate your original will when they need it.
Please don’t hesitate to contact FMD if you have questions about your will or overall estate plan.
© 2023
The IRS warns businesses about ERTC scams
The airwaves and internet are inundated these days with advertisements claiming that businesses are missing out on the lucrative Employee Retention Tax Credit (ERTC). While some employers do indeed remain eligible if they meet certain criteria, the IRS continues to caution businesses about third-party scams related to the credit.
While there’s nothing wrong with claiming credits you’re entitled to, those who claim the ERTC improperly could find themselves in hot water with the IRS and face cash-flow problems as a result. Here’s what you need to know to reduce your risks.
ERTC in a nutshell
The ERTC is a refundable tax credit intended for businesses that 1) continued paying employees while they were shut down due to the pandemic in 2020 and 2021, or 2) suffered significant declines in gross receipts from March 13, 2020, to December 31, 2021. Eligible employers could receive credits worth up to $26,000 per retained employee. The credit may still be available on an amended tax return.
The requirements are strict, though. Specifically, you must have:
Sustained a full or partial suspension of operations due to orders from a governmental authority that limited commerce, travel or group meetings due to COVID-19 during 2020 or the first three quarters of 2021,
Experienced a significant decline in gross receipts during 2020 or in the first three quarters of 2021, or
Qualified as a recovery startup business — which can claim the credit for up to $50,000 total per quarter without showing suspended operations or reduced receipts — for the third or fourth quarters of 2021. (Qualified recovery startups are those that began operating after February 15, 2020, and have annual gross receipts of less than or equal to $1 million for the three tax years preceding the quarter for which they are claiming the ERTC.)
In addition, a business can’t claim the ERTC on wages that it reported as payroll costs when it applied for Paycheck Protection Program (PPP) loan forgiveness or it used to claim certain other tax credits. Also, a business must reduce the wage deductions claimed on its federal income tax return by the amount of credits.
Prevalence of scams
The potentially high value of the ERTC, combined with the fact that employers can file claims for it on amended returns until April 15, 2025, has led to a cottage industry of fraudulent promoters offering to help businesses claim the credit. These fraudsters wield inaccurate information and inflated promises to generate business from innocent clients. In return, they reap excessive upfront fees in the thousands of dollars or commissions as high as 25% of the refund received.
The IRS has called the amount of misleading marketing around the credit “staggering.” For example, in recent guidance, the tax agency explained that contrary to the advice given by some promoters, supply chain disruptions generally don’t qualify an employer for the credit unless the disruptions were due to a government order. It’s not enough that an employer suspended operations because of disruptions — the credit applies only if the employer had to suspend operations because a government order caused the supplier to suspend its operations.
ERTC fraud has grown so serious that the IRS has included it in its annual “Dirty Dozen” list of the worst tax scams in the country. In Utah, for example, the U.S. Department of Justice has charged two promoters, who did business as “1099 Tax Pros,” with participating in a fraudulent tax scheme by preparing and submitting more than 1,000 forms to the IRS. They claimed more than $11 million in false ERTCs and COVID-related sick and family leave wage credits for their clients.
Fraudsters have been able to monopolize on the general confusion and uncertainty around the ERTC. A recent congressional hearing found that some of the problems can be traced back to the entirely paper application process created for the credit. This has contributed to a backlog of nearly 500,000 unprocessed claims, out of more than 2.5 million claims that have been submitted.
Although it’s unclear how much progress the IRS has made on the backlog, the agency has announced that it has entered a new phase of intensified scrutiny of ERTC claims. It’s stepping up its compliance work and establishing additional procedures to deal with fraud in the program. The IRS already has increased its audit and criminal investigation work on ERTC claims, focusing on both the promoters and the businesses filing dubious claims.
If you fell into the trap and are among those businesses, you could end up on the hook for repayment of the credit, along with penalties and interest, on top of the fees you paid the promoter. That could make a substantial dent in your cash flow.
Even if you’re eligible for the credit, you could run into trouble if you failed to reduce your wage deductions accordingly or claimed it on wages that you also used to claim other credits. As the IRS has noted, promoters may leave out key details, unleashing a “domino effect of tax problems” for unsuspecting businesses.
Moreover, providing your business and tax documents to an unscrupulous promoter could put you at risk of identity theft.
Red flags to watch for
The IRS has identified several warning signs of illegitimate promoters, including:
Unsolicited phone calls, text messages, direct mail, or ads highlighting an “easy application process” or a short eligibility checklist (the rules for eligibility and computation of credit amounts are actually quite complicated),
Statements that the promoter can determine your ERTC eligibility within minutes,
Hefty upfront fees,
Fees based on a percentage of the refund amount claimed,
Preparers who refuse to sign the amended tax return filed to claim a refund of the credit,
Aggressive claims from the promoter that you qualify before you’ve discussed your individual tax situation (the credit isn’t available to all employers), or
Refusal to provide detailed documentation of how your credit was calculated.
The IRS also warns that some ERTC “mills” are sending out fake letters from nonexistent government entities such as the “Department of Employee Retention Credit.” The letters are designed to look like official IRS or government correspondence and typically include urgent language pushing immediate action.
Protect yourself
Taking several simple steps can help you cut your risk of being victimized by scammers. First, if you think you may qualify for the credit, work with a trusted professional — one who isn’t proactively soliciting ERTC work. Those who are aggressively marketing the credit (and in some cases, only the credit) are more interested in making money themselves and are unlikely to prioritize or protect your best interests.
You also should request a detailed worksheet that explains how you’re eligible for the credit. The worksheet should “show the math” for the credit amount as well.
If you’re claiming you suspended business due to a government order, ensure that you have legitimate documentation of the order. Don’t accept a generic document about a government order from a third party. Rather, you should acquire a copy of the actual government order and review it to confirm that it applies to your business.
Proceed with caution
No taxpayer ever wants to leave money on the IRS’s table, but skepticism is warranted whenever something seems too good to be true. If you believe your business might be eligible for the ERTC, we can help you verify eligibility, compute your credit, and file your refund claim. FMD can also help you determine how to proceed if you claimed the ERTC improperly.
© 2023
5 tips for more easily obtaining cyber insurance
Every business should dedicate time and resources to cybersecurity. Hackers are out there, in many cases far across the globe, and they’re on the prowl for vulnerable companies. These criminals typically strike at random — doing damage to not only a business’s ability to operate but also its reputation.
One way to protect yourself, at least financially, is to invest in cyber insurance. This type of coverage is designed to mitigate losses from a variety of incidents — including data breaches, business interruption and network damage. If you decide to buy a policy, here are five tips to help make the application process a little easier:
1. Be detail-oriented when filling out the paperwork. Insurers usually ask an applicant to complete a questionnaire to help them understand the risks facing the company in question. Answering the questionnaire fully and accurately may call for input from your leadership team, IT department, and even third parties such as your cloud service provider. Take your time and be as thorough as possible. Missed questions or incomplete answers could result in denial of coverage or a longer-than-necessary approval time.
2. Establish (or fortify) a comprehensive cybersecurity program. Your business has a better chance of obtaining optimal coverage if you have a formal program that includes documented policies for best practices such as:
Installing software updates and patches,
Encrypting data,
Using multifactor authentication, and
Educating employees about ongoing cyber threats.
Before applying for coverage, either establish such a program if you don’t have one or strengthen the one in place. Be sure to generate clear documentation about the program and all its features that you can show insurers.
3. Create and document a disaster recovery plan. An effective cybersecurity program can’t focus only on preventing negative incidents. It must also include a disaster recovery plan specifically focused on cyber threats, so everyone knows what to do if something bad happens.
If your company has yet to create such a plan, establish and implement one before applying for cyber insurance. Put it in writing so you can share it with insurers. Review your disaster recovery plan at least annually to ensure it’s up to date.
4. Prepare to be tested. Some insurers may want to test your company’s cyber defenses with a “penetration test.” This is a simulated cyberattack on your systems designed to uncover weak points that hackers could exploit. Before applying for cyber insurance, conduct a thorough assessment of your networks and, if necessary, train or upskill your employees to follow protocols and be wary of “phishing” schemes and other threats.
5. Consider a third-party assessment. To better uncover weaknesses that could result in a denial of coverage or unreasonably high premiums, you may want to engage a third-party consultant to assess your cybersecurity program, as well as your equipment, network, and users. Doing so can be beneficial before applying for cyber insurance because some IT security firms maintain relationships with insurers and can help streamline the application process.
Like most types of coverage, cyber insurance is a risk-management measure worth exploring with your leadership team and professional advisors. Contact FMD for help determining whether buying a policy is the right move and, if so, for assistance analyzing the costs involved and developing a budget.
© 2023
Avoiding probate: How to do it (and why)
Few estate planning subjects are as misunderstood as probate. But circumventing the probate process is usually a good idea, and several tools are available to help you do just that.
Why should you avoid it?
Probate is a legal procedure in which a court establishes the validity of your will, determines the value of your estate, resolves creditors’ claims, provides for the payment of taxes and other debts, and transfers assets to your heirs.
Depending on applicable state law, probate can be expensive and time consuming. Not only can probate reduce the amount of your estate due to executor and attorney fees, it can also force your family to wait through weeks or months of court hearings. In addition, probate is a public process, so you can forget about keeping your financial affairs private.
Is probate ever desirable? Sometimes. Under certain circumstances, for example, you might feel more comfortable having a court resolve issues involving your heirs and creditors. Another possible advantage is that probate places strict time limits on creditor claims and settles claims quickly.
How do you avoid it?
There are several tools you can use to avoid (or minimize) probate. (You’ll still need a will — and probate — to deal with guardianship of minor children, disposition of personal property and certain other matters.)
The right strategy depends on the size and complexity of your estate. The simplest ways to avoid probate involve designating beneficiaries or titling assets in a manner that allows them to be transferred directly to your beneficiaries outside your will. So, for example, you should be sure that you have appropriate, valid beneficiary designations for assets such as life insurance policies, annuities and IRAs, and other retirement plans.
For assets such as bank and brokerage accounts, look into the availability of “pay on death” (POD) or “transfer on death” (TOD) designations, which allow these assets to avoid probate and pass directly to your designated beneficiaries. Keep in mind, though, that while the POD or TOD designation is permitted in most states, not all financial institutions and firms make this option available.
What if your estate is more complicated?
For larger, more complicated estates, a revocable trust (sometimes called a living trust) is generally the most effective tool for avoiding probate. A revocable trust involves some setup costs, but it allows you to manage the disposition of all your wealth in one document while retaining control and reserving the right to modify your plan. It also provides a variety of tax-planning opportunities.
To avoid probate, it’s critical to transfer title to all your assets, now and in the future, to the trust. Also, placing life insurance policies in an irrevocable life insurance trust can provide significant tax benefits.
The big picture
Avoiding probate is just part of estate planning. We can help you develop a strategy that minimizes probate while reducing taxes and achieving your other estate planning goals.
© 2023
Yes, you still need an estate plan even if you’re single, without children
There’s a common misconception that only married couples with children need estate plans. In fact, estate planning may be even more important for single people without children. Why? Because for married couples, the law makes certain assumptions about who should make financial or medical decisions on their behalf should they become incapacitated and who should inherit their property if they die.
Who’ll inherit your assets?
It’s critical for single people to execute a will that specifies how, and to whom, their assets should be distributed when they die. Although certain types of assets can pass to your intended recipient(s) through beneficiary designations, absent a will, many types of assets will pass through the laws of intestate succession.
Those laws vary from state to state, but generally, they provide for assets to go to the deceased’s spouse or children. For example, the law might provide that if someone dies intestate, half of the estate goes to his or her spouse and half goes to the children. If you’re single with no children, however, these laws set out rules for distributing your assets to your closest relatives, such as your parents or siblings. Or, if you have no living relatives, your assets may go to the state.
By preparing a will, you can ensure that your assets are distributed according to your wishes, whether to family, friends or charitable organizations.
Who’ll make financial decisions on your behalf?
It’s a good idea to sign a durable power of attorney. This document appoints someone you trust to manage your investments, pay your bills, file your tax returns, and otherwise make financial decisions should you become incapacitated.
Although the law varies from state to state, typically, without a power of attorney, a court would have to appoint someone to make these decisions on your behalf. Not only will you have no say in who the court appoints, but the process can be costly and time-consuming.
Who’ll make medical decisions on your behalf?
You should prepare a living will, a health care directive (also known as a medical power of attorney), or both to ensure that your wishes regarding medical care — particularly resuscitation and other extreme lifesaving measures — are carried out in the event you’re incapacitated. These documents can also appoint someone you trust to make medical decisions that aren’t expressly addressed.
Absent such instructions, the laws in some states allow a spouse, children, or other “surrogates” to make these decisions. In the absence of a suitable surrogate, or in states without such laws, medical decisions are generally left to the judgment of health care professionals or court-appointed guardians.
Contact your FMD advisor if you fall into the category of being single without children. We can help draft an estate plan that’s best suited for you.
© 2023
Should your business add a PTO buying feature to its cafeteria plan?
With the pandemic behind us and a red-hot summer in full swing, many of your company’s employees may be finally rediscovering the uninhibited joys of vacation.
Your workers might be having so much fun, in fact, that they might highly value being able to buy even more paid time off (PTO) as an employee benefit. Such a perk could also catch the attention of job candidates. Well, it’s all possible if your business sponsors a cafeteria plan (sometimes referred to as a Section 125 plan).
Compliance requirements
A “PTO buying” feature under a cafeteria plan allows employees to prospectively elect, during the annual open enrollment period before the beginning of each plan year, to buy additional PTO beyond that which they’d otherwise receive from their employer. These purchases typically occur via salary reductions or flex credits.
The rules for PTO buying under a cafeteria plan are complex, but let’s review a couple of the most critical compliance requirements. First, the PTO buying feature must not defer compensation from one plan year to the next. This means that PTO bought under the cafeteria plan generally must be used, cashed out, or forfeited by the end of the plan year. Employees can’t carry over the PTO for use in a later plan year.
If you opt to permit employees to cash out unused PTO at the end of the plan year, you’ll need to clearly inform them that these dollars will be included in their taxable income. Employers can also choose to set up the plan feature so that employees simply forfeit unused PTO when the plan year ends. However, before going this route, you should check into whether your state’s laws restrict such forfeitures.
Second, something called the “ordering rule” applies. The IRS refers to additional PTO bought through a cafeteria plan as “elective” PTO. The ordering rule requires employees to use nonelective PTO before elective PTO. Thus, they can use their purchased PTO only after exhausting all PTO earned under normal compensation.
The practical consequence of the ordering rule is that employees must expend all their PTO — whether elective or nonelective — to prevent a cash-out or forfeiture of any elective PTO at the end of the plan year. Thus, a PTO buying feature under a cafeteria plan may not be a good fit for businesses with PTO policies that allow employees to carry over unused nonelective PTO to future years. And, again, a buying feature might conflict with state laws that prohibit forfeiture of unused PTO.
An appealing benefit
Being able to buy additional PTO may not only be an appealing way to give employees more “beach time,” but also (and on a more serious note) a means of giving staff members more flexibility to care for their mental health. However, as mentioned, the rules involved are complex, so you’ll need to design and manage this cafeteria-plan feature carefully. Contact FMD for further information and assistance.
© 2023
How can an estate plan be kept vital after death?
When a loved one passes away, you might think that the options for his or her estate plan have also been laid to rest. But that isn’t necessarily the case. Indeed, there may be postmortem tactics the deceased’s executor (or personal representative), spouse or beneficiaries can employ to help keep his or her estate plan on track.
Make a QTIP trust election
A qualified terminable interest property (QTIP) trust can be a great way to use the marital deduction to minimize estate tax at the first spouse’s death and limit the surviving spouse’s access to the trust principal. For the transfer of property to the trust to qualify for the deduction, a QTIP trust election must be made on an estate tax return.
QTIP trust assets ultimately are subject to tax as part of the surviving spouse’s estate. In some cases, including more assets in the estate of the first spouse to die can minimize the overall estate tax. In such a situation, the deceased spouse’s executor may decide not to make the QTIP trust election or to make a partial QTIP trust election.
Use a qualified disclaimer
A qualified disclaimer is an irrevocable refusal to accept an interest in property from a will or living trust. Under the right circumstances, a qualified disclaimer can be used to redirect property to other beneficiaries in a tax-efficient manner.
To qualify, a disclaimer must be in writing and delivered to the appropriate representative. The disclaimant has no power to determine who’ll receive the property. Rather, it must pass to the transferor’s spouse or to someone other than the disclaimant, according to the terms of the underlying document making the transfer — such as a will, a living or testamentary trust, or a beneficiary form.
Take advantage of exemption portability
Portability helps minimize federal gift and estate taxes by allowing a surviving spouse to use a deceased spouse’s unused gift and estate tax exemption amount. For 2023, the exemption is $12.92 million.
Bear in mind that portability isn’t automatically available. It requires the deceased spouse’s executor to make a portability election on a timely filed estate tax return. Unfortunately, many estates fail to make the election because they’re not liable for estate tax and, therefore, aren’t required to file a return. These estates should consider filing an estate tax return for the sole purpose of electing portability. The benefits can be significant.
Keep on track
Following the death of a loved one, there may be steps that can be taken to keep his or her estate plan on the right track toward accomplishing his or her goals. To help ensure your loved one’s plan isn’t derailed, discuss your options with FMD.
© 2023
Consider adverse media screening to vet vendors, customers and others
Whether you know it or not, if your business has ever applied for a commercial loan, you’ve likely been subject to “adverse media screening.” Under this commonly used practice, a prospective borrower is “screened against” various media sources to determine whether the person or entity has been a party to any suspicious, unethical, or illegal activities.
Well, two can play that game. Many companies now use adverse media screening to evaluate key vendors, business partners (such as in joint ventures), or major customers that will demand a substantial amount of time and resources. Vetting such parties can help you uncover issues — such as accusations of fraud or litigation for nonpayment — that could make you think twice about getting involved with them.
4 steps to safe screening
Given the vast amount of online data and the potential legal risks in play, conducting adverse media screening requires a careful, methodical approach. Consider taking these four steps:
1. Develop a formal policy. To ensure that adverse media screening meets your needs without triggering legal exposure, draft a formal policy governing its usage. Among other things, the policy should:
Identify the sources you intend to access,
Clarify what actions are off-limits, and
State how you plan to use any negative information discovered.
Ask your attorney to review the policy before rolling it out.
2. Create clear categories. Adverse media screening can cover a broad range of activities. So, create various categories to consistently classify potential red flags. Examples might include civil proceedings, criminal misconduct, environmental violations, regulatory scrutiny, and financial crimes. Doing so will help focus your due diligence efforts and make it easier to analyze information sources.
3. Verify everything. To generate traffic, some news outlets do little to verify the accuracy of their stories. Rely only on information providers with high ethical standards and established histories of accurate reporting. This is particularly important when using social media. For any accusation or story, always look for corroboration and verification from multiple reputable sources.
4. Automate the process, if necessary. Rather than relying on employees to manually research and gather information, you can procure software that uses artificial intelligence to scan the internet and analyze massive amounts of data. This may entail a substantial investment, so it’s not something to consider until and unless the volume of adverse media screening you’ll be doing grows to a certain point.
An enhancement, not a replacement
To be clear, adverse media screening is a potential enhancement to the due diligence process that every business should use when scrutinizing vendors, partners, and big customers. It shouldn’t replace fundamental steps like checking credit reports and following up on references. FMD can help you assess the costs vs. benefits of allocating resources to this practice.
© 2023
Strong billing processes are critical to healthy cash flow
Once a business is up and running, one fundamental aspect of operations that’s easy to take for granted is billing. Often, a system of various processes is put in place and leadership might consider occasional billing mistakes to be part of the “cost of doing business.”
However, to keep your company financially fit, it’s imperative to regularly check in on your billing processes to ensure they’re as efficient, effective, and accurate as possible.
Resolve mistakes quickly
Many billing problems originate from a gradual deterioration in the quality of products or services. You may be giving customers an excuse not to pay their bills if products are showing up late or damaged — or not at all. The same goes for services that aren’t provided in a timely, satisfactory, or professional manner.
When it comes to billing processes, common mistakes include invoicing a customer for an incorrect amount or failing to apply promised discounts or special offers. Be sure to listen to customer complaints and track errors so you can identify trends and implement effective solutions.
In addition, regularly verify account information to make sure invoices and statements are accurate and going to the right people. Set clear standards and expectations with customers — both verbally and in writing — about your policies regarding pricing, payment terms, credit, and delivery times.
On the flip side, work closely with your managers and supervisors to ensure employees are well-trained to enforce billing policies. Staff members should prioritize quick resolutions to billing mistakes and disputes. They should also ask customers to pay any portion of a bill not in question. Once the matter is resolved, the customer should be politely asked to pay off the remainder immediately.
Tighten up timeliness
For invoice-based businesses, regularly sending out bills late can negatively impact collections. Familiarize yourself with current industry norms before setting payment schedules.
Traditionally, such schedules tend to be based on 30-, 45- or 60-day cycles. But times may have changed — particularly now that so much billing is done electronically. What’s more, many companies permit their most important or largest customers to set their own customized payment schedules. If this is the case for you, be sure to adjust your cash flow expectations and projections to recognize these variances.
As mentioned, today’s technology is driving how most businesses handle billing. An automated system can generate invoices when work is complete, flag problem accounts, and generate useful financial reports.
If you haven’t already, consider sending invoices electronically and enabling customers to pay online. Doing so can greatly speed up payment. Like any software, however, you’ll need to reassess it from time to time to determine whether you need an upgrade.
Control what you can
There are so many aspects to doing business that are unpredictable — the global, national, and local economies; customer tastes and demands; and disruptive competitors. That’s why it’s so important for business owners to be proactive about the things they can control. FMD will help you assess the efficacy of your billing processes and identify ways to improve cash flow.
© 2023
The time to make health care decisions is when you’re healthy
When it comes to estate planning, your ultimate goal likely is to provide for your family after your death. To achieve this goal, consider placing assets in an irrevocable trust to protect against creditors and drafting a will to clearly state who gets what.
But estate planning isn’t just about what happens to your assets after you die. It’s also about protecting yourself and your loved ones during your life. In this regard, it’s important to have a plan in place for making critical medical decisions in the event you’re unable to make them yourself. And, as with other aspects of your estate plan, the time to act is now, while you’re healthy. If an illness or injury renders you unconscious or otherwise incapacitated, it’ll be too late.
2 documents, 2 purposes
To ensure that your health care wishes are carried out and that your family is spared the burden of guessing — or arguing over — what you would decide, put those wishes in writing. Generally, that means executing two documents: a living will and a health care power of attorney (HCPA).
Unfortunately, these documents are known by many different names, which can lead to confusion. Living wills are sometimes called “advance directives,” “health care directives” or “directives to physicians.” And HCPAs may also be known as “durable medical powers of attorney,” “durable powers of attorney for health care” or “health care proxies.” In some states, “advance directive” refers to a single document that contains both a living will and an HCPA.
For the sake of convenience, we’ll use the terms “living will” and “HCPA.” Regardless of terminology, these documents serve two important purposes: 1) to guide healthcare providers in the event you become terminally ill or permanently unconscious, and 2) to appoint someone you trust to make medical decisions on your behalf.
Living will
A living will expresses your preferences for the use of life-sustaining medical procedures, such as artificial feeding and breathing, surgery, invasive diagnostic tests, and pain medication. It also specifies the situations in which these procedures should be used or withheld.
Living wills often contain a do not resuscitate order, which instructs medical personnel to not perform CPR in the event of cardiac arrest.
HCPA
An HCPA authorizes a surrogate — your spouse, child, or another trusted representative — to make medical decisions or consent to medical treatment on your behalf when you’re unable to do so. It’s broader than a living will, which generally is limited to end-of-life situations, although there may be some overlap.
An HCPA might authorize your surrogate to make medical decisions that don’t conflict with your living will, including consenting to medical treatment, placing you in a nursing home or other facility, or even implementing or discontinuing life-prolonging measures.
Put your plan into action
No matter how carefully you plan, living wills and HCPAs are effective only if your documents are readily accessible and healthcare providers honor them. Store your documents in a safe place that’s always accessible and be sure your loved ones know where they are. Also, keep in mind that healthcare providers may be reluctant to honor documents that are several years old, so it’s a good idea to sign new ones periodically. Contact FMD with questions.
© 2023