CPA.com Blog

Frank Fiorille

VP of Risk, Compli- ance, & Data Analytics, Paychex

Small Business Job Growth Strong in First Quarter

Small business job growth started 2016 with a bang, marking the best three-month increase in two years, according to the Paychex | IHS Small Business Jobs Index. The uptick was generally widespread across the country, and a number of individual states and metro areas saw job growth trends that indicate strong gains to begin the year.

Each month, Paychex and IHS measure the change in small business employment in the U.S., analyzing year-over-year worker count changes and trending the results to reveal movement. As we look back on Q1, let’s examine some of the data highlights.

National Scope

The pace of small business job growth improved 0.36 percent during the first three months of the year. The index held steady in March following gains in January and February to close the first quarter of 2016 just 0.05 lower than last year.

Regional Analysis

The pace of small businesses employment increased 1.40 percent in the East South Central region, the fastest growth among regions. Both the South Atlantic and Middle Atlantic regions improved solidly. After trending below the national baseline (100) all of 2015, the Middle Atlantic jumped above 100 in January as small businesses conditions strengthened further in February and March as well.

The West Central and Mountain were the only regions where small business employment growth slowed during the first quarter.

State Analysis

With the best growth rate in March as well as Q1 overall, Virginia climbed into the top 10 among states at 100.88. With three monthly gains totaling just over 1 percent, the Ohio index (100.66) is up to its highest level in more than three years and back above the national baseline.

Texas continues to be one of the strong metro indices, yet has slid 0.93 percent, mainly due to sizable drops in Dallas. Illinois fell below the national baseline for the first time in five years, as the pace of small business gains slowed 0.76 percent.

Metro Analysis

Reaching an index level of 104.01, Seattle improved 1.35 percent from December 2015 to March 2016, and overtook Dallas as the top metro index. Houston’s small business employment conditions also improved, by 0.29 percent.

The Chicago metro dropped below 100 for the first time since March 2011, as small business employment slowed 0.79 percent to start the quarter. Also dropping was Dallas metro, which fell 2.97 percent, reserving the trend of 2015.

Industry Analysis

Construction small business job gains continues at a strong pace, 102.22 in March, as the growth rate increased 0.55 percent during the last three months. At 101.13, the pace of employment growth in Education and Health Services is at its strongest level in more than two years, as the industry has gained 0.69 percent.

While most industries improved during the first three months of the year, Manufacturing did not and remains the lowest industry at 98.94.

As you can see, the first three months of 2016 featured a continued expansion of small business jobs growth. While we expect business owners will continue to look at additional options for hiring, such as part-time and contract workers, the overall expansion of small business jobs during Q1 is a positive sign that the year is off to a solid start.

Frank Fiorille is senior director of risk management for Paychex, a leading provider of human capital management solutions for payroll, HR, retirement, and insurance services.

Michael Cerami

Vice President, Business Develop- ment & Corporate Alliances

CPAs and the Growing Opportunity in Sales Tax

For businesses that operate in more than one state, keeping on top of sales and use taxes can be daunting. And it’s evident compliance is only growing more complex: for example, more than a dozen states are taking steps to impose taxes on online retailers or “remote sellers,” part of an effort to persuade Congress to push through national legislation in this area, a recent Wall Street Journal article found.

According to the report: “(The) states are tired of waiting for Congress to write national rules to let them collect sales taxes from out-of-state Internet retailers. So, in a loosely coordinated effort, they are moving to impose those taxes themselves and daring merchants to challenge them.”

The stakes are high: the National Conference of State Legislatures, citing a University of Tennessee study, says states collectively lost $23.3 billion in 2012 because of the different tax treatment of brick-and-mortar businesses versus online-only retailers, although other estimates vary.

In many ways, CPA firms are better positioned than ever to provide clients guidance and support in this area. CPA mobility laws have increased the ability of accounting professionals to practice in multiple states. And merger and acquisition activity in the profession has created new CPA firms with multistate footprints and multistate expertise.

There’s also an X factor in establishing an advisory practice for sales and use tax compliance: technology. The knowledge base for tracking legislative and regulatory developments in tax jurisdictions around the country is something that needs to be curated by a highly trained staff. That’s virtually impossible for all but the biggest CPA firms to replicate, and it explains why specialized cloud solutions that deliver this kind of continuously updated information are an important differentiator for trusted business advisor services.

To learn more about sales and use tax advisory services from the firm perspective, join CPA.com President and CEO Erik Asgeirsson and a panel of experts for a Digital CPA Webcast “Sales and Use Tax: What Your Firm Needs to Know” on May 26.

Heather Windman

Marketing Manager, CPA.com

How to discover new outsourced accounting opportunities during tax season

Although tax season can be one of the most challenging times for tax professionals at your firm, it’s also a time when you can gain more insight into client needs and expand relationships. During client meetings, there is so much that can be uncovered during tax season and if the right questions are asked, it can open the door to new opportunities for client accounting and advisory services.

Simply arm your tax colleagues with sound, probing questions that will get clients talking about their business. Suggested conversation starters, include:

  • What are your business growth goals?
  • Would you like to receive special reports to run your business weekly or monthly?
  • Would you like to have a dashboard where you can view your daily cash flow on a 24/7 basis?
  • Is it difficult to keep a good bookkeeper? Are you the bookkeeper?
  • What is your biggest pain point with your business?

Ready to get started? Here are 3 steps you can take to partner with your tax team.

  1. Education: It starts with internal education. Ensure your colleagues are aware of the types of accounting and advisory services you provide and the value these services offer clients. Set up a meeting to get everyone on the same page, and discuss how you can work together.
  2. Internal Materials: Create internal materials for your tax colleagues such as note cards with the top five questions, a high-level sales pitch that includes core benefits of client accounting services, videos, and more.
  3. External Client Materials: Provide external marketing materials about your services that tax professionals can share with clients such as flyers, case studies, a link to your website, and more.

Get a copy of our tip sheet with more information.

Richard Shuback

Richard Shuback, LLC

It helps to build your brand around a solid framework

When building a sustainable brand with any level of complexity, it’s important to build it based on a sound and solid structure or framework. By creating consensus from both internal and external stakeholders as to what the brand truly is and stands for, the process of execution and adoption will become much more streamlined.

My Framework for Brand Creation has been designed to enable the creative development process to become more informed. This will assist in the decision-making process – enabling stakeholders to judge and support the work based the brand’s true identity not individual personal preference.

> DISCOVERY AND DEFINITION

The first and most critical phase of the Brand Creation process is Discovery and Definition. This phase establishes:

  • Key objectives and timing
  • Market situation
  • Mission and positioning
  • Competition
  • Overall benefits and offerings
  • Value proposition
  • Stakeholders and audience
  • What’s working and performance gaps

The reason this phase is so important is because all of the work that follows will be judged against what’s agreed upon in the final Discovery Document. It’s developed through research documents and background materials. The document is also compiled through other sources that are uncovered through brainstorm sessions and interviews.

This work along with research and insights will inform all of the creative and brand work to follow. This is why it’s important to have accurate, agreed-upon documentation that has buy-in from executive leadership all the way through to the day-to-day marketing team.

Once the Discovery Document has been completed and approved, it will serve as a North Star for creative direction. This will influence and inspire the Creative Exploration, which moves us into the next phase.

> CREATIVE EXPLORATION AND SELECTION

This is the phase where ideas and concepts of what the brand could look and sound like in the marketplace takes shape.

A series of unique creative ideas and tactics are shared with the company’s leadership and marketing teams. This work will take the form of concepts in advertising, social media and design.

The Creative Exploration presentation typically consists of three unique creative directions which include:

  • Logo design & possible naming options
  • Tag lines
  • Messaging
  • Overall look and feel (Imagery, Color, Typography, Persona)
  • Communication mock-ups such as:
    • Home page designs
    • Collateral such as business cards
    • Advertisements
    • Marketing Emails

The concept selection process is aided by referring back to the Discovery Document. This helps in the judging of the creative work and allows each stakeholder to objectively react to each concept based on the agreed upon core objectives and findings.

Reactions and feedback are shared with the teams and they in turn help inform the decision making process. Generally several rounds of adjustments are made before the lead creative direction is finalized. Once that happens, and the brand direction has reached final approval, the creative is ready to move into development.

> BRAND DEVELOPMENT AND EXECUTION

Now that the concepts, ideas and creative directions have been approved, it’s time to begin to tackle the core assignments. At times it can feel like we’re building the plane while we’re flying it. That’s because that’s just about what we’ll be doing.

Key marketing projects and initiatives will inform future assignments. Implementation of design, photography, illustration, fonts and messaging will be taking shape and help us understand how the brand functions in different media channels.

It will be important to prioritize the work in phases and decide what’s needed immediately and what can wait for a later phase.

The first round of the Brand Guidelines will begin to take shape and an asset library is usually created to enable the execution process to run smoothly and consistently. This will also provide internal and external resources with the ability to contribute to the brand’s development and execution.

Language, value proposition, imagery and formats will be executed and begin to be distributed to printers, media partners and online web channels. This soft launch phase provides a window into how the branding functions both technically and creatively.

> BRAND DEFINITION AND ADOPTION

At this stage the Brand Guidelines become more detailed. This is because there will be a series of in-market communications to draw from. These guidelines will assist both creative and marketing with the right tools to maintain brand consistency.

This is also a great opportunity for internal team building. Given the nature of branding or re-branding, the creative shouldn’t look like every other company's in the category. Because of that, many existing team members may not fully agree with or understand the new creative direction. In some cases they may want to go back to the previous way of doing things.

To build adoption both internally and externally the brand needs to be socialized with small events, giveaways and team meetings. This builds affinity for the company by emotionally connecting stakeholders with the new brand and the effort behind it. This enthusiasm brings everyone on board and inspires them to become brand advocates.

> BRAND LAUNCH AND IMPLEMENTATION

The implementation of the new work isn’t the end but the beginning of the brand's development. This phase allows for us to identify efficiencies in creative development such as templates and messaging structures. It can also help inform the volume of work ahead and to determine prioritization.

This phase helps us to view the work beyond concepts and see how it performed in market. It’s a good opportunity to check in with customers, business partners and employees to see if people are noticing the new brand and what it means to them.

Public reaction can inform the future work and help with market research in the next phase.

> MARKET RESEARCH AND ANALYSIS

Soliciting the public’s opinion of the new brand is a good idea. It’s important to see how target markets view the work and if it’s performing according to plan. This can be done through online surveys, polls and focus groups. This review can help identify any gaps that could be missing in the overall brand structure. More importantly, it could also confirm and support the decisions that were made throughout the whole brand development process.

> ONGOING CREATIVE REFINEMENT AND CONTINUITY

A brand, just like an individual, grows organically. Once the analysis from the research is understood, the team can determine the adjustments that need to happen in order to optimize the brand’s overall performance in the market – helping it grow.

In addition, new projects and assignments will come up where the creative solution may not have been addressed earlier. It’s important to stay on course and develop creative directions that both maintain and evolve your new brand.

Eric Enser

Product Manager, Insurance Solutions, Paychex, Inc.

ACA Deadline Extension – What Your Clients Need to Know

With the Internal Revenue Service’s (IRS) extension of the Affordable Care Act (ACA) reporting deadlines for the 2015 tax year, published on December 28, 2015, businesses now have more time to meet the requirements of the Employer Shared Responsibility (ESR) provisions. Employers should use this extra time wisely, making sure they fully understand what’s required of them and the actions they need to take to avoid penalties.

In today’s economy, accountants that understand how these regulations impact their clients’ businesses—and can offer strategic guidance—are in great demand. Business owners continue to rely on CPAs to provide valuable information regarding Employer Shared Responsibility requirements. With that in mind, here’s a rundown of the essential ESR details.

A Brief Overview

Under the ESR provisions of the ACA, certain employers must offer affordable health insurance coverage that meets the established minimum essential coverage and minimum value requirements to full-time employees or risk a potential penalty. If you are considered an applicable large employer, you'll need to provide detailed informational reporting to the Internal Revenue Service (IRS) at tax time.

Need-to-Know Information for ESR Reporting

Is my client subject to the law?

In general, an applicable large employer (ALE) is any employer with an average of 50 or more full-time employees, including full-time equivalents (FTEs) during business days of the previous calendar year. A full-time employee is one who works an average of 30 hours per week or 130 hours per month. In general, ALEs with 50 to 99 full-time employees, including FTEs, may qualify for relief from penalties for not offering affordable and adequate insurance to their full-time employees until 2016, or the beginning of their 2016/2017 plan year if they meet certain conditions and certify in their informational reporting that they qualified for relief.

In general, ALE status for 2015 is based on workforce hours from 2014. A new employer (an employer that didn’t exist in the previous calendar year) will be considered an ALE if the business reasonably expects to employ and does employ an average of 50 or more full-time employees, including FTEs, in the current calendar year.

Keep in mind, rules that determine the size of a business under health care reform are applied at the “controlled group” level, with a special standard applied to government entity employers. Generally, controlled groups are those that are tied together through direct or overlapping (common) ownership. When determining if an employer is an applicable large employer, all member entities within a controlled group or an affiliated service group (under Code Section 414(b), (c), (m), and (o)) must be aggregated.

Last, as part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, employers should not include employees who are military veterans and have coverage through TRICARE or the Department of Veterans Affairs when determining ALE status. Once ALE status is determined, veterans are treated the same as any other employee when determining full-time status, offers of coverage, and 1095-C filing.

Which employees could subject my client to penalties if not offered coverage?

According to the ESR provisions, employees working an average of 30 or more hours of service per week, or 130 hours of service per month, are considered full-time employees. In order to determine full-time employee status for each employee during the tax year, the employer may use either the monthly measurement method or look-back measurement method. Each method identifies, per month, the full-time or part-time status of each employee. Employees considered full-time for at least one month of the year must receive a 1095-C from their employer.

What are the coverage requirements my client needs to meet?

The ESR provisions require ALEs to have offered minimum essential coverage to at least 70 percent of full-time employees and their dependents (relief for covering dependents is available if certain conditions are met) in 2015 to avoid one of the potential penalties. In 2016, they will need to make these offers to 95 percent (or all but five) of full-time employees and their dependents. Keep in mind that the employer can be assessed another penalty for not offering coverage that meets minimum actuarial value or affordability requirements to all full-time employees if any of those employees not offered adequate and affordable coverage receive a premium tax credit.

What do my clients need to know about minimum essential coverage, minimum actuarial value, and affordable coverage?

Minimum essential coverage. Health insurance coverage must meet the minimum benefits standard of the small- or large-group market within the state to qualify as minimum essential coverage. This includes most broad-based medical coverage typically provided by employers. It would not include certain specific coverage, such as accident or disability income, standalone dental, or vision coverage.

Minimum actuarial value. A plan must cover at least 60 percent of the total average costs of medical expenses to qualify as meeting the minimum actuarial value requirement.

Affordable coverage. The IRS has offered three optional safe harbor methods to help you determine this amount:

  1. Form W-2 safe harbor
  2. rate of pay safe harbor
  3. federal poverty line safe harbor

For specifics about the three affordable safe harbors, see question 19 under “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act” on the IRS website.

What forms do my clients need to complete?

There are forms that must be filed with IRS, and forms that must be sent to full-time employees. In general, organizations must file paper forms 1094-C and 1095-C by February 28th of the filing year. For 2016, the original deadline was February 29, 2016 (or March 31, 2016, if you file electronically). Even if an employer is a member of a controlled ownership group, or an “Aggregated ALE Group”, each separate Federal ID must file their own 1094-C and employee 1095-Cs. Any employer filing 250 or more 1095-Cs must file electronically.

In general, organizations must provide all full-time employees with copies of form 1095-C by January 31 of the filing year. For 2016, the original deadline was February 1 because January 31 fell on a Sunday. The form details what type of coverage employees were offered and for which months, as well as the cost of the least expensive employee contribution to employee-only option offering minimum essential coverage and minimum actuarial value.

What are the new dates associated with the Automatic Extension of Deadlines for 2015 filing?

On December 28, 2015, the IRS announced an automatic extension for 2015 tax year due dates for all required filers. The new deadlines are:

  • March 31, 2016, to deliver the 2015 Forms 1095-B and 1095-C to affected employees
  • May 31, 2016, to manually file the 2015 Forms 1094-B, 1094-C, 1095-B, and 1095-C with the IRS — for employers who are eligible for paper filing and are filing the forms on paper
  • June 30, 2016, to electronically file the 2015 Forms listed above with the IRS

Per the IRS announcement, there will be no further extensions granted beyond these dates. Employers who fail to furnish or file by the extended deadlines may be subject to penalties from the IRS.

What penalties are my clients at risk of?

If an organization fails to offer adequate and affordable coverage to its full-time employees and their dependents per requirements of the ESR provisions of the ACA, it may face potential penalties in the form of excise taxes as high as $2,080 ($2160 for 2016 and adjusted for inflation thereafter) for every full-time employee employed during the tax year, in general after the first 80 in 2015 (30 in 2016 and beyond). Organizations may also face penalties for not filing accurate returns on time, starting at $50 per form for both those furnished to the employee and those filed with the IRS, if an accurate return is filed within 30 days after the due date, and escalating from there (certain limitations apply).

What about my clients that qualified for transition relief from penalty assessments in 2015?

ALEs of 50 to 99 employees that may qualify for transition relief from penalty assessments for 2015 must still file the relevant tax forms.

Even with the extension, ESR filing deadlines will be here before you know it. Now is the time for CPAs to provide their clients with valuable information to help ensure they are best positioned to successfully meet the ESR reporting requirements.

Eric Enser is the product manager for Insurance Solutions at Paychex, Inc., a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services nationwide. He is participated in multiple Digital CPA Webcasts to inform the profession on updates on ACA.

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