Reducing Employee Turnover

American workers’ median tenure with their employers is 4.6 years. However, younger employees (those ages 25 to 34) have a median tenure of only three years.* A revolving door of employees can be a major problem for companies.

Consider the Costs

If your construction firm has experienced high employee turnover, then you know first-hand the high costs of recruiting and training replacements. A study by the University of California** reports that it costs about $2,000 to replace blue collar and manual labor workers and up to $7,000 to replace professional and managerial employees.

But financial costs are not the only concern. Disrupted schedules, additional work for other employees, and high stress levels also can be problems. You can avoid the expense and the work associated with high employee turnover by implementing strategies that help new hires settle in and become valuable, long-term employees.

Mentor New Hires

Very few employees will hit the ground running. The majority will need time to adjust to learning new skills, absorbing company protocols and procedures, and developing new relationships. That’s why creating a structured process of welcoming and acclimating new employees can go a long way in increasing employee retention rates.

Consider assigning an experienced mentor or coach to each new hire for at least 90 days. Providing new hires with an organizational chart with names and titles that illustrates the company’s hierarchy is also helpful.

New hires need to know that they will have a future in your company. Providing them with a career development plan that outlines short- and long-term goals can help reassure them about their future prospects.

Over time, the mentor should introduce new hires to managers, supervisors, and coworkers to facilitate team building and encourage a sense of belonging. Also, it’s important that owners and managers deliver regular performance reviews, provide regular feedback, and answer any questions a new hire may have.

The ultimate goal of this process is to give employees the resources they need to do their jobs effectively and to help them reach their full potential. Engaged, motivated employees who feel their efforts are valued are more likely to be satisfied and productive long-term employees.

* U.S. Department of Labor, Bureau of Labor Statistics, News Release, Employee Tenure in 2014

** Arindrajit Dube, Eric Freeman, and Michael Reich (2010), “Employee Replacement Costs,” IRLE Working Paper No. 201-10, www.irle.berkeley.edu/workingpapers/201-10.pdf

“If your construction firm has experienced high employee turnover, then you know first-hand the high costs of recruiting and training replacements.”

Maximize the Impact of Your Company’s Website

Your company’s website is an important marketing tool. For many people, your website may be their first point of contact with your construction firm.

An effective website can help you generate business, establish your reputation for quality work, and showcase your company’s skills and abilities. However, you are not leveraging the power of the web if your site is tough to navigate, lacks contact information, and provides little in the way of content specific to your firm’s area of expertise.

You can maximize the marketing and branding power of your website if you:

  • Provide an easy-to-navigate and intuitive format
  • Create a mobile-friendly design for your site
  • Ensure your company is represented in keyword search results
  • Include contact information in a prominent place
  • Offer practical information that is relevant, up to date, and directly targeted at your market
  • Use pictures and graphics
  • Educate visitors with content that focuses on your company’s expertise and highlights the range of projects it can undertake
  • Display customer testimonials prominently

Delivering a steady stream of up-to-date, relevant content across different web platforms can help boost your website’s ranking in search engine results.

Developments in Tax and Business

Work Zone Safety Issues

Eighty-nine percent of highway contractors believe stricter enforcement of existing laws would reduce the number of work zone crashes, injuries, and fatalities, according to a recent survey by the Associated General Contractors of America. Highway contractors also said that a stronger police presence on highway work zones (85%), an increased use of barriers (79%), and more frequent safety training for workers (69%) would be beneficial.

Construction Employment by Occupation

There were more carpenters (516,340) than electricians (424,810) in the U.S. in 2014, according to data released by the U.S. Department of Labor’s Bureau of Labor Statistics. The data also shows that there were 697,980 construction laborers, 215,140 operating engineers and other construction equipment operators, and 180,640 construction managers.

Warning Signs in Your Financial Statements

A regular review of your company’s financial statements can help you catch warning signs that may alert you to future problems. Detecting problems early can help you prevent long-lasting damage to your firm’s financial health. Here are five warning signs you should be on the lookout for.

Issues with Available Cash

Cash flow is the lifeblood of a business. You should be concerned if your cash flow is insufficient to cover expenses because payments for a project are slow in coming. Another red flag is when your cash reserves accumulate rather than being spent. Excess funds may be parked in short-term investment accounts, but ideally, they should be used for ongoing projects.

High Underbillings Ratio

The underbillings-to-equity ratio measures the percentage of your business’s net worth represented by project work that is underbilled.

Essentially, it is a snapshot of the level of contract volume being financed by the owner. Substantial underbillings may be caused by inadequate estimating or poor billing systems.

Excessive Capital Expenditures

Since new equipment is such a significant expense, you need to carefully manage your equipment needs. Frequent purchases of expensive equipment may impede cash flow, raise debt levels, and limit your ability to take on new projects. In addition, consider how financing a large purchase could affect your ability to obtain credit for other needs.

Before committing to any large capital expenditure, you should analyze your upcoming cash needs and try to match purchases of equipment to existing cash flow. Or, you could consider leasing.

Leasing rather than buying equipment allows you to budget payments over an extended period. You may also be able to tailor the payment schedule to your normal cash flow patterns. Essentially, leasing is a good option if your cash flow is not as good as it should be.

Declining Gross Profit Margin

If you notice that your gross profit margin is shrinking over several periods, your production costs may be rising at a faster pace than your prices. Or, it may be due to the fact that you may be charging less for your services than in the past. Both possibilities present a real threat to the financial health of your business.

Receivables Growing Faster Than Sales

If your receivables are growing faster than sales, then this is a sign that your customers are not paying what they owe you in a timely manner. It’s also a sign that you should evaluate and potentially tighten up your collection procedures.

A good first step is to be proactive and consistent about issuing invoices and providing any necessary supporting documentation. In addition, contact customers as soon as you detect any delays in payment, and stay on top of accounts that are past due.

Business Owners: Brush Up On Bonus Depreciation

Every company needs to upgrade its assets once in a while, whether desks and chairs or a huge piece of complex machinery. But before you go shopping this year, be sure to brush up on the enhanced bonus depreciation tax breaks created under the Tax Cuts and Jobs Act (TCJA) passed late last year.

Old Law

Qualified new — not used — assets that your business placed in service before September 28, 2017, fall under pre-TCJA law. For these items, you can claim a 50% first-year bonus depreciation deduction. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture and so forth.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building.

New Law

Bonus depreciation improves significantly under the TCJA. For qualified property placed in service from September 28, 2017, through December 31, 2022 (or by December 31, 2023, for certain property with longer production periods), the first-year bonus depreciation percentage is increased to 100%. In addition, the 100% deduction is allowed for both new and used qualifying property.

The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions placed in service on or after September 28, 2017. Productions are considered placed in service at the time of the initial release, broadcast or live commercial performance.

In later years, bonus depreciation is scheduled to be reduced to 80% for property placed in service in 2023, 60% for property placed in service in 2024, 40% for property placed in service in 2025 and 20% for property placed in service in 2026.

Important: For certain property with longer production periods, the preceding reductions are delayed by one year. For example, 80% bonus depreciation will apply to long-production-period property placed in service in 2024.

More Details

If and when bonus depreciation isn’t available to your company, a similar tax break — the Section 179 deduction — may be able to provide comparable benefits. Please contact our firm for more details on how either might help your business.

Copyright © 2018

The Changing Face of Personal Exemptions and the Standard Deduction

Personal tax exemptions and the standard deduction have looked largely the same for quite some time. But, in light of the Tax Cuts and Jobs Act (TCJA) passed late last year, many individual taxpayers may find themselves confused by the changing face of these tax-planning elements. Here are some clarifications.

For 2017, taxpayers can claim a personal exemption of $4,050 each for themselves, their spouses and any dependents. If they choose not to itemize, they can take a standard deduction based on their filing status: $6,350 for singles and separate filers, $9,350 for head of household filers, and $12,700 for married couples filing jointly.

For 2018 through 2025, the TCJA suspends personal exemptions but roughly doubles the standard deduction amounts to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. The standard deduction amounts will be adjusted for inflation beginning in 2019.

For some taxpayers, the increased standard deduction could compensate for the elimination of the exemptions, and perhaps even provide some additional tax savings. But for those with many dependents or who itemize deductions, these changes might result in a higher tax bill — depending in part on the extent to which they can benefit from family tax credits.

Copyright © 2018

Heed the Warning Signs of W-2 Phishing Scams

A growing number of businesses have been victimized by W-2 phishing scams. In a traditional phishing scam, a criminal tricks someone into providing confidential information and then uses it to steal money and/or the victim’s identity. The W-2 phishing scam is a variation on this. Whether you’re a business owner, work in management or are simply an employee, it’s important to be able to recognize this dangerous ploy. The better educated a company’s employees are, the less likely that it will suffer at the hands of these criminals.

How it Works

In a W-2 phishing scam, cybercriminals send emails to company employees — typically in payroll, benefits or HR departments — that claim to be from management. The emails request a list of employees along with their W-2 forms, Social Security numbers or other confidential data.

Here are some examples straight from the IRS:

  • “Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.”
  • “Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary)?”

If the employee responds with data, criminals can use the information to file fraudulent tax returns in the employees’ names, seeking refunds.

The scam is particularly nefarious because the employees it targets probably believe that, in complying with the emailed instructions, they’re doing exactly what they’re supposed to. Moreover, at first glance, the emails typically appear legitimate. Many contain the company’s logo and the name of an actual executive, typically gleaned from publicly available information.

The increasing number of such scams prompted the IRS to issue an alert in 2016: “IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s.” More recently, in November 2017, the agency issued another stern warning on its website, entitled “Employers, Payroll Officals: Avoid the W-2 Email Scam.”

Education is Key

While these scams have become more prevalent, businesses (and other employers) can take steps to reduce their risks. Because the scams target humans, rather than the technology itself, education is key. Inform all employees, and particularly those in areas that handle sensitive data, of the scams. Remind them not to click on links or download attachments from emails that were unsolicited or sent by those they don’t know.

Employees often are nervous about questioning a request that appears to come from upper management, so encourage them to double-check any request for sensitive information, no matter who appears to be making it. They should do this not by responding to the email in question, but by talking with a trusted supervisor or colleague.

Precautions Necessary

With sensible precautions, your company can reduce the risk of falling victim to a W-2 phishing scam. Contact us for the latest information about any tax-related fraud issues.

Copyright © 2018

family holding baby

Making 2017 Retirement Plan Contributions in 2018

The clock is ticking down to the tax filing deadline. The good news is that you still may be able to save on your impending 2017 tax bill by making contributions to certain retirement plans.For example, if you qualify, you can make a deductible contribution to a traditional IRA right up until the April 17, 2018, filing date and still benefit from the resulting tax savings on your 2017 return. You also have until April 17 to make a contribution to a Roth IRA.family holding baby

And if you happen to be a small business owner, you can set up and contribute to a Simplified Employee Pension (SEP) plan up until the due date for your company’s tax return, including extensions.

Deadlines and Limits

Let’s look at some specifics. For IRA and Roth IRA contributions, the maximum regular contribution is $5,500. Plus, if you were at least age 50 on December 31, 2017, you are eligible for an additional $1,000 “catch-up” contribution.

There are also age limits. You must have been under age 70½ on December 31, 2017, to contribute to a traditional IRA. Contributions to a Roth can be made regardless of age, if you meet the other requirements.

For a SEP, the maximum contribution is $54,000, and must be made by the April 17th date, or by the extended due date (up to Monday, October 15, 2018) if you file a valid extension. (There’s no SEP catch-up amount.)

Phaseout Ranges

If not covered by an employer’s retirement plan, your contributions to a traditional IRA are not affected by your modified adjusted gross income (MAGI). Otherwise, when you (or a spouse, if married) are active in an employer’s plan, available contributions begin to phase out within certain MAGI ranges.

For married couples filing jointly, the MAGI range is $99,000 to $119,000. For singles or heads of household, it’s $62,000 to $72,000. For those married but filing separately, the MAGI range is $0 to $10,000, if you lived with your spouse at any time during the year. A phaseout occurs between AGI of $186,000 and $196,000 if a spouse participates in an employer-sponsored plan.

Contributions to Roth IRAs phase out at mostly different ranges. For married couples filing jointly, the MAGI range is $186,000 to $196,000. For singles or heads of household, it’s $118,000 to $133,000. But for those married but filing separately, the phaseout range is the same: $0 to $10,000, if you lived with your spouse at any time during the year.

Essential Security

Saving for retirement is essential for financial security. What’s more, the federal government provides tax incentives for doing so. Best of all, as mentioned, you still have time to contribute to an IRA, Roth IRA or SEP plan for the 2017 tax year. Please contact our firm for further details and a personalized approach to determining how to best contribute to your retirement plan or plans.

Copyright © 2018

collectible tax

Do You Know the Tax Impact of your Collectibles?

They say one person’s trash is another person’s treasure. This may hold true when it comes to collectibles — those various objets d’art for which many people will pay good money. But if you’re considering selling or donating some of your precious items, be sure to consider the tax impact on your 2017 return. collectible tax

Sales

The IRS views most collectibles, other than those held for sale by dealers, as capital assets. As a result, any gain on the sale of a collectible that you’ve had for more than one year generally is treated as a long-term capital gain.

But while long-term capital gains on many types of assets are taxed at either 15% or 20% for the 2017 tax year, capital gains on collectibles are taxed at 28%. (As with other short-term capital gains, the tax rate when you sell a collectible that you’ve had for one year or less typically will be your ordinary-income tax rate.)

Determining the gain on a sale requires first determining your “basis” — generally, your cost to acquire the collectible. If you purchased it, your basis is the amount you paid for the item, including any brokers’ fees.

If you inherited the collectible, your basis is its fair market value at the time you inherited it. The fair market value can be determined in several ways, such as by an appraisal or through an analysis of the prices obtained in sales of similar items at about the same time.

Donations

If you want to donate a collectible, your tax deduction will likely depend both on its value and on the way in which the item will be used by the qualified charitable organization receiving it.

For you to deduct the fair market value of the collectible, the donation must meet what’s known as the “related use” test. That is, the charity’s use of the donated item must be related to its mission. This probably would be the case if, for instance, you donated a collection of political memorabilia to a history museum that then puts it on display.

Conversely, if you donated the collection to a hospital, and it sold the collection, the donation likely wouldn’t meet the related-use test. Instead, your deduction typically would be limited to your basis.

Proper Handling

There are a number of other rules that may come into play when selling or donating collectibles. Our firm can help you handle the transaction properly on your 2017 return.

Elderly Couple

When an Elderly Parent Might Qualify as Your Dependent

It’s not uncommon for adult children to help support their aging parents. If you’re in this position, you might qualify for an adult-dependent exemption to deduct up to $4,050 for each person claimed on your 2017 return.

Basic Qualifications

For you to qualify for the adult-dependent exemption, in most cases your parent must have less gross income for the tax year than the exemption amount. (Exceptions may apply if your parent is permanently and totally disabled.) Social Security is generally excluded, but payments from dividends, interest and retirement plans are included.

In addition, you must have contributed more than 50% of your parent’s financial support. If you shared caregiving duties with one or more siblings and your combined support exceeded 50%, the exemption can be claimed even though no one individually provided more than 50%. However, only one of you can claim the exemption in this situation.

Important Factors

Although Social Security payments can usually be excluded from the adult dependent’s income, they can still affect your ability to qualify. Why? If your parent is using Social Security money to pay for medicine or other expenses, you may find that you aren’t meeting the 50% test.

Also, if your parent lives with you, the amount of support you claim under the 50% test can include the fair market rental value of part of your residence. If the parent lives elsewhere — in his or her own residence or in an assisted-living facility or nursing home — any amount of financial support you contribute to that housing expense counts toward the 50% test.

Easing the Burden

An adult-dependent exemption is just one tax break that you may be able to employ on your 2017 tax return to ease the burden of caring for an elderly parent. Contact us for more information on qualifying for this break or others.