Archives for October 2018

The best places to “park” excess company cash

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Business owners face a constant balancing act when it comes to deciding how much cash to keep in their everyday checking account.

On one hand, the money in these accounts is available in case of an emergency or unexpected business opportunity. However, federal law prohibits banks from paying interest on business accounts. Congress often discusses changing the law, but in the meantime, you have to get creative to earn a decent rate of return on your temporary excess cash.

Certificates of Deposit
CD are normally single-deposit investments with maturity options ranging from seven days to several years. They can pay a set or variable interest rate, which is usually higher than other bank deposit investments. The reason is simple: The bank feels comfortable that the funds will stay in your account until the maturity date.

The drawback is that withdrawals from a CD before maturity generally result in a penalty. Therefore, look for promotions with no early withdrawal penalties. In some cases, this no-penalty option can be exercised after a certain length of time — sometimes as brief as two weeks. In other cases, you can withdraw money periodically over the term of the CD.

It’s smart to stagger maturity dates on several CDs, rather than having one deposit make up a single CD. That way, you get access to your cash on a rolling basis if you need it. In any event, keep in mind that interest rates may be negotiable based on the strength of your banking relationship.

Money Market Accounts
Money Markets pay interest and give you some access to your funds. With these accounts, you can write checks and make deposits whenever additional funds become available. However, you can usually make only a limited number of transactions during a given period.

That limitation means money market accounts aren’t designed to handle all of your checks or withdrawals. But with basic cash management, they can be an easy way to earn interest and have access to funds on a limited basis.

Sweep Accounts
These are essentially checking accounts in which you give the bank permission to invest or “sweep” funds into an interest-bearing account on a day-to-day basis. These accounts aren’t always promoted by banks, so you may have to ask if they’re available.

Here’s an example of how they work: Let’s say your company routinely keeps large amounts of cash on deposit for short periods. With a sweep account, you instruct the bank to transfer any amounts exceeding, for example, $25,000 into investments such as overnight paper or repurchase agreements. In essence, you transformed a no-interest account into one that pays you interest.

A word of caution: Sweep accounts may not be federally insured. This happens when your excess funds are swept from an insured bank or credit union account to an investment that isn’t covered by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). If the financial institution fails, you may lose some of your money. With a traditional account, federal insurance generally only covers the first $250,000 on deposit at each institution.

Before making any moves, ask your accountant or financial advisor which of these short-term solutions for excess cash might be wise for your business.

Tax reform opportunities to consider as 2017 winds down

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Congress is enacting the biggest tax reform law in 30 years — one that will fundamentally change the way your federal income tax bill is calculated. Since most of the changes will go into effect next year, there’s still a narrow window before year-end to soften or avoid the impact and best position yourself for the tax breaks that may be heading your way.

Here are 7 last-minute moves to consider as 2017 comes to a close:

  1. If you’re about to convert a regular IRA to a Roth IRA, postpone the conversion until next year. That way, you’ll defer income from the conversion until next year and have it taxed at lower rates.
  2. If you’re not subject to the Alternative Minimum Tax (AMT), pay the last installment of your 2017 estimated state and local taxes no later than December 31, 2017, rather than on the 2018 due date.
  3. Charitable contributions after 2017 may not yield a tax benefit because you won’t be able to itemize deductions, so consider accelerating some charitable giving into 2017.
  4. Consider accelerating “discretionary” medical expenses into this year. For example, get new glasses or contacts, or see if you can squeeze in expensive dental work such as an implant.
  5. If a higher alternative minimum tax (AMT) exemption in 2018 means you won’t be subject to the 2018 AMT, it may be worthwhile to push such deductions into next year, such as exercising an incentive stock option (ISO).
  6. Under the new law, alimony payments aren’t deductible by the payor or includible in the income of the payee, generally effective for any divorce decree or separation agreement executed after 2017. So if you’re in the middle of a divorce or separation agreement and anticipate winding up on the paying end, it would be to your advantage to wrap things up before year end. On the other hand, if you’ll likely wind up on the receiving end, it would be worth your while to wrap things up next year.
  7. The new law suspends the deduction for moving expenses after 2017 (except for certain members of the Armed Forces), as well as the tax-free reimbursement of employment-related moving expenses. So if you’re in the middle of a job-related move, try to incur your deductible moving expenses before year-end. Or, if the move is connected with a new job and you’re getting reimbursed by your new employer, press for reimbursement before year-end.

These are just some of the general year-end moves that should be considered in light of the new tax law. As always, this should not be considered tax advice. Be sure to consult with your CPA or tax advisor for advice specific to your situation.

6 ways to prevent tuition reimbursement fraud

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Every company’s been stepping up its benefits game to attract great hires. Tuition reimbursement pays you back two ways — it’s a high-value perk for job seekers, and investing in employee educationand training is crucial to your organization’s long-term success. However, these programs can also pose a fraud risk in ways that might surprise you. For example, in one recent case, four employees submitted more than $400,000 in fraudulent expense requests for college classes they never even enrolled in.

To avoid having tuition reimbursement benefits become more a liability than a benefit, consider the following steps:

1. Request original documentation. Most educational institutions provide a transcript and receipt for fees paid as well as a diploma if the employee earns a degree or certification. To help prevent the submission of fraudulent documentation, as well as multiple claims for the same expense, consider requiring original transcripts and receipts for fees paid. In addition, some employers request copies of canceled checks or credit card statements to verify that the payment for which the employee is seeking reimbursement was actually made.

2. Help managers with a structured approval process. To keep employees happy, managers may be tempted to “rubber stamp” approvals. Although the majority of tuition reimbursement requests are legitimate, failure to scrutinize claims can result in fraud. Managers should be given a checklist of documents to be submitted with each request, and have a contact person to go to with questions or concerns.

3. Allocate tuition reimbursement to department budgets. To increase accountability and encourage managers to closely review reimbursement requests, consider allocating education expenses to individual department budgets. The level of due diligence that managers perform tends to increase significantly if their departments are charged with the expense. However, you don’t want managers to discourage employees from taking advantage of training opportunities, so make sure the final decision to approve or deny a request rests with someone other than the department manager.

4. Pay the school directly if possible. Depending on the size of your organization and the number of employees who pursue further education each year, it may be a good idea to pay the learning institution directly. That way, your company won’t have to rely exclusively on the documents submitted by employees. In addition, you might be able to negotiate a discount for bulk payments. Paying an institution directly not only reduces the chances of employee fraud; it may also reduce your administrative costs as it involves less paperwork.

5. Reimburse expenses only for accredited schools. Unfortunately, the number of “diploma mills” has exploded in recent years. Establishing a policy to only reimburse for accredited schools can help eradicate tuition fraud as well as potentially increase the quality of education your employees receive.

6. Implement an employee hotline. When employees commit tuition reimbursement fraud, they may be tempted to share their success with co-workers. A hotline can provide employees with an anonymous method to share the information that can stop tuition reimbursement before losses mount.

Tuition reimbursement fraud is relatively easy to detect and prevent. And given the importance of educating and retaining motivated employees, preventing reimbursement fraud should be a priority for every organization.