Employee Benefits – Recent Issues

How is your company’s employee benefit plan affected by same-sex marriages?

Julie Killian, CPA, CGMA | Principal - Assurance ServicesThe IRS has issued new guidance in response to the decision last summer by the US Supreme Court in United States v. Windsor. The decision held that section 3 of the Defense of Marriage Act (DOMA), which prohibited the recognition of same-sex marriages, is unconstitutional because it violates the principles of the Fifth Amendment and equal protection. The Federal Government and the states have been considering the impact on employers of the recognition of same-sex marriage.

What are the Employer Implications of Same-Sex Marriage?

Kevin McKervey, CPA | PresidentIn the wake of the landmark decision last summer by the US Supreme Court in United States v. Windsor, employers have been grappling with the impacts same-sex marriage will have on their businesses. With the recent decision in DeBoer v. Snyder, executives in Michigan have started to take a closer look at the effects. If you have not looked into the implications for your business, please read on.

Outbound International Filings

Sarah Russell, CPA, MBA | Senior Manager - International Tax ServicesAre you a resident of the US doing business in other countries? Or perhaps your company has expanded to other countries. While that business is taking place outside our borders, you need to ensure you are complying with the applicable Internal Revenue Service’s (IRS) filing requirements.

There are specific filing requirements US residents should be aware when doing business outside the United States. Outbound international refers to a US-person (individual or entity) with activity outside the US. It is important to understand what the filing obligations are as failure to report income, activities, and investments can lead to extensive penalties. The information below outlines common outbound international filing requirements.

Employees vs. Independent Contractors

Margaret Amsden, CPA, MST | Shareholder - Tax ServicesWorker misclassification has been a long standing issue because of the difficulty in distinguishing employees from independent contractors. An “employee” must be distinguished from an “independent contractor,” because an employer does not generally have employment tax obligations or fringe benefit obligations with respect to independent contractors. When employers inadvertently misclassify workers, the employer is liable for the cost of back taxes, interest, and penalties associated with correcting the issue. The employer could also be subject to penalties for discrimination related to various benefit plans. Therefore, it is important to make sure employees and independent contractors are correctly classified.

What is a Fiduciary?

Julie Killian, CPA, CGMA | Principal - Assurance ServicesThe Employee Retirement Income Security Act of 1974 (“ERISA”) governs the administration and management of 401(k) retirement plans and provides guidance to individuals responsible for maintaining a 401(k) plan in accordance with ERISA. Individuals responsible for the administration and management of a 401(k) plan are known as fiduciaries. Fiduciaries have important responsibilities and have to comply with certain standards of conduct.

Who is a Fiduciary

The key to identifying a fiduciary is determining the individuals who exercise discretion in administering a 401(k) plan or control over the plan’s assets. A fiduciary is not defined by a job title, but rather by the roles or functions performed on behalf of the plan.

VIE Consolidation Exemption and Other Accounting Updates

Wendy Reedy, CPA | Principal - Assurance ServicesPrivate Company Council – Generated US GAAP Updates

VIE Consolidation Exemption

On February 19, 2014, the Financial Accounting Standards Board (“FASB”) endorsed the Private Company Council (“PCC”) initiated accounting alternative that will offer private companies an exemption from applying the variable interest entity (“VIE”) consolidation model to certain common control leasing arrangements.

The FASB expects to issue the final standard in late March of 2014, and early adoption will be available for private companies’ financial statements ready for issuance immediately when the final standard is issued.

What does this mean to you?

IRS Releases Transfer Pricing Audit Roadmap

Alex Martin | Principal - Transfer Pricing ServicesComprehensive Toolkit Provides Insights to IRS Strategies

 The IRS Transfer Pricing Practice (TPP) released a Transfer Pricing Audit Roadmap on February 14, 2014. The roadmap provides comprehensive guidance for IRS auditors and recommends following a 24-month transfer pricing audit plan. Multinational companies can expect the IRS will rely on this blueprint when planning, assessing, and executing transfer pricing cases. 

The roadmap can be found at the following link: http://www.irs.gov/pub/irs-utl/FinalTrfPrcRoadMap.pdf

Why is This Transfer Pricing Roadmap Important?

The long-awaited roadmap memorializes IRS best practices for evaluating transfer pricing issues and clarifies expectations for audits. Most notably, the 26-page roadmap recommends:

New Draft Transfer Pricing Guidelines

Alex Martin | Principal - Transfer Pricing ServicesThe Organization for Economic Co-operation and Development (“OECD”) released a discussion draft on transfer pricing documentation and country-by-country reporting on January 30, 2014.  This document is an important development as tax authorities adopting these policies would require substantial new disclosures of multinationals’ profit allocations by country.    

The OECD’s membership consists of 34 countries working together on numerous economic matters, including taxation.  OECD members include the US and most developed countries, plus several developing countries. The OECD’s Transfer Pricing Guidelines serve as the foundation for many tax authorities’ transfer pricing rules and regulations.  Many transfer pricing laws and audit procedures explicitly refer to the OECD’s Transfer Pricing Guidelines.

Simplified Method for Home Office Deduction

Margaret Amsden, CPA, MST | Shareholder - Tax ServicesAre you eligible to use the Simplified Method for Your Home Office?

As tax rates continue to increase, taxpayers are looking for opportunities to reduce their overall tax burden. That said, taxpayers do not want a significant record keeping burden. To help taxpayers who work from their home, the IRS has developed a Simplified Method for taking advantage of the Home Office Deduction as described below.

Before we discuss the Simplified Method it is important to understand three things:

Doing Business Internationally

CFO/Controller RoundtableIs your world getting smaller?
How is your international savoir-faire?

International Business

Companies of all sizes are beginning to realize just how flat the world really is. At the quarerly CFO/Controller Roundtable hosted by Tim Hilligoss, Shareholder of International Accounting Services at Clayton & McKervey, P.C. on December 12, 2013, participants were very much aware of both the increasing opportunities abroad and the increasing pressure to expand internationally. Many middle-market companies are faced with growing their operations overseas in order to secure contracts and purchase orders with their larger customers. They also may realize significant cost reductions when doing business globally. Regardless of the reasons for international expansion, companies must realize doing business in different countries will invariably present complexities and risks different from those encountered domestically. Following is a list of issues encountered by participants that companies should consider when expanding globally: