Sandra Callanan CPA, Author at CironeFriedberg, LLP

Cybersecurity: Essential for All Transactions

October 18, 2022 by Sandra Callanan CPA

Cybersecurity — especially data privacy — is one of the biggest problems facing businesses today. These security problems are compounded because every segment of every industry is affected differently, and each is subject to the risk factors peculiar to that segment. Grouping similar data together based on chosen parameters allows businesses to assess the privacy needs of each data segment they are holding. For example, the protections for public data don’t have to be as stringent as the protections for private data.

Protecting the privacy of the data with which they are entrusted is a universal business goal. The best way to get started is to answer the following questions:

What types of data does your business have (e.g., credit card information, health information, criminal history, biometrics)?
Which departments have access to that data?
Who are your data service providers and what are their credentials?
Which personnel can access the data?
What steps has your company taken to protect the data (e.g., encryption, back-up, internal controls)?

Federal and International Regulations

The United States has no federal law protecting data privacy. A number of states, however, are responding: at least 31 states have already established laws regulating the secure destruction or disposal of personal information. At least 12 states — Arkansas, California, Connecticut, Florida, Indiana, Maryland, Massachusetts, Nevada, Oregon, Rhode Island, Texas and Utah — have imposed broader data security requirements. Other states, including New York, are considering legislation.

California is a pioneer on the data privacy front. The California Consumer Privacy Act of 2018, which went into effect on January 1, 2020, is similar to the General Data Protection Regulation (GDPR). Companies that do business in California will be affected by this legislation.

At least some of the activity at the state level is in response to the European Union’s enactment of the GDPR. Any company doing business in a nation that has adopted the GDPR must comply with its consumer protections regarding data privacy. The GDPR covers many types of data, including the following:

Personally identifiable data (e.g., names, addresses, date of births, Social Security numbers)
Web-based data (e.g., user location, IP address, cookies, and RFID tags)
Health (HIPAA) and genetic data
Biometric data
Racial or ethnic data

The bottom line is that U.S. businesses operating in multiple jurisdictions must consider these categories, as well as any other categories pertinent to their industry, as they segment the data they are holding. Understanding the data they hold is essential to instituting the right level of privacy safeguards.

Three Steps to Securing Your Data

Understanding your data is the first step to securing data. The second step requires knowing the relevant laws and regulations your business must comply with.

The third step is to stay alert for any indications of a breach. The sad truth is that many data breaches go on for quite a while before they are discovered. The time lapse between hack and discovery allows hackers to continue accessing vulnerable data. That makes constant monitoring an important aspect of any data security program. Watching for the signs of a breach — such as an unanticipated spike in bandwidth usage — can indicate a problem.

By following these three steps, businesses can be sure they are doing their best to protect the data they and their data service providers hold.

401(k) Plans: Know the Rules

August 29, 2022 by Sandra Callanan CPA

If you offer a 401(k) plan — in any of its various flavors — to your employees, everyone should know the tax rules that govern them. Although the details can get very technical, you can learn the basics. To start with, many companies find that since a 401(k) plan is much prized by employees, it’s a good idea to not only offer one but also to match contributions. You even get encouragement to do so: Employer contributions are deductible on the employer’s federal income tax return. However, for tax-favored status, a plan must be operated in accordance with applicable rules. To qualify for the tax benefits, your plan must contain language that meets certain requirements of the tax law and be operated in accordance with the plan’s provisions. Employers make matching contributions based on employees’ elective deferrals. There are several types of 401(k) plans available to employers:

Traditional 401(k): This allows eligible employees to make pretax elective deferrals through payroll deductions. Any employer contributions can be subject to a vesting schedule. The employer must perform annual tests, known as the Actual Deferral Percentage and the Actual Contribution Percentage tests, to verify that deferred wages and employer matching contributions do not discriminate in favor of highly compensated employees.
Safe harbor 401(k): This must provide for employer contributions that are fully vested when made. The safe harbor 401(k) plan is not subject to the complex annual nondiscrimination tests that apply to traditional 401(k) plans.
SIMPLE 401(k) plans: This was created so that small businesses could have an effective, cost-efficient way to offer retirement benefits to their employees. A SIMPLE 401(k) plan is not subject to the annual nondiscrimination tests, and the employer is required to make employer contributions that are fully vested.

A plan that allows for vesting may require completion of a specific number of years of service for vesting. For instance, a plan may require an employee to complete two years for a 20% vested interest in employer contributions and additional years of service for increases in the vested percentage. If a traditional plan is top-heavy — has significant participation from owners or officers — the employer may be required to make minimum contributions on behalf of certain employees. The rules relating to the determination of whether a plan is top-heavy are complex. A plan is considered top-heavy when 60% or more of the assets in the plan are owned by key employees:

Anyone who owns 5% or more of the company sponsoring the plan.
Anyone who owns 1% or more of the company sponsoring the plan and who also earns more than $150,000 annually from the company.
Anyone who holds an officer position at the company sponsoring the plan and earns more than $185,000 from the company.

These limits may be adjusted from year to year. If you own more than one business, these rules apply to anyone who has an ownership stake in any of the related companies. The point here is you don’t want most of the plan money at the top of the company belonging to the key company leaders instead of the rest of the employee base. This is also applicable to the family of owners, so that any owners’ spouses and other immediate family members will count as key employees if they participate in the plan. The IRS requires top-heavy tests to make sure that no plan disproportionately benefits the key employees of your company. If top-heavy, you can bring your plan back into balance by making contributions to all regular employees. You also could add a safe harbor to the plan, for instance, offering a 3% automatic contribution regardless of whether employees want to contribute. This ensures that the plan treats all employees equitably, and this will satisfy any contribution requirements of the IRS. You report elective deferrals on the participant’s W-2 Form. Though the amounts aren’t treated as current income for federal tax purposes, they are included as wages subject to Social Security or FICA, Medicare and federal unemployment taxes. This is just a summary of a complex series of rules. Be sure to work closely with qualified professionals to make sure you are in full compliance at all times.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Retirement Plans for Medical Offices

July 24, 2022 by Sandra Callanan CPA

Planning for your future is paramount, regardless of what career path you’ve chosen. For doctors, it seems like retirement should be an easy path, but many medical professionals are not aware of the plans available to them. Before you make a decision that can impact your and your employees’ lives forever, it is important to understand the details. Here are some things you should know about choosing the right retirement plan for yourself or for your practice as a whole.

W-2 and 1099 employees – what do you have? Options for retirement are partially dependent on the classification of work. When you receive a W-2 from an employer, you are considered a permanent employee. An employer may provide benefits, and your options are more diverse than your contractor counterparts’. An independent contractor, or someone who files taxes with 1099 forms, is considered self-employed, and so will not have the luxury of a retirement package through an employer. But there are plenty of self-funded retirement plans available. It helps to talk with an accountant or financial planner, both for your sake and your employees’.
One of the most common retirement funds is a 401(k). Many employers will offer this type of account, and some may even match contributions. For independent contractors, there are Solo 401(k) accounts that can be a great way to save for the future in a more traditional and comfortable way.
SEP and SIMPLE IRAs. Another option for doctors managing a staff is to offer a SEP or a SIMPLE IRA. IRAs are individual retirement accounts that are easy to set up and maintain. Offering a SEP, or Simplified Employee Plan, will allow you to make contributions to the staff’s retirement funds. This is particularly good when you’re in an office with high turnover or if only a few of the employees qualify. A SIMPLE IRA, or Savings Incentive Match Plan for Employees IRA, allows a minimum contribution time of two years, compared with SEP’s one. The eligibility is more restrictive overall.
Profit sharing. It may seem like profit sharing isn’t appropriate in the realm of a medical office, but it can be a great way to encourage individual savings, growth and participation. This can be tied to individual production or, if you want everyone to be eligible for the program, it can be divided equally among your employees. It can also be calculated based on the employee’s individual pay. This is an affordable way to provide additional money that can be saved or used immediately, and it promotes a shared sense of ownership and increased productivity.

What retirement plans can you create for your practice to ensure your financial future? Careful planning now can help you create a retirement program good for you and your medical staff.

Future-Forward Manufacturing

June 24, 2022 by Sandra Callanan CPA

The economy has taken a tremendous hit as a result of the Covid-19 pandemic, and many small manufacturers are feeling an impact. But some manufacturers have pivoted to meet customer demand, and more may be able to do so if they can take advantage of (1) increased access to market trends and (2) technology. Even more opportunities may exist for manufacturers than are apparent at first glance.

Creating Opportunities Pre-pandemic, globalization made imported goods cheaper than U.S.-made goods. Manufacturers happily took advantage of that as they looked to increase their profit by buying cheap component parts. The pandemic changed that as it caused interruptions to the supply chain, resulting in a lot of pain for a lot of companies.

But this disruption also created opportunities. Clothing manufacturers, including high-end designers, turned to manufacturing items like masks. Manufacturers using 3D printing also stepped up. For example, NASCAR’s research and technology arm pivoted from using 3D printing of composite parts for stock cars to using it for PPE. Ford also switched gears and manufactured items ranging from respirators to testing kits. Small manufacturers began printing face shields.

These manufacturers all had one thing in common: they were able to find a way to meet the new demands of the marketplace. And they did this in the following ways.

Using Automated Processes Manufacturers used new technology to automate processes and make them more efficient. Many were already moving in this direction even before the pandemic. The JDA 2018 Intelligent Manufacturing Survey showed that many companies had been reprioritizing and refocusing their technology investments to meet quickly changing client needs. Survey respondents focused on inventory optimization solutions, integrated planning and execution technologies. The pandemic accelerated the need for improved forecasting and greater collaboration across the supply chain.

Being Innovative Innovation includes trying new ways of doing things, seeing “holes” in the process that need to be filled and finding new products that meet client demand. Everything has changed, and companies that don’t change — and that continue to do things the way they’ve always been done — are less likely to be able to meet the demands of a disruptive environment.

Making Smart Investments Making smart investments in the business is essential. But manufacturers investing in new technology or new markets face the problem of knowing how much to invest in something they haven’t tried before. Should they try a small-scale test project or go full steam ahead? How long will it be before the technology needs to be updated? It isn’t always easy to find financing for these innovations in an uncertain world.

Forecasting Cash Flow

Looking at cash flow in a period of unprecedented uncertainty is challenging, but some guidelines help:
To prevent unpleasant surprises, estimate cash flow on the basis of a worst-case scenario.
Review projections on a weekly basis over a 13-week timeline.
Closely manage accounts receivable.
Consider possible changes, such as PPP loan forgiveness, staffing changes and changes to pricing.

Manufacturers who are willing to take a hard look at their operations will find plenty of opportunities. The effects of the Covid-19 pandemic may be felt for a long time, and the earlier companies adopt new ways of remaining sustainable in an uncertain world, the better off they will be.

At CironeFriedberg, our experienced advisors perform audits and provide tax and advisory services for a wide range of privately held manufacturing, distribution, and retail businesses. Since our founding, we have provided services to many top industrial companies in our region and make it our business to stay abreast of tax and other regulations that may affect your operations and profitability.

Call us today for trusted guidance to help uncover more opportunities to improve your company’s ability to innovate. Learn more about our services.

Financial Transparency and Nonprofit Audits

June 10, 2022 by Sandra Callanan CPA

You want to demonstrate your commitment to financial transparency. By publishing an independent audit report on your website and providing the report to anyone who requests it, you’ll be assuring your donors and the public that your financial practices meet accepted standards — for handling contributions, for instance.

Many public and private foundations — and funders — require charitable nonprofits to submit audited financial statements to be eligible for funding. Budgets and cash-flow statements predict your nonprofit organization’s financial future, but you need a review of each year’s annual income and expenses in your financial statement, which tells the story of your organization’s past.

Preparing and interpreting your financial statements is a special area of expertise. An audit involves a formal study of your policies and systems for managing your finances, a review of financial statements and commentary about the accuracy of those statements.

Such charity watchdogs as CharityWatch, Charities Review Council and Charity Navigator take into consideration whether a charitable organization has an annual independent audit when they do their ratings. To exercise their due diligence, your top management committee or board of directors may want the assurance offered by an independent audit that the financial statements are free of material misstatements.

In an audit, the CPA expresses an opinion as to the accuracy and completeness of financial statements, based upon test procedures and an evaluation of your internal controls. Analytical procedures coupled with inquiries of management allow the CPA to attest that no material modifications are needed for the financial statements to be in accordance with generally accepted accounting principles (GAAP) — the common set of accounting principles, standards and procedures used to present financial statements.

Getting Started

A first step, then, is to decide who in the organization will oversee the audit process. Typically, the audit is overseen by an audit committee or the Executive Committee. That committee should oversee the selection of the audit firm.

In selecting the audit firm, it makes sense to choose one that has expertise and knowledge in performing an audit for charitable organizations. Before meeting with the candidates, develop goals and objectives to help narrow your search.

Auditors should present the results of their audit to management and the audit committee/executive committee. This presentation should include any recommendations to improve internal controls, which should be followed by a corrective action plan by management to correct any weaknesses in the systems of internal control.

For more information on this topic, read our article, Does Your Nonprofit Need an Independent Audit?

There’s a New Retirement Plan in Town

May 17, 2022 by Sandra Callanan CPA

MyCTSavings is a new retirement savings program sponsored by the State of Connecticut’s Retirement Security Authority designed to help the 600,000-plus private-sector employees who do not have an employer-sponsored retirement savings plan. It offers some of the best features of employer plans and IRAs but does not pose an administrative burden to businesses.

With MyCTSavings, employers can offer a retirement savings plan benefit, and employees can protect their financial future with a convenient savings plan. Participation in the program is completely voluntary.

Employees are able to set aside a portion of their paycheck into an individual retirement account that they fully control through online access. The plan is portable, so it goes with the employee if they change jobs or move out of state.

Employer Eligibility

All Connecticut employers with five or more employees whom they pay more than $5,000 in a calendar year are required by law to join MyCTSavings.
Employees must be at least 19 years of age to be enrolled in the program.
There are no employer fees.
Employers are neither required nor permitted to contribute to the program.
Signing up is quick, easy, and free.
There are registration deadlines. (See the chart here.)

Employer Registration

Signing up for MyCTSavings is quick, easy, and free. Once you sign up, MyCTSavings will notify you when it’s time for your business to register and provide an access code. At that time, you will need:

Your Federal Employer Identification Number (EIN)
MyCTSavings Access Code from your notification

Using Your Payroll Administrator

Employers that have registered with MyCTSavings may choose to use their current payroll administrator to provide information to facilitate the program. Vestwell is the retirement administration partner MyCTSavings uses. The employer portal integrates seamlessly with many existing payroll providers (e.g., ADP, Paychex, and more).

If an employer is not currently using a payroll system, they can easily enter and upload their payroll information. After initial setup, a business can assign administrative rights to additional users to facilitate the process.

You will need the following to set up an employer MyCTSavings account:

Your company’s EIN and the unique Access Code from your registration notification.
Your payroll provider’s name (if you use one) and your company’s payroll schedule(s).
Your company’s bank information for payments.
Your latest employee roster and accompanying personal information (employee name, contact info, date of birth, SSN, etc.). Payroll providers can compile employee information in advance using a template available on the MyCTSavings site.

Employers and employees can learn all about the program by visiting https://myctsavings.com/.

Cybersecurity: Essential for All Transactions

401(k) Plans: Know the Rules

Retirement Plans for Medical Offices

Future-Forward Manufacturing

Financial Transparency and Nonprofit Audits

There’s a New Retirement Plan in Town

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