News & Articles

Team Member Spotlight: David De Graaf, CPA

Posted on Wed, Jul 08, 2020
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Tags: Tax Planning, Business, Succession Planning, Team Member

A Good Time for Making Tax-Smart Family Loans

Posted on Wed, Jul 01, 2020

During the COVID-19 crisis, you may want to loan money to a family member in need of financial assistance. However, before writing out a check, you should review the federal tax rules to ensure that you're making a tax-smart loan. The good news is that now is generally an advantageous time to lend money to family members.   

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Tags: Interest Rate, Family Loans

Kent County Small Business Recovery Program

Posted on Mon, Jun 29, 2020
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Tags: Michigan, Small Business, COVID-19

COVID-19 Crisis May Affect Tax Angles for Rental Property Losses

Posted on Mon, Jun 29, 2020

Economic fallout from the COVID-19 crisis will cause many rental real estate properties to run up tax losses in 2020 — and possibly beyond. Here's a summary of important federal income tax rules for such losses.   

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Tags: Section 179 Deductions, Rental Property, COVID-19

COVID-19 Tax Relief: Roundup of Postponed Federal Tax Deadlines

Posted on Wed, Jun 24, 2020

As a COVID-19 relief measure, the IRS has postponed many of the usual federal tax filing and payment deadlines, along with the deadlines for taking certain other tax-related actions. Generally, deadlines for federal income tax return filing and payments that would otherwise fall on or after April 1 and before July 15 have been postponed to July 15. The postponement applies to certain other deadlines as well. This relief, while welcome, has created confusion. Here's what individuals and business owners should know to manage their tax calendars through July 15.

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Tags: CPA Firm, Tax Deadline, COVID-19, Paycheck Protection Program

Team Member Spotlight - Mike Young, CPA

Posted on Mon, Jun 22, 2020
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Tags: Corporate Income Tax, Taxes, Team Member, Transaction Advisory Services

Keep Employees COVID-19 Free: An Employer's Guide from OSHA

Posted on Fri, Jun 19, 2020

Naturally you care about the health and safety of your employees, and don't need a federal agency to tell you that you should be concerned. Still, it's helpful to know what the overall position of the Occupational Health and Safety Administration's (OSHA) is on COVID-19. In a recent "alert," OSHA urged employers to take the following three steps:

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Tags: OSHA, COVID-19

Virtual Roundtable - Preventing and Mitigating Cybersecurity Risk

Posted on Wed, Jun 17, 2020

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Tags: Cybersecurity, COVID-19

Consider Another Way to Calculate Overtime Pay

Posted on Mon, Jun 15, 2020

After decades in limbo, regulations that clarify certain overtime pay practices have been released by the U.S. Department of Labor (DOL). The newly finalized rules explain how to calculate overtime pay for nonexempt salaried employees using the "fluctuating workweek" (FWW) method.

Use of this method to calculate overtime pay currently affects only around 700,000 employees. But these rules "may encourage some employers to switch" to using it, said the DOL. The agency also expects that some employers will move hourly employees to salaried status to take advantage of the new rule.

One potential outcome of using the FWW method is lowering the cost of overtime pay. For that reason, when the rule was proposed, it was criticized by labor groups. In defending the rule, the DOL conceded that while the lower overtime pay scenario could happen, "the same employer could also reduce the employee's earnings by the exact same amount by lowering the employee's weekly rate of pay."

Two Ways to Calculate Overtime

The FWW methodology is far from new; the DOL issued its first "interpretive bulletin" on FWW in 1940. It was legally challenged but upheld by the U.S. Supreme Court in 1942. To help understand the FWW method, let's start with an explanation of the conventional calculation method.

  • Conventional

Suppose a nonexempt salaried employee has a weekly salary of $600, based on a 40-hour workweek, and in a particular week, he works 10 hours of overtime. His pay would increase from $600 to $825, calculated as follows:

Regular hourly wage on a salary of $600 in a 40-hour workweek = $600/40 or $15  

Overtime hourly wage on same salary = 1.5 x $15 or $22.50

In a week with 10 overtime hours, the total paycheck equals $825 (40 x $15 = $600 plus 10 x $22.50 = $225 for a total of $825).

  • Fluctuating Workweek

Under the FWW calculation method, the employee's normal weekly salary ($600) is divided by the total hours worked (50) to create a new hourly pay rate and overtime rate. His total pay would be $660, calculated as follows:  

Regular hourly wage on a salary of $600 spread over the total hours worked of 50 hours = $600/50 = $12

Overtime hourly wage on same salary = 1.5 x $12 or $18

In a week with 10 overtime hours, the total paycheck equals $660 (40 x $12 = $480 plus 10 x $18 = $180 for a total of $660.)

In principle, if the employee worked only 30 hours one week, he'd still earn his $600 salary, but his hourly equivalent pay would be $20. That's what motivates employers to keep salaried employees busy for 40 hours week, if their pay is based on a full week's work.

Why New Regulations?

The new regulations sought to clarify legal confusion (various federal courts had conflicting opinions) about the impact of using the FWW calculation when employees are also earning special financial incentives.

A timely example could be extra pay for working in a setting where the risk of being infected by COVID-19 is higher than normal. Or simply paying employees more for working on the weekend, even if the total workweek didn't exceed 40 hours. Many employers believed that providing this extra pay to nonexempt salaried workers would make them ineligible for using the FWW method of overtime pay calculation.

Impact of Bonus Pay

The regulations make it clear that the two practices aren't incompatible. However, the extra pay would be added to the employee's regular weekly wage when determining overtime pay amounts.

So, suppose the employee received an extra $100 per week for weeks he worked during the worst of the COVID-19 pandemic. Using the illustration above, $700 instead of $600 would be used (dividing it by 40) to determine the base wage for calculating any overtime earnings. Assuming he earned a bonus of $100 and worked 50 hours, his total paycheck would be $770, calculated as follows:

Regular hourly wage on a salary of $600 plus bonus of $100 spread over the total of 50 hours worked = $700/50 = $14

Overtime hourly wage on the same salary plus bonus = 1.5 x $14 or $21

In that week, the total paycheck equals $770 (40 x $14 = $560 plus 10 x $21 = $210 for a total of $770.)

The new regulations use the following language to describe the types of extra pay that can supplement a base weekly salary without jeopardizing an employer's ability to use the FWW method: "Any bonuses, premium payments, commissions, hazard pay, or other additional pay of any kind."

In its discussion of the FWW method, the DOL noted that the method "is also appropriate where an employee is compensated through piece rate, job rate, or day rate arrangements."

Final Thoughts

Whether the method makes sense for you will depend on your unique circumstances, including how often your nonexempt salaried workers already put in overtime (and that you calculate their overtime pay in the conventional manner), and whether you would like to increase the number of overtime hours such employees work. At EHTC, we focus on people and culture and have local firm relationships with large firm resources. Contact us at info@ehtc.com or leave a message at (616) 575-3482 with any questions you may have. With our team approach to proactive client service, we're here for you!

Note: Several states, including California, Pennsylvania, New Mexico and Alaska, don't allow employers to use the FWW calculation method. Check your state's laws as you consider using this approach to managing overtime costs.
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Tags: Employee Compensation, Overtime

Tax Tips for Individuals Who Haven't Filed a Return for 2019

Posted on Fri, Jun 12, 2020

As part of the federal government's tax relief measures during the COVID-19 pandemic, the IRS extended key deadlines for the 2019 tax year and for making 2020 estimated tax payments until July 15, 2020. If your 2019 personal return is still awaiting completion, you may have significant retroactive tax-planning flexibility.

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Tags: Michigan State and Local Tax (SALT), Tax Return, HSA, COVID-19