Monthly Archives

August 2019

IRS EXPANDS CYBERSECURITY AWARENESS CAMPAIGN

The IRS stated that the use of reinforced authentication to access email accounts is especially important, noting that many email providers offer customers two-factor authentication protections to access email accounts. “Tax professionals should always use this option to prevent their accounts from being taken over by cybercriminals and putting their clients and colleagues at risk,” the agency said.

Two-factor authentication requires users to enter registered credentials, such as a user name and password, along with a security code usually sent in a text message to a mobile phone. “The idea is a thief may be able to steal the username and password but it’s highly unlikely they also would have a user’s mobile phone to receive a security code and complete the process,” the IRS said.

The IRS issued a new four-page guide, Publication 5293, “Data Security Resource Guide for Tax Professionals,” which highlights a compilation of resources for tax preparers, and revised Publication 4557, “Safeguarding Taxpayer Data,” to better reflect ongoing threats to tax professionals. The publications promote basic security steps endorsed by the Security Summit.

Recommendations from the summit included learning to recognize phishing emails, especially those that appeared to be from the IRS, tax agencies, and providers of business software and computer cloud storage. Suspicious emails and attachments should not be opened. “Remember: The IRS never initiates initial contact with a tax professional via email,” the summit said.

Phishing, which was first raised as a concern by the IRS in early 2016, is a practice that uses fake emails that are sent to those who have access to payroll data. The emails purport to be from a high-level company official seeking information about Forms W-2, Wage and Tax Statement. Cybercriminals, in attempting to file fraudulent tax returns for refunds, try to trick workers into disclosing employee names, Social Security numbers, and income information.

The IRS reported that in the first four months of 2017, about 870 organizations reported that they received a W-2 phishing email, up from about 100 organizations in the comparable period in 2016. About 200 of the 870 organizations lost data, up from about 50 in 2016.

In 2016, the IRS started a verification-code pilot program for Forms W-2 in an effort to thwart identity theft and tax fraud. The program uses a 16-character code to authenticate employee data and match individual tax returns with the proper refund amount. Participating payroll service providers include the code in Box 9 of copies B and C of employees’ Form W-2 that are filed electronically. The verification program is expected to be renewed for the 2019 filing season.

The Security Summit, which was formed in 2015, combines the IRS with representatives of the software industry, tax-preparation firms, payroll and tax financial product processors and state tax administrators to combat identity theft refund fraud.

As always, if there are any questions please do not hesitate to contact us.

T&C RECOGNIZES CYBERSECURITY AWARENESS MONTH

This October, Thomas & Company joined the Department of Homeland Security to raise cybersecurity awareness across the nation during National Cybersecurity Awareness Month (NCSAM).

The overarching theme for NCSAM was Cybersecurity is Our Shared Responsibility and We All Must Work Together to Improve our Nation’s Cybersecurity. Cybersecurity is not just the responsibility of governments, companies, groups, or individuals.  Everyone shares the responsibility for cybersecurity – from the average smart-phone user to a corporate CEO.

ORGANIZATIONAL ACTIONS
  • Introduced TechGaurd Security as our new security awareness training platform to provide T&C associates with the necessary training and resources to further protect against cybercrime. Founded to address national cyber defense initiatives, TechGuard Security offers a robust library of security training curriculum which allows our team to perform more frequent security learning to keep security top of mind. TechGuard was utilized out of the gate to facilitate a number of security awareness simulations and compliance tests for T&C associates.
  • Featured best practices and tips to protect both the company and individuals against common cyber-crime tactics and scams in the T&C newsletter and via digital signage throughout the break rooms in our offices.
  • Hosted an all-hands, company-wide assembly to welcome Matt Dunn, retired FBI Special Agent and Supervisor of the Cyber Crimes/Counterintelligence Squad in the FBI’s Nashville Resident Agency to educate T&C with his experience.
  • Arranged some friendly competition between teams and departments to test our knowledge and awareness based on the events and initiatives from NCSAM 2018.
THE T&C COMMITMENT TO CYBERSECURITY

We are proud to serve as an extension of our clients’ HR, Payroll, and Tax teams and are responsible for protecting employee data as if it were our own.  Organizational security is one of the most critical controls we have in place as part of our overall security program.  All T&C associates receive security, privacy and compliance training from the moment they start and complete continuing education including exercises such as these conducted as part of NCSAM.

CYBERSECURITY EDUCATION IN ACTION

During the month of October, Thomas & Company conducted an  unannounced cybersecurity evaluation aimed to help determine  our level of organizational cybersecurity awareness, and action.  Using traditional evaluation methods, along with internal “cyber-crime” simulations we were able to identify those Thomas & Company staff members most vigilant and proactive regarding cybersecurity.

It is worth noting that overall Thomas & Company’s employee cybersecurity awareness statistics were extremely high compared to similar organizations.

PAYROLL TAX SAVINGS OPPORTUNITIES

After the Great Recession of 2008, many corporations have consistently gone through Merger & Acquisition (“M&A”) activity. The Institute for Mergers, Acquisitions and Alliances (“imaa”) recently released a study reflecting a significant increase in this type of activity and below is a graph reflecting their findings:

There are various business reasons why corporations acquire or merge with other entities. Acquiring or merging with companies is generally to grow the business, acquire companies in the same industry, or even merge with companies that would fit their business model.

However, many companies that go through M&A don’t realize the opportunities out there from a payroll tax perspective. Usually the Payroll Department is last to find out about bringing on employees that were acquired to a newly established EIN or transferred to one of their subsidiaries or parent company.

Payroll is scrambling to report these employees under one of the company’s EIN or a newly established entity timely, but payroll can’t do anything until an EIN is created with the IRS, registration with the Secretary of State, applying for state unemployment and withholding account numbers, payroll systems in place, etc…

Due to the time or system constraints, many employers don’t consider payroll compliance requirements (i.e. reporting M&A activity with the state agencies) and SUI, FUTA and FICA wage base continuance. By using the wages paid by the selling employer to determine when the acquired employees attain the annual taxable wage bases (for FICA, FUTA, and SUI), the acquiring employer can realize meaningful savings if the transferred employees restarted these payroll taxes.

This is where Thomas & Company can assist. We ensure that proper management of historical and current M&A compliance obligations are met with the state agencies and that all potential tax saving opportunities are considered at the state and federal level.

We offer the following services for our current and prospective clients:

Comprehensive Unemployment Tax Review

After reviewing and documenting all state unemployment accounts, we will research account history with state agencies and provide an executive summary of findings to the client. We will make sure unemployment accounts are in good standing and identify outstanding balances, delinquencies and overpayments. In the states where it is permissible, Thomas & Company will submit applications to have overpayments refunded to you and we will advise you of tax strategies available to ensure all future payments are accurate.

Merger & Acquisition Compliance Services

When an asset purchase, merger, internal reorganization or acquisition of a part of a predecessor’s business unit occurs, employers are required by state unemployment agencies to disclose information relating to the transaction. Reporting requirements are complex and vary by state. Any undisclosed and erroneous reporting can result in penalty tax rates, tax rate increases, penalties and/or interest charges or missed savings opportunities. Clients who retain Thomas & Company as their Unemployment Cost Management provider receive this service at no additional cost, while non-client engagements are performed on a project basis.

Tax Saving and Refund Opportunities

When a mid-year transaction occurs, employers may be eligible to consider the year-to-date SUI wages paid by the predecessor. Thomas & Company works directly with the state agency to ensure the tax rate transfers are processed and can prepare amended quarterly SUI returns. We can also amend Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) and Form 941 (Employer’s Quarterly Federal (FICA) Tax Return) if the transaction qualifies as a Predecessor/Successor Relationship under state and IRS rules. Thomas & Company will continue to track all SUI, FUTA and FICA credits until refunds are secured, and ensure clients follow all statutory requirements of the state agencies and IRS.

If you have historical or upcoming transactions and would like a review of your unemployment tax options and tax recovery opportunities, please contact Josh Kendall at (615) 620-1821 or via e-mail.

As always, if there are any questions please do not hesitate to contact us.

PRE-ACQUISITION PLANNING FOR STATE UNEMPLOYMENT TAXES

While state unemployment insurance (”SUI”) taxes rarely drive a company’s decision relating to the structure of a merger, acquisition, internal workforce reorganization/restructuring, or divestiture (“M&A”) transaction, pre‐acquisition planning can help shape the timing and final organizational structure that can result in significant tax cost savings.

An acquiring employer has the responsibility, perhaps obligation, to request and obtain sufficient data from a selling employer to assess material concerns, mitigate SUI tax rate risk, and ease the payroll integration process once the transaction has closed.

Perform Due Diligence!

Due diligence is the investigation and discovery of opportunities, risks, and synergies associated with a transaction. From a SUI tax perspective, due diligence efforts should be strategically focused on areas that can have a material financial impact on an acquiring employer, such as:

  • States with significant taxable payrolls
  • SUI tax accounts with very high or very low SUI tax rates
  • Assigned penalty tax rates and the reason for such rates
  • Significant reductions in workforce
  • Debits and/or credits on accounts and the reason for such adjustments
  • Unreported historical M&A transactions
  • Improper payroll reporting practices (e.g., reporting to incorrect state or under an incorrect legal entity)

Design a Plan to Minimize Risk…

Conducting a SUI tax rate impact analysis allows the acquiring employer to quantify the financial impact a transfer of experience (i.e., tax rate) might have on future SUI tax rates and related unemployment tax costs in the current and future years. The analysis enables the acquiring employer to assess:

  • Available transfer of unemployment rating experience options (i.e., required, prohibited, or optional)
  • Revisions to tax rates and when those revisions will become effective
  • How revised rates will impact SUI tax costs
  • Ability to change the effective date of the acquisition (e.g., 01/01 vs. 12/31) to obtain the best financial results
  • Impact on existing and future statutory elections (e.g., voluntary contributions and joint accounts)

…and Maximize Tax Cost Savings

The language used in an acquisition agreement can have material financial implications to an acquiring employer. Such agreement language may influence:

  • An acquiring employer’s ability to access a selling employer’s pre‐acquisition payroll tax records. By using the wages paid by the selling employer to determine when the acquired employees attain the annual taxable wage bases (for FICA, FUTA, and SUI), the acquiring employer can realize meaningful savings by not duplicating employment taxes.
  • An acquiring employer’s ability to obtain a better SUI tax rate. By having the selling employer agree, pre‐acquisition, to any requests by the acquiring employer to transfer SUI rating experience, the acquiring employer can confidently make assumptions as to financial outcomes.
  • An acquiring employer becoming responsible for the payment of undisclosed, contingent, or delinquent SUI tax liabilities of the selling employer.

Thomas & Company assists employers during the pre‐acquisition planning phase by reviewing and assessing data for material unemployment tax risks and potential opportunities.

To speak with one of our UI Tax Analysts related to an upcoming M&A transaction or internal workforce restructuring, please contact Josh Kendall at (615) 620‐1821 or via e‐mail.

PAYROLL TAX SAVINGS OPPORTUNITIES

After the Great Recession of 2008, many corporations have consistently gone through Merger & Acquisition (“M&A”) activity. The Institute for Mergers, Acquisitions and Alliances (“imaa”) recently released a study reflecting a significant increase in this type of activity and below is a graph reflecting their findings:

There are various business reasons why corporations acquire or merge with other entities. Acquiring or merging with companies is generally to grow the business, acquire companies in the same industry, or even merge with companies that would fit their business model.

However, many companies that go through M&A don’t realize the opportunities out there from a payroll tax perspective. Usually the Payroll Department is last to find out about bringing on employees that were acquired to a newly established EIN or transferred to one of their subsidiaries or parent company.

Payroll is scrambling to report these employees under one of the company’s EIN or a newly established entity timely, but payroll can’t do anything until an EIN is created with the IRS, registration with the Secretary of State, applying for state unemployment and withholding account numbers, payroll systems in place, etc…

Due to the time or system constraints, many employers don’t consider payroll compliance requirements (i.e. reporting M&A activity with the state agencies) and SUI, FUTA and FICA wage base continuance. By using the wages paid by the selling employer to determine when the acquired employees attain the annual taxable wage bases (for FICA, FUTA, and SUI), the acquiring employer can realize meaningful savings if the transferred employees restarted these payroll taxes.

This is where Thomas & Company can assist. We ensure that proper management of historical and current M&A compliance obligations are met with the state agencies and that all potential tax saving opportunities are considered at the state and federal level.

We offer the following services for our current and prospective clients:

Comprehensive Unemployment Tax Review

After reviewing and documenting all state unemployment accounts, we will research account history with state agencies and provide an executive summary of findings to the client. We will make sure unemployment accounts are in good standing and identify outstanding balances, delinquencies and overpayments. In the states where it is permissible, Thomas & Company will submit applications to have overpayments refunded to you and we will advise you of tax strategies available to ensure all future payments are accurate.

Merger & Acquisition Compliance Services

When an asset purchase, merger, internal reorganization or acquisition of a part of a predecessor’s business unit occurs, employers are required by state unemployment agencies to disclose information relating to the transaction. Reporting requirements are complex and vary by state. Any undisclosed and erroneous reporting can result in penalty tax rates, tax rate increases, penalties and/or interest charges or missed savings opportunities. Clients who retain Thomas & Company as their Unemployment Cost Management provider receive this service at no additional cost, while non-client engagements are performed on a project basis.

Tax Saving and Refund Opportunities

When a mid-year transaction occurs, employers may be eligible to consider the year-to-date SUI wages paid by the predecessor. Thomas & Company works directly with the state agency to ensure the tax rate transfers are processed and can prepare amended quarterly SUI returns. We can also amend Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) and Form 941 (Employer’s Quarterly Federal (FICA) Tax Return) if the transaction qualifies as a Predecessor/Successor Relationship under state and IRS rules. Thomas & Company will continue to track all SUI, FUTA and FICA credits until refunds are secured, and ensure clients follow all statutory requirements of the state agencies and IRS.

If you have historical or upcoming transactions and would like a review of your unemployment tax options and tax recovery opportunities, please contact Josh Kendall at (615) 620-1821 or via e-mail.

As always, if there are any questions please do not hesitate to contact us.

UNEMPLOYMENT WEEKLY CLAIMS REPORT W/E JULY 27, 2019

The Unemployment Insurance Weekly Claims report for the week ending July 27, 2019 has been released by the Department of Labor.

  • Seasonally adjusted initial claims: 215,000
  • 4 week moving average: 211,500
  • Seasonally adjusted insured unemployment rate: 1.2%
  • Seasonally adjusted insured unemployment number: 1,699,000
  • 4-week moving average: 1,698,250
  • Number of unadjusted claims: 177,948
  • Unadjusted insured unemployment rate: 1.2%
  • Unadjusted number claiming UI benefits: 1,680,143

UNEMPLOYMENT WEEKLY CLAIMS REPORT W/E July 27, 2019

The Unemployment Insurance Weekly Claims report for the week ending July 27, 2019 has been released by the Department of Labor.

  • Seasonally adjusted initial claims: 215,000
  • 4 week moving average: 211,500
  • Seasonally adjusted insured unemployment rate: 1.2%
  • Seasonally adjusted insured unemployment number: 1,699,000
  • 4-week moving average: 1,698,250
  • Number of unadjusted claims: 177,948
  • Unadjusted insured unemployment rate: 1.2%
  • Unadjusted number claiming UI benefits: 1,680,143

The full news release report can be downloaded here.