Keeping Morale Up in a Down Economy
According to the 2008 Management Action Programs Inc. (MAP)/Vantage Research study undertaken in late 2008, some 75% of companies saw a drop in employee morale, tied closely to the economy. “Low employee morale, regardless of its cause, is infectious, and company leaders must take proactive steps to improve their employees’ outlook,” says Lee Froschheiser, president and CEO of business consultancy, MAP. “Interestingly, the majority of the CEOs who have experienced a drop in their employees’ morale have also rated revenue growth as their number-one priority. But to support growth objectives, these business leaders need their employees to be fully aligned with the goals.”
During the time since that survey was completed, not much has changed, notes Froschheiser. “I suspect that, based on the work we’re doing with companies, as the economy has bottomed so has morale. It may not be getting worse, but employees are apprehensive and want to make sure their jobs aren’t in jeopardy, which adds to the morale problem.”
The first step in tackling this issue is acknowledging it exists, he adds. Make it clear to your people that you understand the issue and what created it. The next step is motivating the workforce, which inspires confidence and increases productivity. While business leaders can’t control the impact the economy has on their employees’ overall lives, there are steps they can take to boost confidence in their organization and inspire productivity.
Pay Attention to the “Little” Things
In many cases, paying attention to what you might think of as little or mundane things can make a big difference for employees. Froschheiser outlines a few key tactics:
Keep communicating—“If you’re having any issues, don’t keep quiet about them,” he says. “Let employees know exactly where your company stands. It’s when employees don’t know what’s going on that the rumor mill starts. The more they know, the less they’ll have to guess.”
Give recognition—Whenever possible, let employees know how their job performance is affecting the company. When they’re doing the everyday things right, it helps to point that out. “One rule of thumb that’s always worked for me,” says Froschheiser, “is that every time you tell someone something they’re doing wrong, tell them four things they’re doing right.”
Celebrate all successes, even small successes—Anything matters. You might have a deal that closed or even completed a tough inventory. “People just want to know things are going to be O.K.,” he says. “In that case, recognizing every milestone, regardless of size, can become important.”
Help employees understand priorities from a company perspective—In this economic environment, companies are asking people to do more with less. That can create anxiety and even lead to burnout. Froschheiser advises sitting down with your staff and creating “A lists” of critical tasks. If people know what matters most to the success of the organization—and understand that they’re not expected to be perfect at every task, it can reduce pressure. “You don’t want to tell anyone they shouldn’t do the absolute best job every time, he notes, “but you also need to be realistic about what people can achieve.”
Provide balance—It can be difficult for employees to separate from their responsibilities, so business owners and managers need to force the issue. You might tell someone to work at home for a day or enforce an office-wide day off. “People get wired and tired and when that happens, can make mistakes,” states Froschheiser. He advises looking for signs of burnout, like less responsiveness and enthusiasm, reduced participation, lack of engagement and increased infighting. “If you see those things, nip them in the bud by helping employees back off from work, even for a little while. It helps them put things back in perspective and recharge their batteries.”
Be calm in the storm—No matter what, employees need to see that you, as the leader, believe that the decisions you’re making are the right ones and that the company is remaining on the path to profitability. If you project stability, employees will follow your lead and feel less apprehensive.
“Money talks, especially in a hard-hit economy, but a bonus or financial incentive isn’t the only conversation on the table,” Froschheiser states. “Savvy CEOs are generating energy within their companies by being transparent about their successes and failures, and keeping the lines of communication open. They are challenging employees to set higher goals, empowering their hires, glorifying their works, and demonstrating their role in the company’s future. These tactics may seem fundamental, but these basic strategies really do work.”
Tuesday, March 16, 2010
Business tax planning starts now
Business Tax Planning Starts Now
Most major indicators show the national economy is in the early stages of recovery from a prolonged recession. Addressing tax-related business options now, and doing adequate planning with your tax advisor, offers many potential tax benefits and expanded opportunities.
Immediate Opportunities to Explore
Here are some specific strategies to consider that include taking advantage of recently introduced or revised tax deductions and credits.
Expanded Net Operating Loss (NOL) tax relief for business—Recent legislation, the American Recovery and Reinvestment Act of 2009 (ARRA), expanded the NOL carryback period from two to five years for smaller businesses. In November 2009, the Worker, Homeownership, Business Act became law and expanded that carryback provision to apply to larger businesses as well. Essentially, this enables your businesses to deduct recent losses from taxes paid in previous profitable years and generate significant tax refunds. (For more information, see “Tax Implications,” in this issue.)
Section 179 Expense Elections still attractive—While the Section 179 (Internal Revenue Code Section 179) expense election limit is lower for 2010 than in recent years, it still offers considerable tax savings opportunities for companies planning to purchase new equipment.
Section 179 allows a company to expense the first $134,000 of furniture and equipment placed in service by December 31, 2010. This deduction is reduced by one dollar for each dollar spent above $530,000. For more information, consult related IRS instructions.
Reduced time frame for S Corporation Built-in Gains Tax—The time period for built-in gains tax that applies to C Corporations converting to S Corporations has been reduced from 10 years to seven years. If you have considered converting your C Corporation to an S Corporation, now may be time to reexamine that option.
Increased Domestic Production Activities deduction—For 2010, the Domestic Production Activities deduction increases to 9%, up from 6% for 2009. The deduction is available to clothing, goods and food manufacturers, as well as farmers and some other businesses. The deduction is based on:
taxable income derived from qualified production activities, or
taxable income for the year (not counting the deduction).
The deduction cannot exceed 50% of W-2 wages allocable to domestic production gross receipts. For more information, consult related IRS resources.
Expanded target group for Work Opportunity Tax Credit—Workforce expansion follows early phases of economic recovery, and the Work Opportunity Tax Credit (WOTC) provides an opportunity to attain tax credits while also hiring needed employees.
As part of the ARRA, the WOTC was expanded to include unemployed veterans and disconnected youth among target groups. The credit covers targeted workers hired after Dec. 31, 2006, and before Sept. 1, 2011. The WOTC equates to about 40% of the first $6,000 paid in wages, with a credit limit, per employee, of $2,400. Consult related IRS resources for more information.
Questions to Consider
Are you aware of various “green” tax credits and benefits available? During the past several years, the federal government has introduced a variety of tax credits and incentives to promote greater energy efficiency and less reliance upon fossil fuels. Some of those credits apply to renovations of existing buildings or construction of new facilities, as well as the installation of equipment for generating alternative fuel, such as wind or solar power. Credits exist as well for purchases of hybrid vehicles or vehicles that use alternative fuels. The U.S. Department of Energy lists various credits.
Additionally, ARRA provisions include tax benefits to encourage greater use of public transportation, car-pooling, and bicycle transportation by company employees. Employers may offer mass transit passes to employees for a value up to $230 per month, without it being considered a taxable employee benefit. For car-pooling and vanpooling services, that same $230 per month credit applies, if the vehicle seats at least six people, and is used 80% of time or more for employee transportation. At least 50% of the seating capacity must be occupied for employee trips. Bicycle commuters are also eligible for a $20 per month nontaxable fringe benefit. For more information, consult this related IRS article. State and local governments may offer additional incentives too, so you might be missing opportunities with the ever expanding “green” tax benefits available, so plan to discuss with your CPA early in 2010.
Are you effectively monitoring inventory? Are the accounting methods for recording and assigning value to inventory appropriate, accurate, and consistent? Also, are you carrying inventory that is damaged or obsolete? Writing off that damaged or obsolete inventory yields tax savings.
Are you addressing bad debts? How much money is owed to your company? Ensure that you are making appropriate efforts to collect on overdue accounts. If you’re unable to collect your receivables, write off such debt as uncollectible. The IRS generally allows you to deduct such debts, provided you have documentation (telephone logs, letters, correspondence, contracts with collection agencies, etc.) to prove you tried to collect those obligations. Recordkeeping is key in substantiating bad debt deductions.
Will you need to focus on hiring and retaining employees? The need to hire more workers follows the early phases of economic recovery. Federal and state credits may help you in meeting staffing needs.
Now is a good time, too, to either implement or enhance a retirement plan as a means of attracting and retaining employees. Various qualified pension plans allow employees to defer some compensation, with a relatively small match by the employer. Existing plans can be made more appealing by either raising the employer matching percentage or the percentage of earnings an employee may contribute. Eligibility requirements can be correspondingly adjusted to require longer vesting periods. Consult a benefits advisor to determine which plan may work best for your business.
How do state and local tax laws affect your business? Tax regulations vary immensely among states and localities. Where you have a physical business presence or sell products or services presents tax questions. Where a company logo or other intangibles are used may be the basis for tax nexus, too. Being aware of state and local tax laws enables you to gauge the cost of conducting business in various localities. It also helps you recognize various incentives, credits and other opportunities. State tax laws are becoming increasingly complex. Have you had a “state and local tax check up” with your state tax advisor?
Have you thought that Research & Development Credits (R&D) are just for big businesses? R&D credits aren’t just for new product development efforts launched by large corporations; they may also apply to small business activities pertaining to a new function, performance, reliability or quality of a business component. Check them out with your tax professional to see if your company qualifies for a R&D credit. There are some complications to the law in this area so it is paramount to discuss the topic with a qualified tax or financial professional.
As you know, each year brings many complicated tax law changes and related business opportunities. Schedule a time early in the year to consult with your tax or financial advisor about the best strategies for this year and beyond.
Most major indicators show the national economy is in the early stages of recovery from a prolonged recession. Addressing tax-related business options now, and doing adequate planning with your tax advisor, offers many potential tax benefits and expanded opportunities.
Immediate Opportunities to Explore
Here are some specific strategies to consider that include taking advantage of recently introduced or revised tax deductions and credits.
Expanded Net Operating Loss (NOL) tax relief for business—Recent legislation, the American Recovery and Reinvestment Act of 2009 (ARRA), expanded the NOL carryback period from two to five years for smaller businesses. In November 2009, the Worker, Homeownership, Business Act became law and expanded that carryback provision to apply to larger businesses as well. Essentially, this enables your businesses to deduct recent losses from taxes paid in previous profitable years and generate significant tax refunds. (For more information, see “Tax Implications,” in this issue.)
Section 179 Expense Elections still attractive—While the Section 179 (Internal Revenue Code Section 179) expense election limit is lower for 2010 than in recent years, it still offers considerable tax savings opportunities for companies planning to purchase new equipment.
Section 179 allows a company to expense the first $134,000 of furniture and equipment placed in service by December 31, 2010. This deduction is reduced by one dollar for each dollar spent above $530,000. For more information, consult related IRS instructions.
Reduced time frame for S Corporation Built-in Gains Tax—The time period for built-in gains tax that applies to C Corporations converting to S Corporations has been reduced from 10 years to seven years. If you have considered converting your C Corporation to an S Corporation, now may be time to reexamine that option.
Increased Domestic Production Activities deduction—For 2010, the Domestic Production Activities deduction increases to 9%, up from 6% for 2009. The deduction is available to clothing, goods and food manufacturers, as well as farmers and some other businesses. The deduction is based on:
taxable income derived from qualified production activities, or
taxable income for the year (not counting the deduction).
The deduction cannot exceed 50% of W-2 wages allocable to domestic production gross receipts. For more information, consult related IRS resources.
Expanded target group for Work Opportunity Tax Credit—Workforce expansion follows early phases of economic recovery, and the Work Opportunity Tax Credit (WOTC) provides an opportunity to attain tax credits while also hiring needed employees.
As part of the ARRA, the WOTC was expanded to include unemployed veterans and disconnected youth among target groups. The credit covers targeted workers hired after Dec. 31, 2006, and before Sept. 1, 2011. The WOTC equates to about 40% of the first $6,000 paid in wages, with a credit limit, per employee, of $2,400. Consult related IRS resources for more information.
Questions to Consider
Are you aware of various “green” tax credits and benefits available? During the past several years, the federal government has introduced a variety of tax credits and incentives to promote greater energy efficiency and less reliance upon fossil fuels. Some of those credits apply to renovations of existing buildings or construction of new facilities, as well as the installation of equipment for generating alternative fuel, such as wind or solar power. Credits exist as well for purchases of hybrid vehicles or vehicles that use alternative fuels. The U.S. Department of Energy lists various credits.
Additionally, ARRA provisions include tax benefits to encourage greater use of public transportation, car-pooling, and bicycle transportation by company employees. Employers may offer mass transit passes to employees for a value up to $230 per month, without it being considered a taxable employee benefit. For car-pooling and vanpooling services, that same $230 per month credit applies, if the vehicle seats at least six people, and is used 80% of time or more for employee transportation. At least 50% of the seating capacity must be occupied for employee trips. Bicycle commuters are also eligible for a $20 per month nontaxable fringe benefit. For more information, consult this related IRS article. State and local governments may offer additional incentives too, so you might be missing opportunities with the ever expanding “green” tax benefits available, so plan to discuss with your CPA early in 2010.
Are you effectively monitoring inventory? Are the accounting methods for recording and assigning value to inventory appropriate, accurate, and consistent? Also, are you carrying inventory that is damaged or obsolete? Writing off that damaged or obsolete inventory yields tax savings.
Are you addressing bad debts? How much money is owed to your company? Ensure that you are making appropriate efforts to collect on overdue accounts. If you’re unable to collect your receivables, write off such debt as uncollectible. The IRS generally allows you to deduct such debts, provided you have documentation (telephone logs, letters, correspondence, contracts with collection agencies, etc.) to prove you tried to collect those obligations. Recordkeeping is key in substantiating bad debt deductions.
Will you need to focus on hiring and retaining employees? The need to hire more workers follows the early phases of economic recovery. Federal and state credits may help you in meeting staffing needs.
Now is a good time, too, to either implement or enhance a retirement plan as a means of attracting and retaining employees. Various qualified pension plans allow employees to defer some compensation, with a relatively small match by the employer. Existing plans can be made more appealing by either raising the employer matching percentage or the percentage of earnings an employee may contribute. Eligibility requirements can be correspondingly adjusted to require longer vesting periods. Consult a benefits advisor to determine which plan may work best for your business.
How do state and local tax laws affect your business? Tax regulations vary immensely among states and localities. Where you have a physical business presence or sell products or services presents tax questions. Where a company logo or other intangibles are used may be the basis for tax nexus, too. Being aware of state and local tax laws enables you to gauge the cost of conducting business in various localities. It also helps you recognize various incentives, credits and other opportunities. State tax laws are becoming increasingly complex. Have you had a “state and local tax check up” with your state tax advisor?
Have you thought that Research & Development Credits (R&D) are just for big businesses? R&D credits aren’t just for new product development efforts launched by large corporations; they may also apply to small business activities pertaining to a new function, performance, reliability or quality of a business component. Check them out with your tax professional to see if your company qualifies for a R&D credit. There are some complications to the law in this area so it is paramount to discuss the topic with a qualified tax or financial professional.
As you know, each year brings many complicated tax law changes and related business opportunities. Schedule a time early in the year to consult with your tax or financial advisor about the best strategies for this year and beyond.
Net Operating Loss Carryback Option Extended
Net Operating Loss Carryback Option Extended
Under a revenue procedure recently issued by the IRS, many businesses can use losses incurred during the economic downturn of 2008-09 to reduce income from prior tax years. The provision allows businesses to elect to carryback a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after December 31, 2007, and beginning before January 1, 2010 (it had previously been limited to an end date of January 2009).
A net operating loss typically occurs during a period in which a company’s allowable tax deductions are greater than its taxable income, resulting in a negative taxable income, which generally happens when a company has incurred more expenses than revenues during the period. The NOL carryback procedure can be used to recover past tax payments or reduce future tax payments.
An NOL or loss from operations carried back five years may offset no more than 50% of a taxpayer’s taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year. The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses. The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program.
Under a revenue procedure recently issued by the IRS, many businesses can use losses incurred during the economic downturn of 2008-09 to reduce income from prior tax years. The provision allows businesses to elect to carryback a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after December 31, 2007, and beginning before January 1, 2010 (it had previously been limited to an end date of January 2009).
A net operating loss typically occurs during a period in which a company’s allowable tax deductions are greater than its taxable income, resulting in a negative taxable income, which generally happens when a company has incurred more expenses than revenues during the period. The NOL carryback procedure can be used to recover past tax payments or reduce future tax payments.
An NOL or loss from operations carried back five years may offset no more than 50% of a taxpayer’s taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year. The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses. The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program.
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