In This Issue . . . 401(k) Enrollment 401(k) Enrollment Eligibility Rules Eligibility Rules

Adam Hennen Appointed Employers need to be aware of the 401(k) enrollment eligibility rules. The details of who can par- White Bear Chamber ticipate and when they become eligible should be determined based on your plan goals. Many plan Board Chair sponsors strive for a happy medium between immediate enrollment and highly restricted or delayed enrollment. Replacing Your Car? Consider Donating It As you seek to attain the right balance, keep in mind that the Employee Retirement Income Security Act (ERISA) restricts your ability to limit eligibility in multiple ways. Here are a few rules to keep in Get Your Financial mind: Statements in Order Before Asking for a Age restriction. You don’t have to enroll employees below the age of 21, but you cannot have an age Business Loan restriction over such age. This may or may not have an impact, depending on your workforce demo- graphics. Many plans either have no age requirement or use age 18 as the minimum age. Minnesota Extends Sales Tax to Remote Sellers Delayed gratifi cation. You can require employees to wait up to only 18 months to enter the plan. This is accomplished by requiring employees to work at least 1,000 hours over the course of a 12-month Don't Make this 401(k) period to gain eligibility. The plan then provides that, once eligibility is met, entry into the plan is the Mistake next semiannual entry date.

W-2 Phishing Scams For example, suppose your plan operates on a calendar year. You hire Jane on July 2, 2018, and she completes one year of service and the 1,000-hour requirement by July 2, 2019. She would enter the Food Trivia plan as of January 1, 2020.

Category-based standard. Plan sponsors can assign different standards for exempt vs. nonexempt employees. For example, you could set more generous eligibility rules for exempt employees. You might want to do so if the labor market is tight for the types of jobs your exempt employees hold, but not your nonexempt employees.

However, your ability to establish these job classifi cation distinctions is limited by your need to satisfy IRS coverage tests. These tests are designed to prevent discrimination against lower-paid workers.

2675 Long Lake Road For example, the percentage of participating nonhighly compensated employees (NHCEs) cannot Roseville, Minnesota 55113 be less than 70% of the participation rate of highly compensated employees (HCEs). In addition, the Phone 651-483-4521 average benefi ts received by NHCEs must equal at least 70% of benefi ts received by HCEs. The aver- Fax 651-483-2467 age benefi ts test also features a more subjective nondiscriminatory classifi cation component. You can also create different eligibility rules for union and nonunion jobs, and those distinctions, like the 300 Prairie Center Dr #300 delayed eligibility timing tactic, aren’t subject to the minimum coverage tests. Eden Prairie, MN 55344 Phone 952-941-9242 Fax 952-941-0577 Eligibility rules are some of the most important decisions you will make about your 401(k) plan. Un- derstanding your options will help you make the right decisions to control your administration costs and create a valuable benefi t for your employees.

Contact Employee Benefi t Specialist, Magen Koepp, CPA, at 651-483-4521 or [email protected] to discuss these important eligibility rules.

WWW.OTCPAS.COM JULY/AUGUST 2018 Adam Hennen Appointed Get Your Financial Statements in Order White Bear Chamber Board Chair Before Asking for a Business Loan

Olsen Thielen is proud to announce Adam Hennen has been As a business owner, if you are considering expanding your appointed Chair of the Board of Directors for the White Bear Area company, be sure to get your fi nancial statements in order Chamber of Commerce. Hennen has been an integral part of the before asking for a business loan. When evaluating a company’s Chamber for over ten years and assumed the leadership role request for a loan, banks will use a series of fi nancial ratios and effective July 1. metrics to determine how the business is doing in an attempt to estimate its risk of default. Financial statements provide critical Adam is a principal in the Audit and Accounting Department of information and allow the banks to calculate the metrics that the Roseville Offi ce of Olsen Thielen and has 14 years of experi- are important to them. When one of these key calculations is ence in accounting, auditing and consulting. He specializes in outside the norm, a red fl ag goes up on their end — and the loan the manufacturing, not-for-profi t, wholesale/distribution, and may be denied. telecommunications industries. Common metrics Having graduated from Gustavus Adolphus College with a Bachelor of Science in Accounting, Hennen is a Certifi ed Public To avoid getting denied in this manner, business owners should Accountant (CPA), Certifi ed Fraud Examiner (CFE), and Certifi ed familiarize themselves with some of the more common metrics Information Technology Professional (CITP). that banks use to measure creditworthiness. Adam and his wife, Gina, are raising three boys, Logan, Grant, and For example, banks will compare cash and receivables to current Griffi n. Along with serving as the Board Chair of the White Bear liabilities. If this ratio starts slipping, you’ll likely need to push Area Chamber, Hennen coaches lacrosse and is the treasurer of the Stillwater Area Lacrosse Association. accounts receivable so money comes in more quickly or better manage inventory to keep cash fl ow moving. Other examples of fi nancial benchmarks include: Replacing Your Car? Consider Donating It  Gross margin [(revenue – cost of sales) / revenue], Are you considering replacing your car? Next question is, what  Current ratio (current assets / current liabilities), do you do with your old car? Maybe your dealer is willing to  Total asset turnover ratio (annual revenue / total assets), take your car in trade. Assuming they are willing to take it at all, -and- the amount you receive may be minimal. Have you considered  Interest coverage ratio (earnings before interest and donating your car to charity and help a worthy cause? taxes / interest expense).

If you do donate it to a qualifi ed charity, you may also be able Some banks may also utilize company- or industry-specifi c per- to get a charitable deduction on your income taxes. Below are formance metrics. For instance, a warehouse might report daily the basic rules required by the IRS to take the deduction. These shipments or inventory turnover, not just total asset turnover. rules also apply for contributions of boats and airplanes. Meanwhile, a retailer might provide sales graphs that highlight product mix, sales rep performance, daily units sold and vari-  The recipient organization must be a qualifi ed charity. If ances over the same week’s sales from the previous year. not sure, use the “Tax-Exempt Organization Search” on the IRS website. Note that religious organizations are usually Other methods qualifi ed, but may not be listed.  A written acknowledgement is required for donations of over Keep in mind that not every bank uses the same metrics to $500. The acknowledgement must be provided to you by evaluate performance, or they may combine ratio analysis with the charity on Form 1098-C within 30 days of the donation other benchmarking tools. Some use community-based scor- or their subsequent sale of the vehicle. ing, by which a selected group of fi nance professionals rate and  The amount deductible depends on whether the charity uses review companies based on their payment histories. Others use it for its charitable purposes or sells the vehicle. proprietary commercial-scoring models that use creditor reports -- If used for charitable purposes, you may deduct the to develop credit scores for businesses. fair market value of the vehicle (FMV). This may be determined using a vehicle pricing guide, unless the Preventing disappointment value is over $5,000; in which case, a written appraisal is required. When your strategic initiative fails to launch because the busi- -- If sold by the charity, the deduction cannot exceed the ness can’t obtain fi nancing, it can be crushing. To prevent such gross proceeds from the sale. disappointment, be prepared, have your fi nancial statements in order and target as many common ratios as possible. Important Note on Title Transfer We can help evaluate your performance and determine where Make sure ownership is transferred out of your name to ensure you may need to improve your metrics in order to help obtain a termination of your liability for the vehicle. (In Minnesota, this loan. Contact Audit Principal, Adam Hennen, CPA, CFE, CITP, can be done at any deputy registrar offi ce.) at 651-483-4521 or [email protected] for more information. Contact Tax Manager, Joel Grundmeier, CPA, MST, CFP ® at 651-483-4521 or [email protected] with any questions.

WWW.OTCPAS.COM JULY/AUGUST 2018 Minnesota Extends Sales Tax W-2 Phishing Scams

to Remote Sellers A growing number of businesses have been victimized by W-2 phishing scams. These frauds are a variation on traditional Minnesota releases guidance for remote sellers in response to phishing scams, where criminals trick email users into provid- Supreme Court South Dakota v. Wayfair case ing confi dential information, and then use that information to steal money or the victim’s identity. The Wayfair case allows states to require remote sellers to collect and remit sales tax on sales shipped into their state. How it works Remote sellers may have not had to do this in the past if they did not have physical presence or some other nexus (connec- In a W-2 phishing scam, cybercriminals, claiming to be from tion) with a state. a company’s management, send emails to employees — typi- cally in payroll, benefi ts or human resources departments. The Each state is coming out with their own guidance and start emails request a list of employees along with their W-2 forms, date. Minnesota’s requirement will start on October 1, 2018. Social Security numbers or other confi dential data. Many states have a small business exemption to ease the tax compliance for sellers with only small or occasional sales in At fi rst glance, the emails may look legitimate because scam- their state. Minnesota’s exemption will exempt small sellers mers use techniques known as business email compromise or who have less than 100 sales shipped to MN or less than 10 business email spoofi ng. Many contain the company’s logo and sales that total less than $100,000 in a consecutive twelve- the name of actual executives that the thieves have obtained month total. The customer could potentially owe use tax on that online. The messages use language such as “Kindly send me purchase, but the burden of collecting is not posed on the seller. the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.” Manufacturers and wholesalers should also take note that they may need to start collecting and tracking resale exemption cer- If the employee responds to the phishing email, criminals can tifi cates from remote customers. If they are not protected from use this information to fi le fraudulent tax returns in the employ- the small business exemption mentioned above, they may still ees’ names. The ultimate objective is to claim their refunds. be required to register and fi le even though no tax was collected or owed. Education is key Read the press release and fi nd a link to helpful FAQ’s here: Recently, the IRS released an alert urging employers to educate http://www.revenue.state.mn.us/newsroom/Docu- payroll and other employees about the dangers of W-2 phishing ments/20180725%20Wayfair%20Update.pdf scams. Be sure to inform all workers about the scams, particu- larly those in areas that handle sensitive data. Remind them not If you have questions please contact Tax Manager, Sara Hirsch, to click on links or download attachments from emails that are CPA, at 651-483-4521 or [email protected] with any unsolicited, sent from addresses they don’t recognize or that questions. seem suspicious in any way.

Employees often are nervous about questioning a request that Don’t Make this 401(k) Mistake appears to come from upper management. So encourage them to double-check any email request for sensitive information, no matter who appears to be making it. They should do this not About 75% of companies who offer 401(k) retirement plans by responding to the email in question, but by talking with a offer some type of contribution match, generally based on an supervisor or colleague. employee’s contributions capped at a percentage of their salary. In spite of the possible match, about 20% of people do not Don’t fall victim contribute enough to take full advantage of their employer’s matching program. If you look at the employer match as a Technology has a role to play as well. Install robust antivirus raise and/or free money, the maximum contribution level your and spam fi lters and keep them updated. employer is willing to match should be the bare minimum you choose to put into your 401(k). With sensible precautions, your business can reduce the risk of falling victim to W-2 phishing scams. But if your company Another thing to remember -- many employers’ 401(k) plans does fall victim, report the attack as soon as possible to have automatic enrollment for new hires, often with a low contri- [email protected]. bution rate of 2% or 3% and many workers simply don’t think to change it.

Right now, the amount of money you may be missing out on may not seem important, but you may be surprised at how much of a difference it can make when you eventually retire.

WWW.OTCPAS.COM JULY/AUGUST 2018 Olsen Thielen & Co., Ltd. PRSRT STD Certifi ed Public Accountants & Consultants U.S. POSTAGE 2675 Long Lake Road PAID Roseville, MN 55113 OLSEN THIELEN & CO., LTD. Return Service Requested

Food Trivia Service Organization Control (SOC) Services Kobe beef is an exclusive beef from the black Tajima-ushi Olsen Thielen specializes in accounting, compliance and consult- breed of Wagyu cattle, raised according to strict tradition in ing services. We also perform Service Organization Control (SOC) engagements based on industry recognized audit standards and Japan. Its distinct fl avor, melt-in-your-mouth tenderness and frameworks. fatty well-marbled texture is due in large part to the unusual rearing process. Some of it includes feeding beer to the Our SOC 1 and SOC 2 audit approaches are designed to reduce cattle during summer months to stimulate their appetite, your time commitment and minimize distruption to your staff and massaging the cow to relieve stress and muscle stiffness, includes four key phases: Planning, Analysis, Validation and and brushing the haircoat with sake to improve the haircoat Reporting. and softness of skin, which will in turn affect the meat Contact Olsen Thielen SOC Practice Leader, Brian Stueve, CPA, quality. CITP, CISA, at 651-483-4521 to discuss how Olsen Thielen’s personal, local, and responsive approach can help you meet your Beefalo, also known as catalo or cattalo, is a hybrid beef SOC reporting needs. animal, bred by crossing the domestic Pulled Angus with the American Bison. Texan Charles Goodnight developed the beefalo in the mid-19th century as he preferred bison meat to beef and, with this hybrid, sought to combine the good fl avor Newsletter Policy of the bison with the Angus's resistance to certain diseases This newsletter is designed to present information on business and and pests. tax matters in general terms and is not a solicitation of services under Internal Revenue Code 7216 or intended to be used as a basis for specifi c action without obtaining further advice.

Find us on any of these popular sites Scan to visit our website Editor: Barbara Graf

Contributors: Joel Grundmeier, CPA, MST, CFP ® Adam Hennen, CPA, CFE, CITP Sara Hirsch, CPA Magen Koepp, CPA

WWW.OTCPAS.COM JULY/AUGUST 2018