business wisdom delivered success! - rehmannbusiness wisdom delivered a letter from the publisher...

Success!

[8] Pure CommitmentSupporting tomorrow’s superstar business

[12] Navigating Rapid Changewith CFO Executive Advisors

[14] The Next 12 MonthsPatient Protection and Affordable Healthcare Act

BWDA REHmAnn PubliCAtiOn VOl. 14 | wintER 2012 / 2013

Business Wisdom Delivered

winter 2012 / 2013 | BWD 3



A letter from The Publisher

Even michael Jordan couldn’t do it without this one vital ingredient

What it takes to win

Even the greatest need help.

michael Jordan was already considered an outstanding basketball player in 1988, but he faced a significant problem: the hard-playing Detroit Pistons. the Pistons – nbA powerhouses who would go on to win the championship two consecutive years (1989-1990) – had developed a defensive strategy coined “the Jordan Rules” to contain the rising star and halt his progression from outstanding player to basketball champion.

the “Rules” weren’t that elaborate. Essentially, they focused on using various techniques to interrupt Jordan’s performance on the court. After all, for as good as he was, he was still just one man.

but two rookies on Jordan’s 1988 Chicago bulls team would develop into legitimate players themselves: Scottie Pippen and Horace Grant. An actual team started to sprout up around Jordan and he would go on to lead them to a whopping six nbA championships.

in Jordan’s case, the superstar sold the tickets but the team won the championships. it’s the same way in the business world, too: while it’s great to have a Steve Jobs or Jack welch on your team, they can’t do much single-handedly.

At Rehmann, the high value we place on teamwork permeates everything we do, from our one-of-a-kind Rehmann Experience (a collaborative approach to delivering customized, proactive solutions) to the CFO Executive Advisor service discussed on pages 12-13.

the CFO Executive Advisor initiative is based on the understanding that skilled teammates are essential to success, but can be strategically added in a way that works best for the organization. From the article:

“Our advisors can help put the odds back in your favor by coming in, assessing a situation, recommending solutions and then helping implement real changes required to build business value and prepare for new opportunities.”

that sounds like the kind of teammate i’d like to have, which is why i’m excited about this service and think you will be, too.

in “Gaming the System” expert thomas murphy shows us the good and bad of teams: how employers can tackle occupational fraud by partnering with Rehmann and why they want to tackle it right away – before one player can sour any others. Check out page 20 to learn more.

Of course, that’s just a couple of the stories included in this edition of BWD. i invite you to take some time for yourself and read through this issue. if you see something you like, be a good teammate and pass it along!

Steven D. Kelly, CPAChairman & CEO

Employee TrainingThe first step to protecting your organization from devastating losses due to fraud is to have each employee attend Red Flag Training where they will learn how to spot red flags and how to report them. This also sets a tone that your organization will not tolerate unethical behavior and is proactive about protecting its employees, board and/or owners from fraudulent activities.

ReportingImplementing safe and private avenues for employees to report suspicious behavior encourages employees to take action — without fear of repercussions. Your organization will receive a supply of visual materials such as wallet cards, posters and payroll stuffers to keep fraud awareness top of mind. Each piece will include a reference to both the toll-free Red Flag Hotline and Red Flag Webline as secure avenues for 24/7 reporting.

Expertly HandledHaving an independent party handle reports allows for employees to be more open when coming forward. Once a case is submitted, a Certified Fraud Examiner will evaluate the case and make a recommendation to key persons at your organization. If further investigation is desired, our forensic team will be available to assist you. With 24/7 reporting availability and a Certified Fraud Examiner handling each report, you can be assured each case will be evaluated and handled in a timely manner and with the utmost professionalism.

Your First Step to Protecting Your Organization’s Goodwill & Reputation.

As an owner or executive, the greatest

assets you protect are the employees,

resources, goodwill and value of your

organization. Through training, visual

reminders and 24/7 reporting options,

the Red Flag Reporting Program will

protect what matters most.

46% of frauds are found by someone speaking up*

Victims who have a hotline average a loss of $100,000. Those without average $250,000** Source: Association of Certified Fraud Examiners/2008 Report to the Nation

For further information regarding this system or its implementation, contact Steve Kerby of Rehmann Corporate Investigative Services at: [email protected].

BWD Staff:Publisher: ..................................Steve KellyAssistant Publisher: ...................mitchell Renomanaging Editor: ......................Steve tschirhartCopy Editor: .............................Claudia brimCopy Editor: .............................miranda StempienCreative Director: .....................marcy meinkeCover Photography: .................John martinSubscriptions/Circulation: ........teri Stora

Contributors:Scott baileyJim CarppSandy Gohlkebill Kowalski Don mcAnelly mary mcCune tom mulvihill thomas murphymiranda Stempien

Subscriptions & Circulation:Send inquiries to: Rehmann – bwD1500 big beaver Rd, 2nd Floortroy, mi 48084248.952.5000 | [email protected]

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IN THIS ISSUE

[05]

[06]

[08]

[10]

[12]

[14]

[16]

[18]

[20]

[22]

Tax Wisdom Delivered

Nuggets of Wisdom

Pure Commitment

Safe Travels

Navigating rapid change with CFO Executive Advisors

Taking Action on Healthcare

The Next 12 Months

Criminals Pocketing Tax Refunds

Gaming the System

Carpp’s Book Corner

2012 Year-End Tax Filing Guidetaking care of annual tax reporting requirements can be a demanding process. Rehmann’s 2012 Year-End Tax Filing Guide can help.

the Guide includes:

• Asummaryofchangestoessentialforms

• Reportingrequirements(W-2,1099,personalproperty)

• Alistofdatesanddeadlines

• Convenientworksheets

Download today at www.rehmann.com/2012_filing_guide

Tax Planning Guide 2012-2013For a robust overview of tax planning steps you can take year-round, check out our Tax Planning Guide 2012-2013, which features:

• Taxstrategiesforindividuals

• Businesstaxplanning

• Retirementstrategies

• Estateplanning

the online Tax Planning Guide features real-time updates on tax law changes.

Download today at www.rehmann.com/taxguide

Tax Alertstax news never takes a break, and neither do the tax alerts at rehmann.com. Stay informed about the tax news and information you need by bookmarking Rehmann’s tax Alerts page today.

Online at www.rehmann.com/toolsresources/tax_alerts

Tax season is fast approaching. Prepare yourself with these free resources from Rehmann.



winter 2012 / 2013 | BWD 5

6 BWD | winter 2012 / 2013 winter 2012 / 2013 | BWD 7

Taxi!traveling abroad soon and plan on getting around via taxi? Here’s hoping you’re in one of the five best cities for hailing a cab:

1. london

2. new York

3. tokyo

4. Shanghai

5. bangkok

the selection was determined by categories that included cleanliness, quality of driving and availability.

(Source: Hotels.com)

Nuggets of wisdom

showrooms: not just for cars anymore“Showrooming” is when consumers visit brick and mortar stores to get a better idea of the look and feel of a product before returning home to order that same product online, often at a cheaper price. A recent survey revealed that over 40 percent of smartphone or tablet owners engaged in the practice. their targets?

• Entertainmentitems(books,CDs,DVDs,etc.): 40 percent

• Apparel:31percent

• Shoes:29percent

• Computers:24percent

• Other:19percent

One-third of u.S. adults who own either a smartphone or tablet plan on “showrooming” this holiday season to save money. they might not do it with a completely clear conscience, however: when asked how concerned they are that such a shopping technique might drive brick and mortar stores out of business, 44 percent said they were not concerned while 41 percent said they were somewhat concerned, 12 percent said they were very concerned and three percent said they were extremely concerned.

(Source: Coupon Cabin)

working from homethe number of people who worked at home at least one day per week increased from 9.5 million in 1999 to 13.4 million in 2010, from 7 percent to 9.5 percent of all workers. the largest increase occurred between 2005 and 2010, when the share grew from 7.8 percent to 9.5 percent of all workers, an increase of more than 2 million. Home-based workers increased by 133 percent among state government workers and 88 percent among federal government workers. there was a 67 percent increase in home-based work for employees of private companies.

• MondaysandFridayswerethemostpopulardaystoworkathomeforthose who work both at home and at another location.

• Aboutone-fourthofhome-basedworkerswereinmanagement,businessand financial occupations.

• Home-basedworkersincomputer,engineeringandscienceoccupationsincreased by 69 percent between 2000 and 2010.

• MetroareasintheSoutheast,SouthwestandWesthadthelargestpercentage of workers who worked from home.

(Source: U.S. Census Bureau)

“i can’t come in to work today; i have a broken heart”A recent collection of reasons employees gave for missing work included some very interesting choices beyond the tried-and-true “i’m not feeling well,” including:

• Employeesaidherdogwashavinganervousbreakdown

• Employee’stoewasstuckinafaucet

• Employeewassufferingfromabrokenheart

• EmployeewasupsetafterwatchingThe Hunger Games

• Employeegotsickfromreadingtoomuch

Among the most common reasons employees called in sick, other than actually being sick: “they just didn’t feel like going to work” (34 percent) and “they felt like they needed to relax” (29 percent). be careful, though, before you go blaming your dog’s nervous breakdown for missing work: 17 percent of employers surveyed fired employees for giving a fake excuse.

(Source: CareerBuilder)

Beware the iPhone danger zones!Have an iPhone? be on the lookout for these top five “iPhone danger zones,” the most frequent locations of iPhone accidents in the home:

1. Kitchen (21 percent of home-based accidents)

2. living room (17 percent)

3. bathroom (16 percent)

4. Driveway (10 percent)

5. bedroom (8 percent)

nine percent of users reported a “toilet mishap,” while six percent reported placing their phone on top of their car and driving off.

(Source: SquareTrade)


COMMITMENTRehmann steps up to support tomorrow’s superstar businesses

In 1976, two men in their twenties toiled away in a Los Altos, California,

garage on hand-built personal computer kits they hoped to sell to their

friends and colleagues in a local computer club.

By 2012, the company started by Steve Jobs and Steve Wozniak – Apple

– was the most highly-valued company in the world, having revolutionized

personal computing several times over.

Apple isn’t the only one: the history of American business abounds with

successful companies that launched from garages across the country,

including recent giants Google and Amazon.

There are a number of Michigan originals, too, with the history-changing

automobile industry topping the list. But what’s next? What kind of

innovations are bubbling up in entrepreneurial minds – and garages –

throughout the state?

PURE

From Michigan Governor Rick Snyder:

We are pleased to welcome Rehmann to the growing roster of companies that are

lending their expertise to Pure Michigan Business Connect. As a former accountant,

I know well and appreciate just how valuable the company’s accounting, consulting

and tax services will be to many Michigan small businesses and our efforts to create

more and better jobs.

Notable companies that started in garages:

•Apple

•Google

•Amazon

•Hewlett-Packard

•Harley-Davidson (technically a wood shed and not really a garage, but close enough)

•MagInstruments (makers of the MagLite)

•Mattel

Mary McCune Rehmann Principal

We’re thrilled with the opportunity to contribute

to Michigan’s exciting future. With this amount of

individualized attention, we can provide an organization

‘jump start’ to growing companies and then prepare them

for their ongoing needs in accounting and finance.

Focusing on the futureIdentifying and supporting the next round of American business giants is the goal of the Michigan Economic Development Corporation’s (MEDC) Pure Michigan Business Connect, a statewide initiative designed to spur growth among the thousands of companies that call Michigan home.

The MEDC can’t do it alone, though. Supporting these companies is a Herculean task requiring significant contributions from established companies.

That’s where Rehmann comes in.

In what is the first accounting sector contribution to date – and one of the largest overall – Rehmann pledged $200,000 in services to Pure Michigan Business Connect.

Over the next five years, Rehmann will offer companies in the early stages of development accounting, consulting and tax services through its offices in several Michigan locations, including Saginaw, Troy, Ann Arbor, Farmington Hills, Detroit, Jackson, Grand Rapids, Traverse City, Lansing, Cheboygan, Muskegon and Midland.

“We’re thrilled with the opportunity to contribute to Michigan’s exciting future,” Rehmann Principal Mary McCune said.

Rehmann will provide up to 250 hours of services annually through 2016, with each Pure Michigan Business Connect program participant receiving up to 20 hours of service.

“Jump start”Even greater than the dollar value, though, is the potential to make a positive long-term difference to the program’s participants.

“With this amount of individualized attention, we can provide an organization ‘jump start’ to growing companies and then prepare them for their ongoing needs in accounting and finance,” McCune said.

Rehmann will provide a variety of services, including initial general ledger development, implementation of accounting systems (including software such as QuickBooks), development of budgets and forecasting tools, assistance with applicable tax and governmental regulations and preparation for bank financing requests and/or equity investments.

“The addition of Rehmann to the $8 billion Pure Michigan Business Connect program is significant because it will provide a necessary, but often expensive, service to many start-up and early stage businesses at no cost,” said MEDC President and CEO Michael A. Finney. “This is an impressive commitment and will further enhance our multi-faceted network of opportunities for Michigan businesses.”

Companies seeking support can tap into Pure Michigan Business Connect’s network at http://www.michiganadvantage.org/Business-Connect/. Fill in a brief form, requesting services such as accounting, and then the MEDC in partnership with the Michigan Small Business & Technology Development Center match the request with firms such as Rehmann.

In Rehmann, they’ll find an energetic, committed partner.

“As a Michigan-based company ourselves, we’re thrilled for the opportunity to help other Michigan companies reach their full potential,” said Rehmann Chairman and CEO Steve Kelly, CPA. “We’re very sincere about our commitment to delivering business wisdom and this effort is the perfect venue for doing just that.”


Traveling can increase the risks computer users face, as it often requires accessing public Wi-Fi at airports, hotels and coffee shops or leaving a laptop unattended in a hotel room. It’s also easy to let your guard down, since you likely have a lot on your mind during a business trip. That’s why it’s vital to fortify your IT defenses before you even get on the airplane. Here are a few tips that can keep you, and your info, more secure while traveling abroad.

Leave your computer at home. Go ahead and take a computer with you, but it’s a good idea to consider leaving your computer at home – the one on which you do your business, banking, Web surfing and everything else – and traveling instead with a loaner computer provided by your IT department. Depending on the purpose of the trip, it’s unlikely you’ll need all of your regular bells and whistles anyway.

Lock down your data. While you’re getting that computer from the IT department, make sure its hard drive has full disc encryption enabled and that the operating system firewall has been properly configured. I know of one instance where a business traveler returned to his hotel room in a foreign country only to discover that his laptop had been physically opened up and its hard drive copied. Had the hard drive been encrypted, his data would have been protected. Have a favorite USB flash drive? Unless it, too, is fully encrypted, leave it at home.

the flight went well, customs wasn’t a problem and you’ve

arrived at your hotel a little hungry but otherwise none the

worse for wear. Your trip is off to a good start.

in your room, you kick off your shoes and power up the

laptop … and whether or not you know it, your trip takes

a turn for the worse: perhaps that hotel wi-Fi isn’t secure,

or is a hotspot set up by hackers to virtually look over

your shoulder as you surf the web. they certainly have

motivation – the estimated identity theft total for the united

States alone was reportedly $54 billion (Javelin Strategy &

Research, 2009). Spyware, malware, phishing and other

technology-derived methods combine to reap big rewards

from unsuspecting computer users each year.

Lock down those cool gadgets, too. Turn on your smartphone’s passcode access. Not taking this quick and easy step leaves contact information, photos, links and any notes (including handy little password reminders) vulnerable to anyone who can get to your phone. But requiring, say, a four-digit passcode is the bare minimum you can do to protect your information. On an iPhone or iPad, set a longer passcode via General > Passcode Lock > slide “Simple Passcode” off > “Turn Passcode Lock On” > enter a passcode with letters, numbers and special characters. The process can be different across various Android devices, but on the Galaxy s3 it can be done via Settings > Security > Security Lock > Password.

A survey by Javelin Strategy & Research found seven percent of smartphone owners were victims of identity theft, a 1/3rd higher incidence rate compared to the general public. Part of this increase may be attributable to consumer behavior: 62 percent of smartphone owners do not use a password on their home screen, and 32 percent save login information on their device.

Establish a VPN “tunnel.” Going directly online using your hotel’s Wi-Fi is never a good idea. Think of it as the Web surfing equivalent of leaving your hotel room door unlocked, since anyone who wants a peek at what you’re doing won’t have to work too hard to do so. Instead, surf under the protective cover of a virtual private network (VPN). There are a number of ways to develop a VPN solution if your company doesn’t already offer one, but perhaps the most convenient is to create a GoToMyPC or LogMeIn account and remotely access a home or work computer and its Web browser. (Be sure your company policies allow use of these tools.) You’ll be able to leverage the hotel’s Wi-Fi while surfing privately through the protective/encrypted tunnel.

You have a lot on your mind while preparing for a business trip, but taking just a handful of precautions before you depart can make your experience much safer and protect your confidential data and intellectual property.

SafeTravelsKeeping your data secure during a business trip begins before you get on the plane

By Scott Bailey

ABOUT THE AUTHOR

Scott bailey is Director of Digital Forensics and it Security Consulting with Rehmann Corporate investigative Services (CiS) and has over 24 years of experience in risk management, information security and digital forensic fields. Contact him at [email protected].

You have a lot on your mind while

preparing for a business trip, but taking just

a handful of precautions before you depart

can make your experience much safer.[ ]

12 BWD | winter 2012 / 2013

Fresh perspectives used to be “nice.”

“nice” like cotton candy. And rainbows. And songs about

summertime.

in business, a fresh perspective was “nice to have,” rarely

rising to the same “need to have” standards of, say, access

to capital and inexpensive labor.

but business today is different. business today is a

swift-moving current whose banks are littered with

disintermediated industries and myopic strategies.

business today demands fresh perspectives provided

by experienced advisors examining the financial and

operational aspects of an organization and providing

guidance on the sound business decisions required to

meet short- and long-term goals.

Rehmann’s CFO Executive Advisor service, offered through

the Accounting, Consulting and tax teams, was designed

to offer just this sort of fresh perspective, backed by the

experience needed to deliver on its vision.

BWD sat down with Rehmann Principal Sandy Gohlke

(pictured left) to talk about CFO Executive Advisors and

why today’s business climate is especially well-suited to

such a service.

Why put together a team of CFO Executive Advisors?

i’d like to say we thought long and hard about whether or not a service like this was needed, carefully examining a myriad of datasets until our eyes crossed, but that wasn’t the case. the need for something like CFO Executive Advisors walked right up to us and kicked us in the shins. it was pretty difficult to overlook.

What made it so difficult to overlook?

(Waves around the room.) the world around us. the speed with which everything is changing. imagine if we were having this conversation 10 or 15 years ago: we might be out walking and we’d pass by newspaper stands, pay phones, travel agencies, a record store or two … see where i’m going with this?

You’re talking about industries that have really changed in the last few years.

Really changed. Either they’ve changed or they’ve been put on the endangered species list. And the list goes on.

CFO Executive Advisors is a response to a world in which change can happen practically overnight.

the business world has always been about change. it’s always been present. but today’s business leaders are dealing with two things they didn’t have to worry about in decades past: globalization and technological advancement, especially where the internet is concerned. those two elements have proven to be especially disruptive to businesses today. All due respect to Henry Ford, but he didn’t have to worry about Google eating his lunch.

So we brought together a team that can help CEOs, CFOs – any ‘C’ level executive – or small business leaders face the challenges that greet them every morning.

You mention CFOs – so this isn’t a “rent a CFO”-type program someone might have heard about before?

we can provide solutions across a wide spectrum of situations, but a CFO Executive Advisor isn’t about filling a CFO role or replacing a CFO: it’s about shoring up his or her strengths in a world that requires rapid responses to scenarios they don’t necessarily teach in business school.

One way to look at this: earning a bachelor’s degree in finance or business and then going straight into an mbA program can conservatively require a six- or seven-year investment. So by the third or fourth year after you’ve earned an mbA, a full decade of this kind of accelerated change has already occurred in the world around you. Even if you’re a fan of life-long learning, or feel that the best way to learn is in the boardroom and not the classroom, that’s still an awful lot of change to deal with on your own.

Enter the CFO Executive Advisors.

Yes. Our advisors can help put the odds back in your favor by coming in, assessing a situation, recommending solutions and then helping implement real changes required to build business value and prepare for new opportunities.

The Right ExpertiseEach of Rehmann’s CFO Executive Advisors has earned the prestigious Chartered Global management Accountant (CGmA) designation, established to recognize accounting professionals who have attained a proven track record of management accounting experience in business, industry or government. CGmA advisors:

• Combinefinancialexpertiseandbusinessacumentoachieve sustainable business success

• Arecommittedtoprofessionalethicsandacodeofconduct

• Puttheirtrainingandexperiencetouseacrosstheorganization, supporting roles such as board Director, Chairman and CEO

the CGmA was developed by the American institute of Certified Public Accountants and the Chartered institute of management Accountants.

CFO Executive Advisor ServicesA CFO Executive Advisor can provide assistance in:

• Meetingcompliancecovenantsofdebtagreements

• Identifyingandnegotiatingfinancingarrangements

• Managingrelationshipswithkeyexternalstakeholders

• Managingkeyinternalrelationships

• Identifyingnewwaystoleveragefinancialandoperatingreports to support enhanced outcomes

• Identifyingandunderstandingtrendsandsignalsinoperating data

• Identifyingrelevantbenchmarkinformationforcriticalperformance comparisons

• Managingorganizationalchange,includingpersonneltransition, succession, growth and external forces with an emphasis on promoting operational efficiency and effectiveness

And every one of them has earned the Chartered Global Management Accountant (CGMA) designation, right?

Every one. Having each of the advisors earn the designation was important to us, so clients have even greater confidence in us and understand better just how qualified this team is. Every one of these advisors brings a wealth of experience to the table, but the CGmA designation helps quantify it. (To learn more about the CGMA designation, see the “The Right Expertise,” above.)

What are some of the ways these advisors can help a business?

there are so many, let me just mention a few. we can help identify and understand trends and signals in operating data, manage organizational change such as a personnel transition or identify new ways to leverage financial and operating reports to support enhanced outcomes. (See “CFO Executive Advisor Services,” page 12, for additional services.)

It’s a pretty full menu of services.

which is exactly what you need nowadays. You have to be ready to successfully tackle every new opportunity as it presents itself, and avoid pitfalls along the way.

And CFO Executive Advisors help you do that.

(Smiling.) that and more.

Thanks for your time, Sandy.

thank you.

winter 2012 / 2013 | BWD 13

Navigating rapid change withCFO Executive Advisors

CGMAFinancia

l

Expertise

Training &

Experience

Professional

Ethics

WANT TO LEARN MORE ABOUT REHMANN’S CFO EXECUTIVE ADVISOR SERVICE?

Contact Sandy Gohlke at 248.458.7940.

winter 2012 / 2013 | BWD 15

Is there a change in an individual’s ability to deduct medical costs as an itemized deduction on their personal tax return?

Yes. There will be an increase in the threshold for the itemized deduction for unreimbursed medical expenses – from 7.5 percent of adjusted gross income to 10 percent of adjusted gross income. However, the increase is waived for individuals age 65 and older for tax years 2013 through 2016.

Will the amount that employees can put away pretax in a flexible spending account for medical expenses change?

Contributions to flexible spending accounts for medical expenses will be limited to $2,500 per year beginning January 1, 2013. (Prior to this legislation, there was essentially no limit on the amount of money an employee could contribute to a flexible spending account.) This amount will increase annually via a cost of living adjustment. Please see IRS publication 502 for more information on flexible spending accounts. Also, note that the regulations relate to medical expenses paid with a flexible spending account and do not provide any added limits relative to Dependent Care expense reimbursements under a flexible spending account arrangement.

How will other pretax accounts, such as a health savings account or a health reimbursement account, be affected?

The legislation does not affect the current contribution limits on an HSA (health savings account) or an HRA (health reimbursement account). However, the law did create certain limitations on how the accounts can be used. Most non-prescribed, over-the-counter medicine is no longer a qualified expense under these plans. Furthermore, the penalty for any non-qualified distributions has been increased from 10 percent to 20 percent. This penalty is in addition to income tax consequences of the non-qualified distribution being added to taxable income for the current year.

Will Medicare taxes increase?

For 2013, the Medicare Part A (hospital insurance) tax rate on wages increases by 0.9 percent (from 1.45 percent to 2.35 percent) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. Also, an additional Medicare tax at the rate of 3.8 percent will be imposed on unearned income for higher-income taxpayers. While its complexities are beyond the scope of this article, in general terms, the tax will be assessed on individuals with a modified adjusted gross income of $200,000 and joint filers with a modified adjusted gross income of $250,000. (Among other things, unearned income can include interest, dividends, royalties, annuities and rents).

I’m hearing about a tax on medical devices. What should I be aware of?

Effective January 2013, the sale of any taxable medical device by a manufacturer or importer will incur an excise tax of 2.3 percent. As we currently understand, items to be exempted from the tax are eye glasses, contact lenses, hearing aids and any device of a type that is generally purchased by the public at retail for individual use.

How do I know if we qualify for the small business tax credit, how does it work and when does it phase out?

There are two phases of this program. Phase One took effect beginning in 2010 and will last through 2013. For an organization to take full advantage of the non-refundable business tax credit under Phase One, they typically must pay 50 percent or more of the health insurance premium and be deemed a “small employer.” This means they should have 25 or fewer “full-time equivalent” employees with an average annual salary not to exceed $50,000. Employers meeting these criteria will most likely qualify for a credit equal to as much as 35 percent (25 percent for non-profits) of the employer expenses.

Phase Two will begin in 2014 and expire in 2017. Under Phase Two, employers will qualify if they have less than 10 full-time equivalent employees with an annual wage of less than $25,000, the employer pays 50 percent or more of the premium and the coverage is purchased through the state-based Exchange. If all these criteria are met, the employer is most likely eligible for a tax credit equal to as much as 50 percent (35 percent for non-profits) of the employer expenses.

The Patient Protection and Affordable Healthcare Act has generated a great deal of political, social and media interest … a situation unlikely to change in the coming years. Stay tuned to BWD magazine – and your trusted Rehmann advisors – to understand fully the implications of the Act as they evolve.

It’s one of the most hotly-debated political issues in recent

memory, but let’s take a look at some of the practical, real-world

implications the Patient Protection and Affordable Healthcare Act

may have for you, your employees and your business.

The following is a Q&A developed from some of the most common

questions I’ve heard about the Act.

The Next12 MONTHSWhat you need to know about the Patient Protection and Affordable Healthcare Act by Don mcAnelly, CPA/AbV/CGmA

14 BWD | winter 2012 / 2013

ABOUT THE AUTHOR

Don mcAnelly is principal-in-charge of Rehmann’s Saginaw office.

He has experience in: practice assessments, corporate and personal income tax, compensation arrangements, practice mergers, internal control analysis, healthcare financial statement analysis and planning as well as various other areas regarding financial management in a physician’s practice.


What business needs to know – and what you need to do – regarding upcoming changes to healthcare

At over 900 pages long – not quite War and Peace, but easily surpassing Moby Dick – there’s little wonder why the Patient Protection and Affordable Healthcare Act stirs as much confusion as it does: that’s a lot of information to parse.

Regardless, there are Act-imposed changes coming to the fore in 2013 … so it’s a good idea to understand the steps you’ll need to take to ensure compliance with the law come January 1.

1. Provide the summaryHealth insurance issuers and group health plans are required to provide employees a summary of a health plan’s benefits and coverage; this “Summary of Benefits and Coverage” (SBC) must be made available on the first day of open enrollment.

The same SBC form will be used by all insurance companies and group health plans to make comparisons easier for your employees to understand. Also included: “coverage examples” that allow employees to see what the plan would generally cover in two common medical situations. A glossary of terms should also be made available.

For more information: http://www.healthcare.gov/law/features/rights/sbc/

2. Promote the limitA $2,500 limit on flexible spending accounts begins in 2013; you are responsible for distributing material that describes this new limit to eligible employees.

Prior to this legislation, there was essentially no limit on the amount of money an employee could contribute to a flexible spending account; it was up to the plan sponsor to prescribe a contribution limit. This amount will be increased annually via a cost of living adjustment. Note that the regulations relate to medical expenses paid with a flexible spending account and do not provide any added limits relative to Dependent Care expense reimbursements under a flexible spending account arrangement.

For more information: http://www.irs.gov/pub/irs-pdf/p502.pdf

3. Track the costsTracking and recording health care coverage costs in 2012 is necessary to prepare for the new reporting requirement for group health plan coverage costs that will apply to Forms W-2 (“Wage and Tax Statement”) issued in January of 2013. If you provide fewer than 250 Forms W-2 for 2012, you do not need to worry about this requirement.

Both the amount paid by you, the employer, and the amount paid by the employee should be recorded so as to offer the employee as complete a picture as possible about the total cost of the benefit. The amount will be entered in “Box 12” of the form and identified by the code “DD,” “Cost of employer-sponsored health coverage.”

For more information: http://www.irs.gov/newsroom/article/0,,id=257101,00.html

4. Coordinate the feesCoordinate with applicable insurers/administrators to make sure that fees related to Patient-Centered Outcomes Research are paid in a timely fashion in 2013. These fees will be used to conduct research to help involved parties make informed health care decisions.

For the first year, the PCOR fee is $1 multiplied by the average number of covered individuals. For years two to seven, the fee increases to $2 multiplied by the average number of covered participants.

For more information: http://www.pcori.org/

Taking action on HEALTHCARE

by tom mulvihill, CPA/CGmA

ABOUT THE AUTHOR

tom mulvihill is a Principal with Rehmann’s Healthcare management Advisors, and is located in the Farmington Hills office.

tom has 30 years of experience in public accounting. He was a principal in the accounting firm of boyes, wright, Pittman & Co, PC that merged with Rehmann in January of 2007. He provides business management and consulting services to physicians and dentists, including tax planning and preparation.

winter 2012 / 2013 | BWD 19

Criminals PocketingTax Refunds

Thieves may obtain Social Security numbers and other personal information from insiders at businesses where the information is stored, or through computer malware.

An online tax return is filed using the legitimate taxpayer’s name and Social Security number along with a fictitious income.

The criminals buy a debit card in most cases, so the IRS can issue the refund to that card. Some thieves have also received illegally-requested refunds through receipt of actual Treasury checks.

When the real taxpayer goes to file their tax return, they discover that a tax return has already been filed, a refund has already been given and their return is not going to be processed or will be significantly delayed.

As crimes go, this one can be as easy as it is bold:

Good intentions gone wrongWhen the IRS began offering tax refunds on debit cards and by direct deposit, they had good intentions and were just trying to keep up with our new technology-driven society by offering faster, more convenient returns. The problem is, they have set up a system that is also convenient for the criminals who wish to take advantage of it.

And take advantage of it they do: the thieves often submit false returns in bulk without even changing the mailing address on the returns. In one reported case, North Miami Beach police searched one suspect’s home and found approximately $250,000 in debit cards and 10 spiral notebooks with ledgers of names, Social Security numbers, dates of birth and the dollar amounts of returns pertaining to 3,000 potential victims.

In another case, an Inspector General discovered one residential address in Lansing, Michigan that was the source of 2,137 tax returns targeting more than $3.3 million in potentially fraudulent refunds.

The U.S. Justice Department and the IRS are working together to combat identity theft aimed at stealing tax refunds. The Justice Department is gathering information from local prosecutions and complainants to identify patterns in the cases and help create computerized filters to block potentially fraudulent refunds. In a Sept. 15 speech in Boston, IRS Commissioner Douglas Shulman said his agency stopped more than three million tax returns this year and determined that 90 percent of them were “bad.” The IRS blocked $15 billion in fraudulent payments from being sent, up from $11 billion the year before.

Last year, criminals across the country illegally collected billions of dollars in fraudulent tax refunds

through a brazen form of fraud that takes advantage of the Internal Revenue Service’s (IRS) fast and

convenient online returns. Conceivably using little more than laptops and free Wi-Fi connections

available at their local coffee shop, criminals steal identities using the names of legitimate taxpayers

and use this stolen information to file fraudulent online tax returns.

do doN’T

1

3

2

What can you do to help ensure your tax refund doesn’t get stolen by an identity thief?

1. Shred documents that contain private and confidential information instead of throwing them in the garbage.

2. File your tax return early.

3. Monitor your credit cards and bank statements for signs of identity theft.

1. Share private information with an online source you don’t trust.

2. Provide bank or personal information such as Social Security numbers in response to an email request or telephone call.

The U.S. Justice Department and the IRS are working together to

combat identity theft aimed at stealing tax refunds. By gathering

information from local prosecutions and complainants they have

been able to block potentially fraudulent refunds.[ ]

For additional information visit: http://www.irs.gov/uac/Identity-Protection

If this happens to you, what should you do?

1. Contact your bank’s fraud department and your credit card companies and alert them that your identity has been compromised.

2. File a report with local law enforcement or the Federal Bureau of Investigation (FBI) concerning the theft of your identity. Find your local FBI office at http://www.fbi.gov/contact-us/field

3. Notify the IRS; you will need to fill out Form 14039: http://www.irs.gov/pub/irs-pdf/f14039.pdf

ABOUT THE AUTHOR

bill Kowlalski is the Director of Operations for Rehmann Corporate investigative Services.

bill began his investigative career in 1983 as a Special Agent with the Federal bureau of investigation (Fbi) where he received numerous awards and letters of commendation during his 25-year career.

18 BWD | winter 2012 / 2013

by bill Kowalski, JD


Putting a stop to Family medical leave Act and other occupational fraud

ABOUT THE EXPERT

thomas murphy is the Director of intelligence and Research for Rehmann Corporate investigative Services (CiS).

thomas joined CiS in 1999 as an investigative researcher. Since that time, he has coordinated and supervised backgrounds on thousands of subjects. His background efforts have linked individuals to organized crime, located lost heirs throughout the united States and tracked identity theft issues. in addition to due diligence, thomas has conducted a variety of external and internal social engineering investigations to identify vulnerabilities in security.

You’re undoubtedly already familiar with some forms of occupational fraud – stalwarts such as stealing cash (say, from the petty cash fund) or inflating expense reports. But you might not be familiar with the newest scheme on the scene: Family Medical Leave Act (FMLA) fraud.

FMLA fraud occurs when employees use FMLA for situations other than those covered by the Act. Perhaps it’s an employee requesting time off for medical tests but instead taking a vacation or doing work for another company. Maybe a worker claims a medical condition that prevents him from handling certain tasks in the office, but in his private life does not exhibit those same symptoms.

“FMLA fraud is new, it’s growing and it should be a concern for every business – big and small – out there,” said Thomas Murphy, Senior Manager with Rehmann’s Corporate Investigative Services.

Murphy noted a particularly unpleasant aspect of FMLA fraud that makes it especially threatening: its potential to go viral.

“Once a person begins committing FMLA fraud, it can spread very quickly,” Murphy said. “Internally, it’s amazing what people know. If an employee is abusing FMLA privileges, other employees know about it. We’ve seen an entire shift of over a dozen people ‘FMLA off.’”

He added, “When people start to game the system to that degree, it can be very difficult to deal with.”

While the FMLA focuses on unpaid leave, productivity hits absorbed by companies dealing with FMLA fraud can cause real damage to the bottom line.

It wasn’t supposed to be this way, of course. FMLA has at its roots very pro-family intentions: it was passed into law in 1993 in recognition of the importance of balancing family and work obligations, something it was designed to achieve by granting family and temporary medical leave under certain circumstances (primarily focused on the treatment of illnesses).

There’s no reason to abandon the FMLA to fraudsters, though: Murphy suggests some steps to help mitigate against not just FMLA fraud but other forms of occupational fraud, as well.

1} Conduct a thorough background check on prospective employees. “Know your employees as well as you can,” he said. “You’re putting your company in their hands.” A background check could turn up previous issues with employers, for instance, or even a criminal conviction.

2} Institute appropriate internal controls. The same person who handles accounts payable shouldn’t also be a signer for the company. It’s also a good idea to have a hotline for employees to use if they spot suspicious or questionable activity – a service such as Red Flag Reporting, which provides phone and online tools for confidentially alerting management to such issues. According to the ACFE, tips are the leading defense against occupational fraud.

3} Look for patterns that might reveal fraud, whether it’s an employee – or even several employees – seeking repeated Fridays or Mondays off, or days with heavier workloads. If money is turning up missing, review those employees with access on the days in question. Being aware of such behavior and addressing it promptly is perhaps the easiest, most cost-effective solution to occupational fraud.

“You want to create a work environment where people feel empowered to do their best without worrying about a colleague undermining everyone’s efforts by engaging in fraudulent activity that can wreak havoc on the bottom line,” Murphy said.

“Occupational fraud hurts everyone, and that’s why it’s so important to put a stop to it as soon as possible.”

the System

if a masked thief broke into your business today and made off with $140,000 in cash, the heist would likely warrant a pronounced law enforcement response and intense media coverage.

Yet that is the median loss caused by occupational fraud cases worldwide, according to the Association of Certified Fraud Examiners’ (ACFE) 2012 global fraud study.

Once a person begins committing

FmlA fraud, it can spread very

quickly, murphy said. internally, it’s

amazing what people know. if an

employee is abusing FmlA privileges,

other employees know about it.

we’ve seen an entire shift of over a

dozen people ‘FmlA off.’

Gaming

by miranda Stempien


Year-round access to valuable tax planning information

www.rehmann.com/taxguide

Real-time updates to accommodate tax law changes.

Available anytime, anywhere.

Tax Planning Guide2012 – 2013

How Will You Measure Your Life?Clayton M. Christensen, James Allworth and Karen Dillon

One of life’s challenges is knowing if you are doing the right things for yourself, your career and your family. The authors set forth guidelines for making sense of personal and professional balance as they toggle between business challenges and insights into the most challenging questions you face as an individual. With this in hand, you can manage your career by examining priorities, focusing on opportunities and dedicating resources to what is important. This book provides you the opportunity to challenge your existing assumptions and then chart a course to meet your objectives.

Getting Things DoneDavid Allen

The title says it all. This book is tactical in its nature as it focuses on helping you to first get control by corralling, organizing and setting up a system to manage your tasks and then on how to execute against it. If you want to get down to work with a straightforward easy-to-implement methodology, I’d pull this one out and within a few short hours you can be well on your way to increasing your productivity.

Making It All WorkDavid Allen

In this book, David builds on the foundation laid in Getting Things Done. This time, however, he is reflective and focuses less on the tactics (how to) and more on perspective (why). He systematically walks you through capturing, clarifying, organizing, reflecting and ultimately engaging in actions which are correlated to your primary purpose. Be prepared to take a bottom up snapshot of what you have going on in your life, mixing it up and ultimately organizing everything into a cohesive plan. It takes some time to do this, but in the end it is worth your time.

Ready for AnythingDavid Allen

David explores five basic themes with 52 simple concepts centered on productivity that are concise, inquisitive and easy to deploy. They are simple in nature; however, collectively they can propel you to a new level of performance. You can take one at a time or several in a sitting. In either case, when leveraged they can make a difference in your thinking and performance.

A common theme heard today is that the pace of life is

speeding up, days are getting shorter and there is no end

to the amount of work that needs to be done. the more

people i talk with, the more i am convinced that work-life

balance all boils down to knowing your priorities and then

managing your time, talent and resources. with that in

mind, i have assembled four books that will first assist you

in setting your priorities and subsequently executing against

them to get the most out of your days, weeks, months,

years and life. Good reading, planning and executing!

Carpp’s Book Corner

Jim Carpp, CISA/CIRMDirector of Consulting

866.799.9580

rehmann.com

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