In Notice 2021-61, the IRS recently announced 2022 cost-of-living adjustments to dollar limits and thresholds for qualified retirement plans. Here are some highlights:
Elective deferrals. The annual limit on elective deferrals (employee contributions) will increase from $19,500 to $20,500 for 401(k), 403(b) and 457 plans. As well as for Salary Reduction Simplified Employee Pensions (SARSEPs). The annual limit will rise to $14,000, up from $13,500, for Savings Incentive Match Plans for Employees (SIMPLEs) and IRAs.
Catch-up contributions. The annual limit on catch-up contributions for individuals age 50 and over remains at $6,500 for 401(k), 403(b) and 457 plans, as well as for SARSEPs. It also stays at $3,000 for SIMPLEs and SIMPLE IRAs.
Annual additions. The limit on annual additions — that is, employer contributions plus employee contributions — to 401(k)s and other defined contribution plans will increase from $58,000 to $61,000.
Compensation. The annual limit on compensation that can be taken into account for contributions and deductions will increase from $290,000 to $305,000 for 401(k)s and other plans. This includes Simplified Employee Pensions (SEPs) and SARSEPs.
Highly compensated employees (HCEs). The threshold for determining who is an HCE will increase from $130,000 to $135,000.
Key employees. The threshold for determining whether an officer is a “key employee” under the top-heavy rules, as well as the cafeteria plan nondiscrimination rules, will increase from $185,000 to $200,000.
Participation in a SEP or SARSEP. The threshold for determining participation in either type of plan will remain $650.
Business owners, along with their HR and benefits staff or providers, should carefully note when the new limits and thresholds apply. Sometimes the answer isn’t obvious. The 2022 compensation threshold used to identify HCEs will be generally used by 401(k) plans for 2023 nondiscrimination testing.
Review your employee communications, plan procedures and administrative forms, updating them as necessary to reflect these changes. Whether your company offers a 401(k) or another type of plan, we can provide further information on the tax rules.
In Notice 2021-61, the IRS recently announced 2022 cost-of-living adjustments to dollar limits and thresholds for qualified retirement plans. Businesses that offer a qualified plan, such as a 401(k), should take careful note. For example, the annual limit on elective deferrals will increase from $19,500 to $20,500 for 401(k), 403(b) and 457 plans, as well as for SARSEPs. The annual limit on compensation that can be taken into account for contributions and deductions will increase from $290,000 to $305,000. However, the annual limit on catch-up contributions for those age 50 and over will remain the same at $6,500. We can provide further information on the adjusted amounts.
Business owners: If your company offers a qualified retirement plan, such as a 401(k), you need to know how the IRS recently adjusted many of the key dollar limits and thresholds related to plan administration.
Creating a comprehensive, realistic spending plan allows you to identify potential shortages of cash, possible constraints on your capacity to fulfill strategic objectives, and other threats. Whether you’ve already put together a 2022 budget or still need to get on that before year-end, here are four red flags to watch out for:
Too often, companies create a budget by applying an across-the-board percentage increase to the previous year’s actual results. Clearly, the pandemic showed us how an unexpected event can wreak havoc on a budget. However, even without such an event, this approach may be too simplistic in today’s complex business environment.
Historical results are a good starting point, but not all costs are fixed. Some are quite variable based on various factors, such as the supply-chain disruptions we’ve seen in 2020 and 2021. Certain assets — such as equipment and people — have capacity limitations to consider. Prepare accurate forecasts of revenue and expenses on a department-by-department basis using up-to-date technology to capture timely data.
Your finance or accounting department shouldn’t complete the budget alone. Seek input from key employees in every department and at various levels of management.
For example, your sales department may be in the best position to estimate future revenue. A production or service manager may offer insight into unanticipated expenses or necessary investments in equipment upgrades. The product development team can help forecast revenue and expenses related to new products and enhancements to existing products.
In addition, soliciting broad participation gives employees a sense of ownership in the budgeting process. This can help enhance employee engagement and improve your odds of achieving budgeted results.
Good budgets encourage hard work to grow revenue and cut costs. But the targets must be attainable, based on your company’s history as well as economic and industry trends.
Employees will likely become discouraged if they view the budget as unachievable or out of touch with what’s actually happening on the ground. If budgets repeatedly fail, employees may start ignoring them altogether. Tying annual bonuses to the achievement of specific targets can help encourage budget buy-in.
Even if expected revenue is forecast to cover expenses for the year, production and cost fluctuations, as well as slow-paying customers and uncollectible accounts, can lead to temporary cash shortages. Of course, more significant events can have an even bigger impact.
An unexpected shortfall can seriously derail your budget. So, look beyond the income statement and balance sheet. Forecast cash flow on a weekly or monthly basis. Then create a plan for managing any anticipated shortfalls.
For example, you might need to contribute extra capital from cash reserves. Or you might need to apply for a line of credit at the bank. Alternatively, you might consider buying materials on consignment, revising payment terms with customers, or delaying payments to suppliers (if a penalty won’t apply).
As you’ve no doubt experienced in 2020 and 2021, the environment in which your business operates is constantly evolving, so budgeting needs to be an ongoing process. We can help you develop a reasonable annual budget and monitor actual results throughout the year.
Creating a comprehensive, realistic budget enables businesses to identify potential cash shortages, constraints on their capacity to fulfill strategic objectives, and other threats. Here are four red flags to watch out for when creating or reviewing yours: 1) It’s based on last year’s results, historical data is a good starting point, but many costs are variable; 2) It lacks companywide consensus, seek input from managers and employees who are on the front lines; 3) It’s unrealistic, targets must be attainable, based on current economic and industry trends; 4) It ignores cash flow, an unexpected shortfall can seriously derail your budget, so be sure to forecast cash flow weekly or monthly.
If you have any questions about your budget and need professional advice be sure to contact us!
No matter the size of a business, one can’t overstate the importance of sound accounts receivable policies and procedures. Without a strong and steady inflow of cash, even the most successful company will likely stumble and could even collapse.
If your collections aren’t as efficient as you’d like, consider these five ways to improve them:
It may seem superficial, but the design of invoices really does matter. Customers prefer bills that are aesthetically pleasing and easy to understand. Sloppy or confusing invoices will likely slow down the payment process as customers contact you for clarification rather than simply remit payment. Of course, accuracy is also critical to reducing questions and speeding up payment.
At some companies, there may be several people handling accounts receivable but no one primarily focusing on collections. Giving one employee the ultimate responsibility for resolving past due invoices ensures the “collection buck” stops with someone. If budget allows, you could even hire an account receivable specialist to fill this role.
The more ways customers can pay, the easier it is for them to pay promptly. Although some customers still like traditional payment options such as mailing a check or submitting a credit card number, more and more people now prefer the convenience of mobile payments via a dedicated app or using third-party services such as PayPal, Venmo, or Square.
If your business largely engages in B2B transactions, many of your customers may have specific procedures that you must follow to properly format and submit invoices. Review these procedures and be sure your staff is following them carefully to avoid payment delays. Also, consider contacting customers a couple of days before payment is due — especially for large payments — to verify that everything is on track.
Often, the culprit behind slow collections is a lack of timely, accurate data. Accounts receivable aging reports provide an at-a-glance view of each customer’s current payment status, including their respective outstanding balances. Aging reports typically track the payment status of customers by time periods, such as 0–30 days, 31–60 days, 61–90 days, and 91+ days past due.
With easy access to this data, you’ll have a better idea of where to focus your efforts. For example, you can concentrate on collecting the largest receivables that are the furthest past due. Or you can zero in on collecting receivables that are between 31 and 60 days outstanding before they get further behind.
Need help setting up aging reports or improving the ones you’re currently running? Please let us know — we’d be happy to help with this or any aspect of improving your accounts receivable processes.
No matter the size or shape of a business, one really can’t overstate the importance of sound accounts receivable policies and procedures. If your company’s collections aren’t as efficient as you’d like, consider the following five suggestions: 1) Redesign your invoices to ensure they’re clear and easy to understand. 2) Appoint a collections champion who has the primary responsibility of following up on past-due invoices. 3) Expand your payment options to include the latest mobile technology. 4) Acquaint (or reacquaint) yourself with your B2B customers’ procedures for invoice formatting and submission. 5) Generate accounts receivable aging reports. Contact us for help.
As mitigation measures related to COVID-19 ease, it will be interesting to see which practices and regulatory changes were taken in response to the pandemic remain in place long-term. One of them might be relief from a sometimes inconvenient requirement related to the administration of 401(k) plans.
In IRS extends administrative relief for 401(k) plans, the IRS recently announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a 401(k) plan representative or notary public.
The original relief, which appeared in IRS Notice 2020-42, was provided primarily to facilitate plan loans and distributions under the CARES Act. However, the relief could be used during 2020 for any signature that, under regulations, had to be witnessed in the physical presence of a plan representative or notary public. This included required spousal consents. The relief was subsequently extended through June 30, 2021, under IRS Notice 2021-03.
Under the notices, signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established under the original relief:
Signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state law requirements for a notary public.
As mentioned, IRS Notice 2021-40 further extends the relief — subject to the same conditions — through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding:
Comments should be submitted by September 30, 2021.
Going forward, the need for a signature may often relate to spousal consents. If your business recently established a 401(k), the plan may be designed to limit the need for spousal consents.
However, plans that offer annuity forms of distribution are still subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a non-spouse as the primary beneficiary. Feel free to contact our firm for more information on the latest IRS guidance addressing employee benefits.
In Notice 2021-40, the IRS recently announced a 12-month extension (through June 30, 2022) of its temporary relief from the requirement that certain signatures must be witnessed “in the physical presence” of a 401(k) plan representative or notary public; instead, audio-video technology can be used. The relief was provided primarily to facilitate plan loans and distributions under the CARES Act, but it applies to any signature that is required to be witnessed in the physical presence of a plan representative or notary public. This includes spousal consents. Notice 2021-40 also requests comments regarding whether permanent modifications should be made. Contact us for more information.
COVID-19 has affected small businesses in ways they never could have imagined. It’s more important than ever to have an up-to-date and accurate understanding of your business financials. Outsourcing your bookkeeping to the experts at David Mills, CPA, LLC is the answer.
When the clock struck midnight on Jan. 1, few people could have envisioned the year that 2020 would become. The worldwide COVID-19 pandemic has upended businesses and forced companies large and small to re-evaluate.
Some businesses have struggled during COVID-19 with lost business, redacted productivity, disrupted supply chains and more. Others have found their niche during the pandemic and have experienced business growth.
Businesses on both ends of the spectrum have realized now, more than ever, accurate financial data is key.
With offices in Morton and East Peoria, we’re Central Illinois small business bookkeeping experts. We understand most business owners don’t have the time to learn the skills necessary to accurately keep their set of books. That’s especially true in 2020 when business owners are faced with hundreds of additional decisions and challenges. Outsourcing your bookkeeping is the solution.
Our bookkeepers are current and up-to-date on all bookkeeping and payroll laws, so there’s no need to train your staff. This is especially vital in 2020 where cuts to payroll taxes, PPP loans and other COVID-related government programs have made the year unlike any other.
When you use David Mills, CPA, LLC to provide your small business bookkeeping services, you know you’ll receive timely financial information, allowing you to make sound decisions.
Will you need to take out a small business loan? Should you refinance existing loans? The business climate in 2020 means many are re-evaluating their finances. Up-to-date information gives you the knowledge you need to make the best decisions for your business.
The pandemic has forced Americans to change their habits and spending. Perhaps your business has been one that’s benefitted from COVID-19. Trying to manage your bookkeeping while also staying on top of business demands can be a daunting task.
Running your business and catering to your customers’ needs is what you do best. Leave the bookkeeping to us.
Every month, we will:
All of the information is entered into a QuickBooks file, which can be easily retrieved whenever information is needed.
COVID-19 has made 2020 much more challenging, however, your business bookkeeping doesn’t have to be part of that challenge. Contact David Mills, CPA, LLC today.
Learn more about the small business bookkeeping services we offer.
With the events of the last few days (closing of schools and extending the stay-at-home order until April 30th) it’s clear the COVID-19 virus threat is greater than expected.
To protect you and our staff at David Mills CPA, LLC, effective April 2, 2020, we will no longer be meeting with clients until the stay-at-home order is lifted. Our doors will be locked, and reception areas will be closed to walk-ins.
Our staff is still providing all the services we normally do. We continue to prepare tax returns, bookkeeping and payroll services.
For payroll clients: We will contact you about payroll delivery. This is a good time to consider direct deposit for employees. We’ll keep you updated on events as they happen.
Thank you for your understanding and patience during these unprecedented times.
Small businesses need budgets, but too often, they don’t have one. The staff at David Mills CPA, LLC can assist with your budgeting needs.
Creating a business budget can seem overwhelming. One survey found as many as two-thirds of all small businesses don’t have a budget.
Without a budget, though, your company’s financial health is at risk. Small businesses face challenges every day. A budget helps mitigate those difficulties.
The experts at David Mills CPA will show you how budgeting can grow your profits. Interpreting the numbers is key, but we understand making sense of those figures can feel overwhelming.
We can help you answer the critical questions:
A smartly planned budget will include flexibility to help you navigate any troubled waters your business may face.
A budget should be more than just a yearly chore. It’s a tool to help you tackle short-term obstacles while planning for the long-term future.
We will teach you the questions to ask when looking at your budget versus actual numbers. In this way, your budget becomes a valuable tool to manage cash flow and build your business.
Budgets help make your business more efficient. They can help keep your company out of debt while developing a roadmap for future growth or expansion.
Planning your business budget will make it more efficient to operate your company.
Let the staff at David Mills CPA assist you with all your business budgeting needs. Contact us today for more information.
You’re the CEO of your business and an expert in your industry, but does that expertise expand to the financial side of your business plan? If phrases like “projected profitability” and “cash flow” make you cringe, it’s time to call the experts at David Mills, CPA, LLC.
Chances are you didn’t get into business because the idea of managing financial statements appealed to you, yet your company’s success is directly related to the quality of your financial statements and the CFO (chief financial officer)/Controller Services overseeing them.
A head-in-the-sand approach to your business finances is a disaster waiting to happen. Just like ignoring your car’s check engine light can leave you stranded, not paying attention to finances can cripple your business.
More than 28% of bankrupt businesses cite problems with the financial structure of their company as a primary reason for failure.
Businesses fail because they forget about the basics. Have you taken the time to create a budget? If you have, do you regularly analyze the results? Is your business making a profit, yet you never seem to have money in the bank?
Hiring an outsourced controller/CFO is the smart way to keep your finger on the financial pulse of your business plan.
If financial statements make no sense to you, you won’t use them. You need controller services you can trust to interpret the statements for you.
Just because you may not have the budget for a full-time CFO doesn’t mean you don’t have alternatives.
With our Morton and East Peoria offices, our firm can provide CFO services on an “as-needed” basis to companies in the Tri-County area.
We can take full responsibility for the financial side of your business, work part-time, or train your staff. Our services are available on a monthly, quarterly or a specific-project basis.
You’ll gain greater control over your business plan when the numbers make sense.
Having the staff at David Mills, CPA, LLC be your financial experts allows you to excel at the business you do best.
Contact us today about our CFO consulting and outsourced controller services.
If you have been looking for a professional and reputable accounting firms in Peoria, Illinois, you have come to the right place. David Mills, CPA, LLC is an accounting firm with years of experience in tax preparation, budgeting, payroll services, bookkeeping, business structure, and more! If you need help with finances, we have your back. From personal to small and medium-sized businesses, we have the knowledge to provide you with the services you need to get ahead with your finances.
When you work with an accounting firm you have the experience and knowledge behind you to make financial decisions. This is vital for both personal finances and for business finances! As a person, a large financial decision like a home or a car can majorly impact you and your income. Budget planning can help you decide what options are best for you. As a business, growth and profit are two of the most important outcomes. If you don’t have proper bookkeeping, transactions may be inaccurate and cause financial issues down the line. This could limit profits and growth!
We can also help businesses with setup, training, and troubleshooting of QuickBooks! Our payroll, controller & CFO services, business structure, and tax preparation services help you make informed decisions about your business. Leave the technical, financial work to us so you can focus on what really matters; your business.
Out of the accounting firms in Peoria, Illinois, choose us to ensure your finances are going in the right direction. Give us a call today and tell us how we can help you! We are eager to help you with your personal and business finance needs!
Every business should be keeping track of their finances. And while nearly all large businesses or corporations have someone–or maybe even a team of people–bookkeeping for their business, small to medium size businesses tend to lack in this department. It is often because the staff is too busy with the revenue generation activities like marketing or public relations. Bookkeeping keeps a record of purchases, sales, and receipts. Without it, financial transactions could be incorrectly recorded and future business planning could be compromised. This is why you should consider using our bookkeeping services. We offer both monthly and quarterly so you can focus on what’s important: your business.
Each month or quarter–depending on your chosen service–you will have access to all the files and information you might need for your business’ finances. Additionally, the information is easily retrievable from a Quickbooks file so you can quickly and easily access any information you might need. Outsourcing your bookkeeping is a great way to approach finances for small to medium-sized businesses, so make sure to give us a call. Our team of professionals is ready to help you and your business.
Ready to get started with bookkeeping services? Fill out our contact form to get started!