If you are looking for effective ways to get your business’ name out there but you don’t have a lot of money to put towards marketing, here are a few ideas that won’t cost you a lot of money.

1.  Free Networking Events - Many associations or organizations tend to offer free monthly networking events or mixers in order to increase awareness and membership enrollments. Make sure you and your employees take advantage of this opportunity to market your business and meet local business owners!

2.  Recycle - Turn old or outdated letterhead into a new promotional item for your company. If your company has had a recent address or name change, instead of tossing the old letterhead you can have it cropped and turned into a notepad to use as a giveaway that’s not only useful but also eco-friendly. Many printing companies will offer this service for a very low cost compared to the traditionally high prices of brand new promotional items and notepads.

3.  Social Networking – All of these options are essentially free marketing tools. Not only are they effective ways to keep up with your clients and fellow business associates, but they are fun too!

a. Twitter - This isn’t just for celebrities to tell you about their latest perfume, you can use it to market your products or services! Make sure to keep your Twitter account updated frequently in order to maintain followers’ interests and get the most out of tweeting. Try offering one-time moneysaving offers for new followers or followers who re-tweet your message.

b. Blogging - Just like we’re doing right now, creating a blog on your website or on WordPress can engage your website viewers with commenting or reposting. Make sure to update your blog frequently. And if your blog is located on somewhere other than your company website, always make sure you include a link to your website as well as contact information for you or your company.

c. Facebook - Creating a Facebook page for your company is nothing new or novel. However if you have the application on Facebook where visitors to your company headquarters can “check-in” when they have arrived to your office – then you have created a new, more frequent way for your company to show up on your Facebook fans newsfeed.

4.  Press Releases – Any time you have a new employee, an internal promotion, a new award or really anything new and exciting, take a chance to see if local newspapers or magazines would be interested in what you’ve got to say. Just type it up and send to the publication’s press release contact and you’re good to go.

If you have any questions about marketing, please feel free to contact Hertzbach’s marketing department.

It seems like we constantly hear about government waste…..how about hearing some news about the government trying to reduce costs?

The federal government spends more than $600 billion annually in the form of grants and cooperative agreements. The Office of Management and Budget (“OMB”) and the federal agencies have been talking for some time about how grant policies can be reformed to increase the efficiency and effectiveness of federal programs, as well as to eliminate unnecessary and duplicative requirements and focus in on areas that emphasize achieving better outcomes at a lower cost. Improving federal oversight has also been included in the discussion. On February 28, 2012, OMB issued an Advance Notice to more fully describe the reform ideas it is contemplating so that the public can provide feedback.

Some of the key changes in the Advance Notice are as follows:

Single Audit Threshold for Audit Increased. Entities that expend less than $1,000,000 in federal awards would not be required to undergo a single audit. This would represent an increase from the current threshold for single audits of $500,000, which was established in 2003. It is estimated that approximately 10,000 auditees would no longer be required to have a single audit if the threshold is increased.

A New Category of Single Audit. For those entities expending between $1 million and $3 million in federal awards, a single audit would be required, but major program audit procedures would be focused on testing only two compliance requirements—that is, allowable and unallowable costs and one additional requirement that would be selected by the federal agency responsible for the program. The proposal is silent regarding the level of testing of internal control over compliance that would be expected.

Changes for Larger Single Audits. For entities expending more than $3 million in federal awards, a full single audit would be required. However, the proposal indicates that federal agencies may identify subsets of compliance requirements that they believe most effectively address improper payments, waste, fraud, abuse, and program performance and require additional testing for those requirements. At the same time, the proposal indicates that other compliance requirements could be made optional for testing or the auditor could be directed to perform less testing on those requirements. The proposal also states that federal agencies could move compliance requirements that would no longer be “universal” to a specific program’s special tests and provisions compliance requirement, if a requirement is deemed to be relevant to preventing waste, fraud, and abuse for that program.

Pass-Through Entities and Subrecipients. The ideas discussed in this section call for more federal coordination regarding additional federal agency audits of recipient entities. Further, for entities that receive a majority of funds directly from the federal government and some other awards from a pass-through entity, the suggestion is for the federal government to perform audit follow-up for all funds, both direct and subawards, when the findings are not specific to the program delivery of the subawards. However, once the federal government has resolved the “general” findings, it would be up to the pass-through entity to follow up to ensure that the subrecipient complies with the audit resolution.

Changes to the Cost Principles. The potential changes to the cost principles (i.e., OMB Circular A-21, Cost Principles for Educational Institutions, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, OMB Circular A-122, Cost Principles for Non-Profit Organizations, and the Cost Principles for Hospitals) include consolidating the cost principles into a single document and ensuring limited variations by type of entity. Other ideas discussed include using flat rates instead of negotiated rates for indirect costs; exploring alternatives to time-and-effort reporting requirements for salaries and wages through the use of pilot projects; and other changes for specific cost elements.

Reforms to the Administrative Requirements. In large part, the changes to the administrative requirements are suggestions for federal agency change. For example, the Advance Notice discusses combining a consolidated set of administrative requirements; increasing pre-award considerations to include consideration of the merit of each proposal and financial risk; and changes to communication of funding opportunities.

The OMB is also asking for other suggestions to relieve administrative burden. It is also asking for feedback in terms of whether the proposals discussed in the Advance Notice would result in reduced burden.

As always, the Nonprofit Services Group at Hertzbach will keep you up-to-date on any developments. If you have specific questions regarding this Advance Notice, please feel free to contact a Hertzbach professional.

On February 22nd the President signed the “Middle Class Tax Relief and Job Creation Act of 2012″.  The Act extends the reduced 4.2% OASDI tax rate for employees’ share of payroll taxes through 12/31/12.  If you recall back in December Congress had only agreed to extend the rate through the end of February.

The employers’ share of OASDI remains at 6.2% and the Medicare rate of 1.45% is still in effect for both employers and employees.  The Act also repealed the recapture provision for taxpayers earning over $18,350 during the first two months of 2012.

The extension of the payroll tax cut is estimated by the Joint Committee on Taxation staff to cost $93 billion in revenue over the next two years.

In addition to the payroll tax cut the Act extended certain unemployment benefits and blocked a cut in Medicare payments to doctors.

Please contact a Hertzbach professional if you have questions regarding payroll taxes.

The IRS has recently posted the final 2011 Form 990, Return of Organization Exempt From Income Tax, and the related instructions on its website. The latest version of the Form 990 contains a few important changes that may be of significance to tax-exempt organizations.

The first required change is that an organization must complete Form 990, Part I of Schedule F, Statement of Activities Outside the United States, if it had foreign investments valued at $100,000 or more during the tax year. The prior requirement for completion of this schedule was if the organization had aggregate revenues or expenses or more than $10,000 attributable to various foreign activities.

Another change is the requirement that organizations complete Part X, Balance Sheet, by reporting their distributive share of assets in any joint ventures and other entities treated as partnerships for federal tax purposes according to the ending capital account as reported on Schedule K-1. In addition, an organization’s distributive share of investment income, royalties and rental income from joint ventures should be reported on specific lines of Part VIII, Statement of Revenue.

The Form 990 instructions also contain several changes including revising the definition of “grants and other assistance” to exclude certain payments by voluntary employees’ beneficiary associations. In addition, Appendix K, Contributions, was amended to clarify that in the case of a text message contribution, the donor’s phone bill meets the Section 170(f)(17) recordkeeping requirement if it shows the name of the donor organization and the date and amount of the contribution.

If you have any questions about these changes to the Form 990, please contact a Hertzbach professional.

The Financial Accounting Foundation (FAF) has conducted its first post-implementation review of an accounting standard, starting with FIN 48, Accounting for Uncertainty in Income Tax Positions. No surprise that the FAF found that the standard generally achieved its purpose. What was surprising was that the FAF acknowledged the standard needs some improvement.

The report, which was compiled by an independent committee appointed by the FAF Board of Trustees, found that consistently applying FIN 48’s guidance may not increase the comparability of information as management’s judgments and the increasing complexity of the tax code. Management has to assess each tax position separately on its technical merits and as a result different judgments may result in different reported outcomes, even for similar uncertain tax positions.

The committee found that the information FIN 48 provides “may not be predictive or confirmatory of future cash flows because FIN 48 employs a benefit-recognition approach, not the best-estimate approach for liabilities to be settled.” Overall, the report found that the benefits of FIN 48’s improved consistency and reporting of uncertain tax positions outweigh its costs.

It is unclear as to what changes this review will have on the current standard. The FASB will examine the post-implementation review report and provide a written response in the next few weeks.

The FAF has also been receiving a steady stream of input on its proposal for a Private Company Standards Improvement Council. More than 6,200 CPAs, lenders, investors, other financial statement users, private companies and small business owners sent comment letters to the FAF in response to its proposal for changing private company financial reporting. The comment letters urged FAF to accept the Blue Ribbon Panel on Standard Setting for Private Companies’ recommendation that an independent, authoritative standard-setting board be set up to modify U.S. GAAP, where warranted, for private companies. In response, the FAF has scheduled roundtable discussions in various cities through March 1 to gain further input from stakeholders.

As always, Hertzbach will keep you updated on any changes.

As a business valuation professional, the most often asked question from clients revolves around the adjustments made to their company’s income stream. After all, if their company is managed in a way that doesn’t leave much income on the bottom line, then so be it. That’s how their company operates and that’s how it should be valued, right? Not exactly…

Valuations are necessary for a variety of reasons but most commonly they are completed for tax or litigation purposes which require a company to be valued at “Fair Market Value” rather than “Investment Value.” According to the IRS, “Fair Market Value” is considered to be the price at which two hypothetical people that are not being forced to buy or sell the company would agree to the transaction when they both have knowledge of the relevant information about the company. For tax purposes, the “Fair Market Value” standard is used because the IRS needs to know what the business would be worth on the open market, not to the current owner. “Investment Value” on the other hand, is the value of the business to the current owner. Normalizing adjustments are the adjustments made to the earnings stream to convert the value of a company to “Fair Market Value.”

Most people have difficulty with this concept. Adjustments are made to revenues and expenses to ascertain the earnings stream if a non-owner officer was running the company. In other words, we need to adjust the company’s financial statements to show income and expenses at amounts similar to industry averages, while leaving other company specifics the same. For example, adjustments are commonly made to owner/officer compensation for those who are over/under paid. Rent expense is typically adjusted for a company that doesn’t pay market rent because it rents from a related party. Another common adjustment is for extraordinary transactions (income and expense items that aren’t part of normal business operations) such as gain/losses from a lawsuit or the sale of a business asset. The resulting financial information (after adjustments) must demonstrate the profitability of a company without any related party, discretionary, or one time items influencing the bottom line profits.

Owners are generally concerned that making adjustments will result in a different value than what they believe is the value of their business. Owners need to understand the current/actual level of earnings translates to a value to the current owner, not the value to an outside investor. These adjustments reflect the value of the business to an outside buyer who is looking for what earnings/cash flow could be produced with a normalized level of revenues and expenses.

Ultimately, it is important to note that the “Fair Market Value” standard is used for many purposes and it is required by the IRS. Since normalizing adjustments are based on hypothetical assumptions, the value derived may not reflect the value of your business to you or to specific potential buyers that may be interested for synergistic purposes. For that reason, it is important for owners to talk to a valuation professional to determine which standard should be utilized given their specific needs. For more information, please contact a Hertzbach professional.

The IRS announced that Exempt Organizations with a filing due date in January or February will have until March 30, 2012 to file their annual returns. The extension is the result of the IRS e-file system that handles these returns being offline for maintenance.

The extension applies to Forms 990, 990-EZ, 990-PF, and 1120-POL as well as extensions for those forms which are due at the same time. It generally applies to organizations with a fiscal year ending on Aug 31 or Sept 30, 2011 and those that have already obtained the initial three month extension.

If the organization has already obtained a first extension that expires during the e-file blackout and intends to apply for a second three-month extension the second extension should be timely filed on paper. Penalty relief is available to those affected by this issue under Notice 2012-4.

Form 990-N, which is filed by smaller organizations, was not granted the extension and should file by its original due date.

As always, please contact a Hertzbach professional if you have questions.

The IRS has officially announced many of the rates and limits in effect for 2012. Below is a summary of some of the most widely used.

Mileage Rates
Business 55.5 cents per mile
Medical/Moving 23 cents per mile
Charity 14 cents per mile

Retirement Plan Contribution Limits
IRA (under age 50) $5,000
IRA (age 50 & older) 6,000

401(k) & 403(b) 17,000
Catch-up 50 & older 5,500

Health Savings Account Contribution Limits
Single 3,100
Family 6,250
Catch-up 55 & older 1,000

As always, please contact a Hertzbach professional if you have any questions.