News and Events | Canon Capital Management Group, LLC

Canon Capital Payroll Services Q&A: Independent Contractor or Employee?

We’re often asked about this topic. Companies will bring a new person on board to perform professional services – are they employees or independent contractors?

The easy part is knowing how to treat each category with regard to payroll. An employee is on the company payroll and the company is required to withhold income taxes, withhold – and pay – Social Security and Medicare taxes and pay unemployment taxes on all employee wages. Not so for an independent contractor, who is technically self-employed and responsible for his/her own tax payments.

How can you differentiate your employees from your independent contractors? The IRS provides this simple guide to make that determination. We’re also happy to help. Give us a call at 215-723-4881 or contact us online.

Financial Self-Defense – Avoiding IRS Scams

During the recent Financial Self-Defense seminar presented by our Wealth Management division, we focused on the three main areas of financial fraud: preying on senior citizens, tax-related fraud, and general financial fraud.

With tax-related fraud, the most prevalent attempt comes from people or entities who call on the phone to try and fool you into thinking they are the IRS and that you owe them money. The IRS does not operate that way. In fact, here are six things the IRS will never do.

Six Things the IRS Will Never Do

#1. Call to demand immediate payments over the phone, nor will the agency call about taxes owed without first having mailed you several bills.

#2. Call or email you to verify your identity by asking for personal and financial information.

#3. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

#4. Require you to use a specific payment method for your taxes, such as a prepaid debit card.

#5. Ask for credit or debit card numbers over the phone or email.

#6. Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for non-payment.

If you think you might have experienced this type of fraud and have questions, let us help you determine next steps. Learn more at www.canoncapital.com or call 215-723-4881.

“Financial Self-Defense” for Senior Citizens

With incidents of financial fraud on the rise, the second session in our Wealth Management division’s Financial Literacy series focused on “Financial Self-Defense.” The hour-long seminar focused on three main areas of financial fraud: preying on senior citizens, tax-related fraud, and general financial fraud. Today’s recap covering red flags for senior citizens is the first in a series of blog posts recapping the seminar.

Top Ten Red Flags of Senior Citizen Financial Fraud

#1. “He said he was certified to help people like me.”

If the financial advisor is telling you it’s normal procedure also to be the custodian of your account, be aware that this is not a financial management best practice. Two different entities should serve these roles.

#2. “Don’t worry about the details; they’ll just confuse you.”

Wrong. You have the right to get a second opinion from a trusted professional. If you don’t understand what is being said, don’t buy it.

#3. “You’re Invited! Wine, Dine and Learn!”

You have probably been invited to at least one of these events. You’re promised a nice meal and a presentation of the advisor’s services. Be aware, this type of practitioner usually counts on high up-front commissions. Don’t feel obligated to please by making a decision you could regret later.

#4. “You don’t want what you leave to your family or charity to be eaten away by taxes or fees, do you?”

Don’t give in to this tactic, designed to pressure or scare you into making a decision that is not in your best interest. Just because a so-called expert recommends it doesn’t mean it’s right for you.

#5. “Do you need more income from safe fixed-income investments? We’ll show you how!”

Beware these promises of high returns on small investments. If it sounds too good to be true, it’s probably not legitimate or safe.

#6. “He’s one of us. I’m sure you can trust him.”

Always reserve the right to do your research. Even if an advisor is recommended from within your social circle, take the time to learn more, get a second opinion from an objective third party. Don’t confuse familiarity with trust.

#7. “I’ll take care of all the paperwork.”

Sounds perfect, right? Wrong. You want to see and understand all paperwork dealing with your money. The final sign-off should always be yours.

#8. “All of my clients in this fund are making a lot of money.”

Don’t feel pressure to follow the masses. In most cases, this tactic is designed to benefit the advisor more than you. Make sure the money others are making isn’t yours.

#9. “I’ve got a much better idea for your money.”

This perspective is a likely precursor to what’s known as “churning,” or excessively trading your account so the advisor receives more commission. Get as much information as possible about their proposal and get it checked.

#10. “Stop paying the bank for your house. Let the bank pay you!”

A reverse mortgage might sound like a great deal but be careful. Don’t sign over the deed to your property and know that you don’t have to take the payment in a lump sum. As a homeowner, you have rights. Make sure you know what they are before entering into this kind of agreement.

In any dealings with a financial advisor, there is no need for you to feel rushed or pressured into making a decision. Transparency and third party accountability are key. If you have questions, we would be happy to help. Learn more at www.canoncapital.com or call 215-723-4881.

Memorial Day Holiday Observance

Canon Capital’s offices will be closed in observance of Memorial Day on Monday, May 30th. Our regular business hours will resume on Tuesday, May 31st.

We wish you a safe and happy holiday!

Top Ten Red Flags of Financial Fraud

The recap of our recent “Financial Self-Defense” seminar concludes with a general overview of the red flags to be wary of when dealing with a financial advisor. You always have the right to pursue a second opinion and to take the time to think things over.

Top Ten Red Flags of Financial Fraud

#1. “We’ve known him forever. I’m sure you can trust him.”
This is the “friends and family” prospects model. Your friend’s nephew is just starting out at a financial firm. Do you mind if he meets with you? It’s not impolite to decline such a meeting or, if you agree, do your homework. Make sure this person is someone you truly would trust with your finances.

#2. “Just sign here. I’ll take care of the rest.”
Never leave blanks on your signed financial paperwork. It might be tempting but be present for the completion of your paperwork.

#3. “This is just for my special clients.”
Beware any offer labeled as “private” or “exclusive.” It rarely is. Ask whether your investments are regulated or supervised by independent third parties.

#4. “I’ll send you all of the investment reports.”
Make sure you receive reports from your advisor and the independent third party custodian of your accounts. Those reports should match.

#5. “Make the check payable to me.”
Your check should be made payable to the custodial entity. Never give a financial professional a blank check, no matter how trusted your relationship.

#6. “I know it’s a difficult time, but you need to decide now.”
Take your time. If you’ve inherited some money, it’s recommended to take up to one year to decide how to manage these funds. Feel free to bring a trusted friend along to your appointment. Trust, but verify.

#7. “This one’s a no-brainer. You can’t lose.”
There’s prudence in financial management, but nothing is certain. Take your time. Get a second opinion. It’s your money.

#8. “This offer is only good today.”
Pressure selling is a common practice in the brokerage world. If anyone tries to force you into a decision using this tactic, steer clear.

#9. “I can replace that with something better.”
Understand how a financial professional earns their pay. Before agreeing to any transaction, carefully consider the charges you’ll incur and the timing involved.

#10. “It’s very complicated. No need to bother you with all the details.”
Don’t buy what you can’t understand. Make sure the advisor explains everything about your investments.

In addition to avoiding all of these red flags, it’s a good idea to designate a trusted friend or relative to handle your investments should something happen to you.

If you have questions about your investments or would like a second opinion, we’re happy to help. Contact us online or call 215-723-4881.

Miss the first two Financial Self-Defense: Financial Fraud Recaps? Read them now:

Financial Self-Defense: Avoiding IRS Scams

Financial Self-Defense for Senior Citizens

The Microsoft Windows 10 Free Upgrade Offer Ends July 29 – Should You Do It?

It’s hard to believe it’s almost a year since Microsoft released Windows 10, the latest version of their Windows operating system. Existing Windows users have the opportunity to access a free upgrade through July 29, 2016. So, should you upgrade? If you have already upgraded and things are going well, then by all means stay with it. If you have not upgraded yet, we do not recommend a rush to do so.

The features of Windows 10 are mostly cosmetic, and we’ve yet to see the major software suppliers release new products not compatible with Windows 7 and 8. Even QuickBooks 2016 – the only version of QuickBooks compatible with Windows 10 – is also compatible with Windows 7 and 8. So as long as your primary software continues to support Windows 7 and 8, we don’t recommend upgrading to Windows 10 on an existing computer.

An operating system upgrade is never as easy as just pushing a button. You need to make sure all of your hardware, software and peripheral equipment is compatible with the new operating system. Will your QuickBooks work? Will you still be able to print? Multiply this by the number and variety of computers in your workplace and what seemed a simple task can be a daunting project.

Be prepared by being proactive.

What we do recommend is that you start preparing now for the day you’ll need to replace your computers, s since Windows 10 will be the standard on any new machines. This includes staying up to date with all software packages and apps while using Windows 7 or 8. Doing so provides better support and more security.

We also suggest scheduling our Computer Solutions’ upfront analysis service which reviews your hardware, software, and equipment to determine what, if any, work is needed before a transition to Windows 10. This allows you to take your time and know what to expect when you eventually move on from Windows 7 or 8 to Windows 10. It’s part of our due diligence and saves you the inconvenience and cost of future unknowns.

We’ve conducted this upfront analysis for a number of clients who have chosen to upgrade to Windows 10 and found that even with no predetermined issues, there were some hiccups once the transition to Windows 10 was complete.

There’s another element to the free Windows 10 upgrade. Some users have experienced an automatic update. Others have made the upgrade accidentally due to the way Windows has presented the option in pop-up messages. If this is the case in your situation, Windows 10 does have an uninstall option allowing you to revert to your previous operating system as long as you do so within 30 days of the Windows 10 installation.

If you have questions or would like to schedule an upfront analysis to be prepared for Windows 10, we are always available to you at 215-723-4881 or www.canoncapital.com.

Four Little Words Cost My Client over $55,000

“Details matter.” That’s what a client recently said as I was handing her a series of amended tax returns for 2014 and 2015 which included around $18,000 in additional taxes owed. Add to that a projection of an additional $37,000 owed for 2016. Why? Four words. Four little words cost my client over $55,000 in unexpected taxes, and I am helpless to do anything about it at this point.

“Details matter.” How simple, yet how profound.

The four words? “Tenants-by-the-entireties.” What does that even mean?

My client’s husband had 50/50 ownership of several rental properties with an unrelated partner. My client’s husband began to have failing health and passed away in 2014. Before his passing, they approached a lawyer to provide some estate planning.

Fortunately, the lawyer established an estate where shares of the partnership would be passed to the children and heirs. This not only kept the partnership from terminating upon my client’s husband’s death but it also meant the partnership was no longer a 50/50 split. Simply put, you need two people for a partnership. If one passes away, the partnership no longer has two individuals and therefore can’t exist. So the lawyer adequately addressed one concern by passing the partnership on to the children and heirs. However, he also did something else that he probably shouldn’t have done. He admitted the wife into the partnership as “tenants-by-the-entireties.” Those four words – “tenants by the entireties” – cost my client about $55,000.

When my client’s husband passed away, the partnership interest (aka ownership) would have automatically gone to his surviving spouse. The fair market value of the partnership interest would have passed through his estate, and his wife would have inherited the properties/partnership interest at full fair market value. So if the properties were sold the day after the husband’s passing, the wife wouldn’t pay a penny in federal income tax because it was handled through the estate.

What should have been a simple inheritance was complicated by the lawyer admitting the wife to the partnership, creating a tenancy by the entireties. From a tax perspective, she then owned 50% of her husband’s share and became ineligible to inherit the whole ownership at fair market value. She was only eligible to inherit half of it at fair market value. As a result, she had to pay taxes on her half of her husband’s share.

Communication is Key

While this is a very complicated area of tax law, the point of the story is this: Whether you have a multi-million-dollar business or as little as two rental properties, make sure your team is in communication with each other. Your accountant, lawyer, insurance agent, investment broker, etc., should all be on the same page. I recommend your accountant should be the “quarterback” guiding the team and identifying the “details” that matter.

It wasn’t until after we drafted the final partnership return in 2016 that we discovered the partnership agreement as it was revised. At that point, there was nothing we could do. While the lawyer did what he did to ease the transfer of ownership, it cost my client approximately $55,000.

Don’t be deceived into thinking this couldn’t happen to you. These particular clients weren’t “big clients with a lot of money.” There were only two rental properties. So please, hear my plea, and that of my clients: “Details matter.”

If you have questions about how your estate planning affects your tax situation, we’d be happy to help. Contact us or call 215-723-4881.

Brent Thompson, CPA has been with Canon Capital since 1998. He provides management advisory services, tax and general business planning, tax preparation, and financial statement preparation and review services for numerous businesses and their owners. He holds the Certified Management Accountant (CMA) designation and a Chartered Global Management Accountant (CGMA) designation. Brent is a member of the AICPA and the Institute of CMA’s.

This article is designed for general information only. The information presented should not be construed to be formal advice nor the formation of a client relationship.

New Payroll Rules and Regulations

Several rules and regulations have recently been passed that will affect payroll. Here is a summary of what to expect.

The Overtime Rule

Final ruling has been passed and will become effective on December 1, 2016. The final rule does not make any changes to the duties test for executive, administrative and professional employees. The final rule will raise the salary threshold indicating eligibility from $455/week to $913/week. Thus, anyone earning hourly wages or a set salary under $47,476 annually will be entitled to overtime pay.

In response to the new overtime rule, employers can:

• Pay time-and-a-half for overtime work
• Raise workers’ salaries above the new threshold
• Limit workers’ hours to 40 per week
• Some combination of the above

For additional information, please review Guidance for Private Employers or Guidance for Non-Profit Employers.

Please consult your HR Specialist to make sure you are in compliance prior to the effective date.

PA Child Support

Previously, employers were permitted to deduct up to 2% of the ordered amount per pay as reimbursement for administrative costs related to withholding support. Effective 8/30/16, employers may deduct a one-time fee of $50 for reimbursement of administrative expenses. The 2% fee is no longer permitted.

Accelerated Form W2/W3 and 1099-MISC Filing Deadlines

Beginning with 2016 forms filed in early 2017, employers are required to file forms W2 and W3, whether filing electronically or on paper, to the Social Security Administration by January 31. Form W2 is still required to be provided to employees by January 31.

The new January 31 deadline also applies to Forms 1099-MISC on which nonemployee compensation is reported in Box 7, even if amounts are also reported in other boxes on the form.

Please don’t hesitate to contact us with any questions. We are happy to help.

Canon Capital Wealth Management Welcomes Bradley Barnhorst, CFA

We are pleased to announce that Bradley Barnhorst, CFA, has joined Canon Capital’s Wealth Management group as Investment Committee Counsel. Brad’s expertise and experience – particularly in the area of investment and portfolio risk and volatility reduction — will enhance our ability to offer favorable investment solutions to our clients.

Before joining Canon Capital, Brad worked on Wall Street as an Associate Director with Bear, Stearns & Co., where he specialized in structured equity products and derivatives geared to mitigating investment risk. He is a recognized expert in investment portfolio risk and volatility reduction, with numerous published works in both scholarly and professional journals.

Brad also serves as the Chair of the Finance Major program for both the undergraduate and graduate divisions at DeSales University, a position he will retain along with his professor duties. Brad’s passion for research has led to the publishing of his finance-related work in both scholarly and professional journals.

Brad holds the Chartered Financial Analyst (CFA) designation and is a member of the CFA Institute, the Northeastern Association of Business, Economics, and Technology (NABET) where he serves on the Executive Board as Recording Secretary and the New York Society of Security Analysts.

Brad earned a Bachelor of Arts in Computer Science from Harvard University and a Master of Business Administration (MBA) with a concentration in Corporate Finance and Investment Management from Penn State University. Brad lives in Bath, PA with his wife and two daughters.

Canon Capital Wealth Management serves individuals, retirement plans, trustees, and institutions. If you or someone you know would like to find out more about the benefits of a relationship with our Wealth Management group, we encourage you to contact us.

New Sales Tax Laws Effective 8/1/16

On July 13, 2016, Governor Tom Wolf signed into law Act 84 of 2016. Per the Pennsylvania Department of Revenue, the following updates have been made to Sales, Use, and Hotel Occupancy taxes:

Timely Filing Vendor Discount
Effective for returns that have a period end date after August 1, 2016, the vendor discount for licensees for timely filed returns and payments is limited to the lesser of $25 or 1 percent of tax collected for a monthly filer, $75 or 1 percent of tax collected for a quarterly filer and $150 or 1 percent of tax collected for a semi-annual filer.

Exemptions
Effective July 1, 2017, property and services directly and predominately used in “timbering” by a company primarily engaged in the business of harvesting trees is exempt from tax. The term shall not include the harvesting of trees for clearing land for access roads.

Effective immediately, licensees are not required to collect tax on corrugated boxes used by a person engaged in the manufacture of snack food products to deliver the manufactured product, whether or not the boxes are returnable.

Effective in 60 days, the sale at retail or use of services related to the setup, tear down, or maintenance of tangible personal property rented by an authority to exhibitors at the Pennsylvania Convention Center and the David L. Lawrence Convention Center is exempt from sales and use tax.

Sales tax base expansion
Effective August 1, 2016, licensees are now required to collect tax on digitally or electronically delivered or streamed video, photographs, books, any other taxable printed material, apps, games, music, any audio service including satellite radio or canned software. These items are taxable whether accessed and purchased singly, or by subscription or in any other manner. Any maintenance, updates or support on these items are taxable.

Taxable sales on these items made on or after August 1, 2016, must be included when filing sales tax returns. The date of sale is the date of the invoice or other similar document.

Sales Suppression
Any person who, for commercial gain, sells, purchases, installs, transfers or possesses in this commonwealth an automated sales suppression device or zapper that the sole purpose of the device is to defeat or evade the determination of sales tax due commits a punishable offense.

Anyone that commits such an offense and is in possession of three or fewer devices will be subject to a fine up-to but not to exceed five thousand dollars ($5,000).

Anyone that commits such an offense and is in possession of three or more devices will be subject to a fine up-to but not to exceed ten thousand dollars ($10,000).

This shall not apply to an entity that possesses an automated sales suppression device for the sole purpose of developing hardware or software to combat the evasion of taxes by use of automated sales suppression devices or zappers or phantomware.

For additional information or if you have any questions regarding this notification, contact the Taxpayer Service and Information Center at 1-717-787-1064, or visit the department’s website at www.revenue.pa.gov, and click on Online Customer Service Center; Service for Taxpayers with Special Hearing and/or Speaking Needs is 1-800-447-3020 (TT only).