Author: Ketel Thorstenson, LLP

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Senior Manager Announced by Ketel Thorstenson, LLP

Ketel Thorstenson, LLP announces the promotion of Jeff Yennie, CPA, to Senior Manager.

Jeff Yennie, CPA received a Bachelor of Science degree in Accounting, and a Master’s degree in Accounting both from the University of Wyoming. He joined Ketel Thorstenson, LLP in 2012, and serves in the audit department in the Rapid City office. His areas of industry specialization include: city government, school districts, manufacturing and retail businesses, and non-profit organizations. Yennie is a member of the South Dakota CPA Society (SDCPA) and the American Institute of Certified Public Accountants (AICPA). He is a member of the Leadership Rapid City class of 2016, and serves as Treasurer of Pheasants Forever, Black Hills Chapter. As Senior Manager, his responsibilities include the management, scheduling and strategic planning of the audit department, building and ensuring a positive client experience, and seeking training and education opportunities for staff and clients.

Ketel Thorstenson, LLP is a full-service firm with 19 partners, over 55 Certified Public Accountants (CPA) and Enrolled Agents (EA), and offices in Rapid City, Custer, Spearfish, SD, and Gillette, WY. KTLLP has a rich history, serving clients since 1936 and a depth of knowledge and experience that clients rely on and trust. The firm offers a variety of services including tax planning and return preparation, audit services, QuickBooks support, bookkeeping, payroll, business valuation, business consulting and estate planning.

June 18, 2019
| Ketel Thorstenson, LLP
KT Insights
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Procurement – New Components of the Requirement

After several years of extensions, the new components of the procurement compliance requirement are finally applicable.  What does this mean for governmental and non-profit entities?  Any governmental or non-profit entity expending federal dollars is required to follow the new components of this compliance requirement.

The new components are effective for entities with year-ends on or after December 31, 2018.

In a nutshell, the compliance requirement contains the following components, discussed in more detail below:

  • Entities must have a written procurement policy
  • Entities must maintain records to detail the history of the procurement
  • One of the approved procurement methods must be utilized

One of the biggest changes within this compliance requirement is the fact that the procurement policy needs to be written.  There is not a standard template to utilize, as each entity’s procedures for the purchasing process differ.  The policy should contain (1) a statement regarding the entity’s adherence to the applicable state and local laws and regulations, provided such conform to federal law, (2) standards of conduct regarding conflicts of interest surrounding selection, award, or administration of the award by employees, officers, or agents, as well as organization conflicts of interest for a parent, affiliate, or subsidiary that is not a state/local government or Indian tribe, and (3) a statement that the purchase of the product or service must not unduly restrict competition, identify the requirements which the offer must fulfill, and use current prequalified lists to ensure maximum open and free competition.

Next, an entity must maintain records detailing the purchase of items, which will vary based on the type of procurement method utilized.  For example, a rationale for the method of procurement selected, the selection or rejection of contractors, and the basis for contract prices.

Once it is determined an item or project needs paid for or funded, the requirements of the applicable procurement method must be followed.  The various methods are described below:

  • Micro-purchase – The purchase of an item less than $3,500 (adjusted periodically for inflation)[1]. When practical, distribute the purchase of such items among qualified suppliers.
  • Small purchases – The purchase of an item exceeding the micro-purchase threshold of $3,500, but less than the simplified acquisition threshold of $150,000 (adjusted periodically for inflation)1. For these items, price or rate quotes must be obtained from an “adequate number of qualified sources.”  The guidance does not clarify how many is an “adequate number” and such determination must be made by each entity.
  • Sealed bid – This method applies to purchases greater than $150,000. Sealed bids must be obtained from an adequate number of known suppliers, it must be publicly advertised, and there must be an invitation to bid and opening the bids.
  • Competitive proposal – This method also applies to purchases greater than $150,000. There must be a request for proposal (RFP), an adequate number of qualified sources, a written method for conducting technical evaluations and for selecting recipients, and contracts awarded to the responsible firm based on price and other factors.  Qualifications-based procurement may be used for architectural and engineering professional services only.
  • Noncompetitive proposal – This method results in solicitation from a sole source and only applies when an item can be purchased from a single source, there is written approval for the specific purchase, an emergency has occurred, and/or competition is deemed inadequate after soliciting proposals.

For governmental entities located within South Dakota, keep the State bidding rules in mind as well, as they contain requirements for bidding at a threshold less than the $150,000 federal requirement.  The current bid booklet can be obtained at the following link – https://legislativeaudit.sd.gov/resources/Bid%20Booklet%202018.pdf

The procurement compliance requirement can be accessed within the Electronic Code of Federal Regulations (Title 2, Part 200.317) at the following link –

https://www.ecfr.gov/cgi-bin/text-idx?SID=2c3b760522ce1f6e31689567eb2fd4f1&mc=true&node=sg2.1.200_1316.sg3&rgn=div7

Please feel free to contact any of the governmental/non-profit experts at Ketel Thorstenson with any questions.

 

[1] On June 20, 2018, the Office of Management and Budget (OMB) issued memorandum M-18-18, which clarifies and changes the micro-purchase and simplified acquisition thresholds.  However, confusion exists regarding the effective date of such guidance, which will not be clarified until the release of the 2019 Compliance Supplement, which is anticipated by the end of June 2019.

 

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
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FLSA Proposed Change

The Department of Labor has announced a Proposed Rulemaking that would adjust the FLSA minimum salary requirement for exempt level staff.

Under the current law, employees with weekly pay of less than $455 ($23,660 annually) must be classified as non-exempt and are subject to overtime pay for all hours worked over 40 per work week.  The proposed new rule will increase that weekly pay to $679 ($35,308 annually).

The proposed rule also has the following recommended changes.

  • Up to 10% of nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used towards the salary threshold requirement.
  • Highly compensated employees must earn a total annual compensation of at least $147,414 ($679 of which must be paid weekly on a salary or fee basis).
  • There is no automatic update to the salary threshold (as was recommended in the 2016 proposed rule). The Department of Labor intends to propose an update to the salary threshold every four years to ensure that these levels continue to provide useful tests for exemption.

The public comment period closed on May 21, 2019; a finalized rule should be announced in the next few months.  The proposed implementation date of the new rule is January 1, 2020.

Follow Ketel Thorstenson on social media for future updates.

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
 |

How Do I Condense QuickBooks Desktop Files?

After many years of using QuickBooks Desktop software, there can be several million data pieces in the database.  This data accumulation can cause the software to run slowly and make users wonder if they should convert to a different program.  Before switching systems, consider condensing the data first – then see if further action is still desired.

The QuickBooks definition of “condensing” the data includes taking all transactions for a particular client or vendor and summarizing it into a single journal entry.  There is an option to have the entries posted by year or by month – and some transaction types are available for exclusion.  (This exclusion is global – not by vendor/customer/account basis.)

Before running the condense process, the files should be reviewed and adjustments made where necessary.  Following is a step-by-step guide to condensing QuickBooks files.  The instructions are based on QuickBooks Desktop 2019 – however, versions 2016 – 2018 should be able to follow them as well.

Clean up the files

  • Look at outstanding/uncleared checks and deposits that may be hanging around.
  • If they cannot be cleaned up before the files are condensed – the archive date selected should be older than the outstanding items.

Create a Local Backup to an external (USB) drive

  • Name it whatever you like, and add “Archived” at the beginning so the file can be easily identified.
  • This will be the “go-to” for review of any detailed pre-condense date information.

Sign into QuickBooks Desktop as Administrator.

With all other windows closed – go to File / Utilities / Condense Data.

A window will pop up with options to “Condense your company file.”

  • Option 1: Keep all transactions, but remove Audit Trail Information to date – this option does just what it describes – and identifies how the choice will affect file size.
        1. NOTE: This option does not allow for date options.  The transactions will remain intact, but existing transactions will no longer have edit history for later review.
        2. This option is not typically recommended due to the minimal space gain and the extensive history loss.
  • Option 2: Remove the transactions you select from your company file – Condense Data
        1. Remove “Transactions before a specific date” – Choose the first day of the year for the data being kept (For example: if keeping (5) calendar years – then choose 1/1/2014).
        2. “All Transactions” – This will remove all detail, leave only lists and preferences, and may be used if copying company files but not transaction detail.
        3. “Transactions outside of a date range” – This will keep the data within the range and remove everything else. Companies wanting to prepare a period copy of the file would use this option.
        4. Once the best choice has been made and related dates selected – click “Next.”
  • How Transactions Should Be Summarized: On the next screen, choose whether to have one summary journal entry or monthly journal entries – and the system defaults to creating one journal entry. This option is not recommended.  (See ii. Below)
        1. The single journal entry option will compress all previous transactions into one journal entry as of the beginning date selected.
        2. The recommended option is the summary journal entry for each month.
          This will allow for a Balance Sheet and Profit & Loss statement to be created for the periods condensed.
          It replaces the transaction details for that month.
        3. DO NOT CHOOSE THE “Don’t Create a summary” entry – using this option will result in having to create opening balances for every account.
  • How Should Inventory Be Condensed?
      1. If you use inventory items – this will be your next screen.
      2. Choose to either Summarize the inventory or Keep the transactions.
  • Do You Want To Remove The Following Transactions?:
      1. This screen will either follow the inventory options (d.) or – if you do not use inventory items – this will be the next screen after the Transactions Summary screen (c.).
      2. This screen provides the opportunity to remove uncleared bank and credit card transactions, unprinted transactions, and so forth.
      3. The removal of these items has the potential to cause issues with bank reconciliations invoices, and so forth.
      4. Click on the “Select None” button to let these outstanding items remain, and click Next.
  • Do You Want To Remove Unused List Entries? Screen allows for the cleanup of cluttered lists.
    1. Review and decide if you’re okay with paring down the respective lists and don’t see any issues with removing them.
    2. Unclick any that should be kept whether they’re used or not.
    3. Then click “Next.”
  • The final screen Begin Condense is advising that your data will be condensed and may take several minutes/hours.
      1. This is the final opportunity to go back and adjust or cancel the condense process.
      2. If the files are large – expect it to take a long time – maybe start it before leaving for the night and let the condensing process run.
  • The screen will go grey for a short time, and then the working/condensing screens will appear.
  • When the process has been completed – a message will appear that advises of a backup made, where it’s located, and confirms the condensed transaction date.
    1. If you didn’t make a backup of the files before you started – make a note of the file location.
    2. Click “OK,” and the screen goes grey again.
  • Click “Home,” and you’re back in business.

To Summarize – running this process will remove all transactions before the specific date chosen and replace them with the single monthly or final summary journal entry – depending upon which option was selected.  This is preferable over the costly and time-consuming process of converting to new software or creating a new company.  The archive data is still available from the backup, the software should run better and faster, and the recent years’ details are still easily accessible.

If this seems like it will help speed-up the QuickBooks software performance – but is not something you want to tackle – feel free to contact Ketel Thorstenson LLP and let one of our QuickBooks ProAdvisors do the heavy lifting!

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
 |

What Should I Consider When Wanting to Sell My Business?

You have spent decades building your business but the time to sell is on the horizon.  What now?  From a valuation perspective, consider the following:

  • Clean Financials– Ensure no personal expenses or assets used for personal use are on the books. Go through your depreciation schedule to exclude any fixed assets that are no longer owned by the company or that will not be included in the sale.
  • Real Estate– Decide whether real estate will be included in the business. If so, obtain value. If not, estimate a fair market rent and draft a rental agreement.
  • Contracts– Determine if contracts can be transferred to a buyer.
  • Buyers– Make a list of possible buyers. Visit with employees to see if one or a group is interested in buying.
  • Selling Price– Contact your certified business appraiser to assist in determining a reasonable sales price. It’s important not to set the price too low and leave money on the table. Conversely, setting the price too high may disgruntle potential buyers.

Working towards selling should begin three to five years prior to the desired sale date.  Call the KTLLP Valuation Team to assist with a successful sale!

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
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Considerations When Starting a Business

Starting a business or being your own boss can be incredibly satisfying and fulfilling. Businesses provide financial flexibility unlike when one is employed, and can act as a source of inheritance for your beneficiaries or spouse. The new venture requires an individual with perseverance, because it will take the owner committing his or her time—maybe every waking hour, to build a successful business.

Developing an idea
Before one can start a business, there has to be an idea that will determine the type of business and opportunities available in the business. For example, brainstorming with the Maslow Hierarchy of Need may provide some viable business ideas.  Also, leveraging existing life and work experiences might help in coming up with an opportunity.

Feasibility Study
After the idea is developed, the most important part of ensuring the idea is viable is to conduct a feasibility study. This will help gauge whether the business idea has a good chance of success. The feasibility study identifies competition, the market target, uniqueness of the idea, and other factors such as technicalities involved in developing the idea, human resources factors, financial capital, and legal requirements. Knowing the economics of the business will help the entrepreneur make pertinent decisions.  In addition, researching whether the business idea is practiced elsewhere or is a brand new concept will aid in determining viability—after all, why reinvent the wheel?

Determine the reason for starting the business
A business idea can be effectively implemented if the owner has a close personal connection to it. This requires the owner to examine the goals and expectations of developing a new venture. There are several motivating factors: independence, personal fulfillment, lifestyle change, income improvement, respect, and control.   If you have a good idea and a solid reason to start the business, the next step is to develop a business plan.

Business Plan
A business plan is important as it contains all strategies needed make your business a success.  It should contain an executive summary which gives a brief overview summarizing what appears in the business plan; reveals the mission statement, and explains why the venture is being started. The business plan acts as a blueprint and helps the business owner make decisions on whether to proceed or abandon the venture.

  • The business description is contained in the business plan and it describes the business legal structure. Generally we recommend the use of Limited Liability Companies.  This part also describes how the business will stand out in the market and the type of products or services that will be offered and target clientele.
  • The market analysis describes the ins and outs of the industry, and the specific market approach.
  • The SWOT analysis is used to identify strengths, weaknesses, opportunities, and threats that might affect the success of the business.
  • The management and organization description tells who will help in running the business. If it is a sole proprietorship family members may be included. The structure of the organization is developed showing a chain of command.
  • A breakdown of products and services is developed which gives detailed information on how the product will be developed and sold. Also it will describe the material suppliers and outline the cost of manufacturing.
  • The marketing plan describes how the products or services reach the customer, and the budget that will facilitate the delivery of the products. Considerations within the marketing plan should include developing a website. Be sure to choose an internet address that is easy to remember. It should be able to support customer traffic and offer fast processing.
  • A sales strategy describes how the product will be sold. It may include advertisements, personal selling, discount strategies s and promotional methods.
  • The funding component discusses the amount needed to make the business a success. The capital may be obtained from a venture capitalist, angel investors, family members, equity, debts, sale of personal assets and other approaches of getting funds.
  • The last component is developing a financial projection which shows the breakeven of the business. I suggest projected financial statements that describe the financial performance over at least the first 12 months of operation.

Decide on Vendors and Suppliers
Consideration should be given to what services the business will need and selecting the right vendors to work with such as cleaning, maintenance, security, insurance, accounting, and retirement plans.

Rent or lease?
Before opening a business one should make a decision on whether to lease or rent facility space and/or equipment.  Leasing may act as an off-balance sheet transaction, and with no down payments required, this may improve the credit of the firm. However, leasing may be more expensive in the long run and it probably does not allow for up-front income tax expensing.

These are just some of the key considerations to evaluate when starting a new business. For additional assistance call the KTLLP Team for a consultation or request a copy of Is Owning a Business Right for You?, an electronic booklet written by the tax and valuation experts at KTLLP.

 

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
 |

Estate Tax Returns: What to do When a Loved One Passes

My loved one just passed on, now what? Do we need to file a final Form 1040 tax return? How about a Form 1041 fiduciary tax return? Is a Form 706 necessary? When are all these tax returns due? These are all the questions that may run through your head after a loved ones passing. I can help you walk through this difficult time and decide what needs to be filed and when.

A final Form 1040 is required to be filed if your loved one had gross income of $12,000 or more prior to their passing. A final Form 1040 will need to be filed if there is income tax withheld that can be refunded to the decedent’s estate. The final Form 1040 is due April 15th.

A fiduciary tax return or a Form 1041 will need to be filed if the estate received income of $600 or more.  The income would include but is not limited to: interest income, sale of personal property, sale of personal residence, business income earned, any rental income, etc. Some expenses that can be deducted to offset income would be accounting and legal fees, selling expenses, utility costs, cleaning expenses related to decedent’s assets, brokerage fees, bank charges, etc.

The executor and tax preparer will decide if the tax return will use either a calendar year end or a fiscal year end. A calendar year end would mean the first Form 1041 would include income and expenses from the date of death through 12/31 of that year. The following years’ returns would be for a full calendar year from January through December.   The due dates for the returns would be April 15th of the following year. If the executor chooses to file a fiscal year return he or she can pick any month end and the fiscal year would be the next preceding twelve months. An example: date of death is July 20th, 2019, the return would have a fiscal year of July 21st 2019 to June 30th 2020.

What is a Form 706? The Form 706 is used to calculate federal estate tax.  The return is a snapshot in time of assets and debt the decedent had as of the date of death.  For 2018, a Form 706 is required to be filed if a decedent’s gross assets were more than $11,180,000.  This number is indexed for inflation every year. This includes but is not limited to: bank accounts, brokerage accounts, personal assets, personal home, vehicles, other property, businesses, livestock, crops, etc.

Another reason to file a Form 706 would be for portability. If your spouse passes on and your joint gross estate has the potential to be more than $11,180,000 when you pass on then we recommend Form 706 is filed for the surviving spouse. . Basically your decedents and other beneficiaries would be able to inherit your assets without paying estate tax..  The Form 706 is due nine months after the decedent’s death. Using the example above, July 20th, the due date would be March 20th, 2020.

Obviously this is a complex situation to cover. If you think you may be subject to any of these tax returns, please give us a call and we would be happy to help you.

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
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What Motivates Donors to Give?

As a non-profit organization dependent upon the support of the community, and especially upon the funding from donors, you may be wondering, what motivates donors to give?  Once you know what some of the key drivers are, your organization can procure and grow its relationship with all types of potential donors.

Your Mission
Of course, one of the top reasons a donor gives to your organization is because they feel moved by your mission.  Whether your mission affects them or someone they know personally, or they realize how vital your mission is to the community, your mission is the key selling point to any and all types of donors.

How the Money is Spent
Speaking of the importance of your organization and mission, donors also want to see that their money is being used resourcefully and funding what they think it should be going towards to make a difference.  As such, specific programs or services you provide can also influence donors.  If you have programs unique in the community, you have a new service your organization will provide, or maybe you ask for a donation for a specific upcoming event, donors are more likely to contribute to your causes.  If your organization has run a capital campaign in the past, you know that this can prove a big success.  Many organizations running capital campaigns state they will focus the funds into a certain area or program, such as construction of a new building for operations.

Sometimes It Pays to Feel Good
Sharing a success story from your organization helps to put a face to the organization and pulls on the heartstrings of donors, making them want to give to continue your success.  You may also perform an event each year that influences the emotions of donors.  These events could be anything from a bake sale where the people uplifted by your organization help out, or having one of your clients speak at a banquet to potential donors about how your organization has benefitted them.

Other Times It Feels Good to Pay
Finally, we all know some donors give to receive some of the tax benefits.  Although the standard deduction rose in 2018 with the Tax Cuts and Jobs Act, this could prove to be good news for non-profits, as donors may want to give more to receive the tax benefits in the upcoming years.

As your organization may receive many different types of funding from individual donations to grants, always feel free to reach out to any of the KTLLP Nonprofit Team members if you have questions on the proper accounting treatment, and we would be more than happy to work with you!

June 6, 2019
| Ketel Thorstenson, LLP
KT Insights
 |

QuickBooks ProAdvisors Offer Training Special and Classes

Ketel Thorstenson, LLP (KTLLP) understands the struggle businesses have when it comes to managing their accounting software besides managing their taxes and finances.  The KTLLP QuickBooks ProAdvisor Team, certified by Intuit QuickBooks, wants to help by offering one-on-one training at a discounted rate, and three classes. Those wishing to learn more about QuickBooks have options to choose from, train at KTLLP or onsite with a ProAdvisor or attend a basic, advanced or online focused class.

“We know that time is money, and businesses are looking for a reliable resource for immediate answers and ongoing training for their QuickBooks software so that they can move quickly to the next items on their to-do list,” said Jennifer Konvalin, CPA, Partner with Ketel Thorstenson, LLP. “Our training and class options can help users get up to speed.”

The training special is structured into two offerings, 2 hours of training for $160 plus tax or 6 hours for $475 plus tax. Training session time can be broken down and used in smaller increments. The special runs through Sept. 27, 2019. Training time must be used by Dec. 20, 2019. To schedule training sessions, contact the KTLLP ProAdvisors Team at 605-342-5630.

The schedule for the basic and advanced classes is as follows:

June 25- Basic QuickBooks Class
Learning QuickBooks will allow you to simplify the accounting for your business saving time, money, and reducing stress at tax time. The KTLLP ProAdvisors will help you with understanding the fundamentals of navigating QuickBooks. What will be covered:

  • Setting up a QuickBooks File
  • Working with Bank Accounts
  • Working with Credit Card Accounts
  • Entering Liability and Equity Accounts
  • Entering Sales Information
  • Receiving Payments and Making Deposits
  • Entering and Paying Bills

Time: 8:30 am – 3 pm
Price: $279
Location: KTLLP Rapid City Office, 810 Quincy St.
Lunch is included.

August 27- Advanced QuickBooks Class
QuickBooks is an excellent tool for small business owners, but it can be confusing without the proper introduction or training. The KTLLP ProAdvisors will help take you to the next level of navigating QuickBooks beyond the basic fundamentals. This is an advanced course; you will need a strong foundation of the basics of QuickBooks to attend. What will be covered:

  • Analyze Financial Data
  • Inventory
  • Setup and Track Sales Tax
  • Payroll
  • Time Tracking
  • Estimates and Progress Invoicing
  • Customize Forms and Letters

Time: 8 am – Noon
Price: $199
Location: KTLLP Rapid City Office, 810 Quincy St.
Snacks will be included.

Each attendee will receive one hour of follow up training with a ProAdvisor to be used within 60 days after the class. RSVP’s are required for classes due to limited space available. Please call 605-716-3284 or email [email protected]. A pdf handbook will be issued before the scheduled class once payment is received.  Attendees are welcome to bring a laptop. A computer is not necessary to attend or follow along with the instruction. Computers will not be available onsite. Watch for details coming soon on a class in September for those wanting to learn more about the online version of QuickBooks.

Ketel Thorstenson, LLP is a full-service firm with 18 partners, over 55 Certified Public Accountants (CPA), and Enrolled Agents (EA), and offices in Rapid City, Custer, Spearfish, SD, and Gillette, WY. KTLLP has a rich history, serving clients since 1936 and a depth of knowledge and experience that clients rely on and trust. The firm offers a variety of services including tax planning and return preparation, audit services, QuickBooks support, bookkeeping, payroll, business valuation, business consulting and estate planning.

QuickBooks Summer Special Flyer

QuickBooks Basic Class Flyer

QuickBooks Advanced Flyer

June 4, 2019
| Ketel Thorstenson, LLP
KT Insights
 |

EEOC to Collect Employee Pay Data by September 30, 2019

Breaking News!  A federal judge has ordered the Equal Employment Opportunity Commission (EEOC) to collect employee pay data by September 30, 2019 from those employers required to complete the EEO-1 Report.

Under this order the EEOC will require employers to provide employee pay data sorted by race, ethnicity, and sex by September 30th.  This is in addition to the regular EEO-1 Report that is due May 31st.  The EEOC said it anticipates having the collection portal available to employers by July 15th and will provide guidelines/training prior to that date.

This will apply to any employer located in the 50 states or the District of Columbia and who has at least 100 employees.  Also, all federal government contractors and first-tier subcontractors with at least 50 employees and at least $50,000 in contracts must also file.  The deadline for the EEO-1 Report does not change, all reports must be filed by May 31st.

Follow Ketel Thorstenson on social media for future updates.

April 25, 2019
| Ketel Thorstenson, LLP