Transform Your Business Operations by Harnessing the Power of AI
Artificial Intelligence (AI) has emerged as a transformative force in virtually every industry, revolutionizing the way businesses operate and interact with their customers. From streamlining processes to unlocking valuable insights, the potential applications of AI are vast and varied. In this article, we explore how AI can help improve a business across multiple dimensions, driving efficiency, innovation, and growth.
Enhanced Decision-Making with Data Analytics
One of the most significant advantages of AI for businesses is its ability to analyze vast amounts of data quickly and accurately. AI-powered analytics tools can sift through complex datasets to uncover actionable insights, enabling informed decision-making at every level of the organization. By leveraging predictive analytics, businesses can anticipate market trends, identify opportunities, and mitigate risks, gaining a competitive edge in today’s fast-paced business landscape.
Personalized Customer Experiences
AI-driven technologies, such as machine learning algorithms and natural language processing, have revolutionized the way businesses interact with their customers. Through personalized recommendations, chatbots, and virtual assistants, companies can deliver tailored experiences that resonate with individual preferences and needs. By harnessing the power of AI to understand customer behavior and sentiment, businesses can build deeper, more meaningful relationships, driving customer satisfaction and loyalty.
Streamlined Operations and Automation
Automation lies at the heart of AI-driven transformation, offering businesses the opportunity to streamline operations and improve efficiency. AI-powered software robots can perform repetitive tasks with speed and accuracy, freeing up human resources to focus on more strategic initiatives. Whether automating invoice processing, supply chain management, or customer service inquiries, AI enables businesses to reduce costs, minimize errors, and scale operations more effectively.
Predictive Maintenance and Asset Management
In industries such as manufacturing, energy, and transportation, AI plays a critical role in predictive maintenance and asset management. By analyzing sensor data in real-time, AI algorithms can detect anomalies and predict equipment failures before they occur, enabling proactive maintenance and minimizing downtime. This predictive approach not only enhances operational efficiency but also extends the lifespan of assets, resulting in significant cost savings over time.
Risk Management and Fraud Detection
AI-powered systems are increasingly being deployed to enhance risk management and fraud detection capabilities. Machine learning algorithms can analyze vast amounts of transactional data to identify patterns indicative of fraudulent activity, enabling businesses to mitigate risks and safeguard their assets. Moreover, AI-driven risk models can adapt and evolve in response to changing threats, providing businesses with a proactive defense against emerging risks.
Unlocking Innovation and Creativity
Beyond its practical applications, AI has the potential to unlock new realms of innovation and creativity within organizations. By leveraging AI-driven tools for natural language generation, image recognition, and generative design, businesses can explore new possibilities and push the boundaries of what is possible. Whether designing products, creating content, or optimizing processes, AI empowers businesses to innovate at a pace never before imagined.
In conclusion, AI represents a powerful catalyst for improving business operations across multiple fronts. From data analytics and customer experiences to automation and innovation, the potential applications of AI are limitless. By embracing AI-driven technologies, businesses can unlock new opportunities, drive efficiency, and position themselves for success in an increasingly digital and competitive marketplace.
How to Determine If You Should File Taxes Jointly or Separately When Married
When it comes to filing taxes, married couples have the option to file either jointly or separately. Deciding which filing status to choose can significantly impact your tax liability and potential refunds. Understanding the benefits and drawbacks of each option is crucial for making an informed decision. Here’s a comprehensive guide to help you determine the best filing status for your situation.
Understanding the Basics
Married Filing Jointly (MFJ):
- Combines the incomes of both spouses on a single tax return.
- Both spouses share responsibility for the tax liability.
- Offers higher standard deductions and beneficial tax rates.
Married Filing Separately (MFS):
- Each spouse files their own tax return, reporting individual income and deductions.
- Spouses are responsible for their own tax liabilities.
- May result in higher tax rates and reduced eligibility for certain deductions and credits.
Benefits of Filing Jointly
- Higher Standard Deduction: For the 2023 tax year, the standard deduction for joint filers is $27,700, compared to $13,850 for separate filers. This higher deduction can reduce taxable income significantly.
- Tax Brackets and Rates: Joint filers generally benefit from more favorable tax brackets. For instance, in 2023, the 22% tax bracket applies to incomes up to $190,750 for joint filers, compared to $95,375 for separate filers.
- Eligibility for Credits and Deductions: Filing jointly can increase eligibility for tax credits such as the Earned Income Tax Credit (EITC), the Child Tax Credit, and education credits. These credits are often reduced or unavailable for separate filers.
- Simplified Filing Process: Filing jointly simplifies the tax preparation process by consolidating income, deductions, and credits on a single return.
Drawbacks of Filing Jointly
- Joint and Several Liability: Both spouses are equally responsible for the tax liability, including any penalties or interest. This can be a concern if one spouse has questionable financial activities.
- Potential for Higher Combined Income: Combining incomes can push the couple into a higher tax bracket, potentially increasing overall tax liability compared to separate filings with lower individual incomes.
Benefits of Filing Separately
- Separation of Liabilities: Each spouse is only responsible for their own tax liability. This can be beneficial if one spouse has significant deductions, unpaid taxes, or legal issues.
- Deduction of Medical Expenses: Medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income (AGI). Filing separately can make it easier to exceed this threshold if one spouse has high medical expenses relative to their individual AGI.
- Protection from Tax Issues: Filing separately can protect one spouse from potential tax issues of the other, such as audits or underpayment penalties.
Drawbacks of Filing Separately
- Lower Standard Deduction: The standard deduction for separate filers is half that of joint filers, which can lead to higher taxable income.
- Higher Tax Rates: Separate filers face less favorable tax brackets, potentially resulting in higher tax liability.
- Reduced Credits and Deductions: Many tax credits and deductions are reduced or unavailable for separate filers. For example, the Earned Income Tax Credit and the Child and Dependent Care Credit are significantly limited for MFS status.
- Phase-Outs and Limits: Income limits for phase-outs of deductions and credits are typically lower for separate filers, reducing eligibility.
When to Consider Filing Separately
- High Medical Expenses: If one spouse has significant medical expenses, filing separately might make it easier to meet the deduction threshold.
- Income-Based Repayment Plans: For student loans, filing separately can lower the AGI used to calculate repayment amounts under income-driven repayment plans.
- Legal and Financial Protection: If one spouse has potential legal issues or significant debt, filing separately can protect the other spouse from associated liabilities.
Conclusion
Deciding whether to file jointly or separately requires careful consideration of your financial situation. While filing jointly generally provides more tax benefits, there are circumstances where filing separately might be advantageous. Evaluate your income, deductions, credits, and potential liabilities to make the best decision for your family. Consulting with a tax professional can provide personalized advice and ensure you choose the optimal filing status for your unique circumstances.
Frequently Asked Questions About Estimated Taxes
Quarterly Estimated Tax Payments can be a nightmare for business owners to determine how much they owe the IRS. Here is our guide for Frequently Asked Questions regarding Estimated Taxes.
What are Estimated Taxes?
Estimated Taxes are taxes that are paid to the IRS throughout the year on earnings that are not withheld from the federal government. Most people pay these taxes on a quarterly basis.
Who pays estimated taxes?
Unlike individual workers who receive a traditional paycheck from their employer, business owners and 1099 workers are required to pay estimated taxes.
You can also be eligible to pay estimated taxes for income you have earned on the side through investments such as realized capital gains or dividends.
Sometimes, W-2 workers can end up not withholding enough to cover their taxes and need to pay estimated tax payments as well.
What are the Tax Payment Dates for 2024?
- If you earned income from Jan. 1 – Mar 31, 2024, your estimated payment deadline is April 15, 2024.
- If you earned income from April 1 – May 31, 2024, your estimated payment deadline is June 17, 2024.
- If you earned income from June 1 – Aug 31, 2024, your estimated payment deadline is September 16, 2024.
- If you earned income from Sept. 1 – Dec 31, 2024, your estimated payment deadline is Jan. 15, 2025.
How much do I need to earn to be eligible for estimated payments?
- Workers that have not withheld enough: You will owe at least $1000 in federal income taxes
- Self-employed individuals: If you expect to owe more than $1,000 from your gigs, you should pay quarterly estimated taxes as there is no tax being withheld on your income.
- Businesses: You should make estimated tax payments if you expect to owe $500 or more for the entire tax year.
How do I figure out how much I owe?
There is a reason they are called estimated taxes unfortunately. You need to estimate your projected annual income to determine your tax bill. You can use data from your previous year to help you figure out how much to send. For example, if you think you will owe $12,000 at the end of the year, you should send $3,000 quarterly. This works best if you have a stable income.
If your income varies, you can estimate how much you owe by your previous quarter. The IRS has plenty of resources to help business owners.
Can I pay more often than quarterly?
Yes, similar to paying off a credit card expense, you can pay as soon as you want, and not just on the listed deadlines. It is a good idea to pay more frequently if you are nervous about underpaying.
What happens if I underestimate my tax payment?
If you underpay your estimated tax payment, you will receive a penalty from the IRS. This penalty is determined by how much you underpaid at the deadline plus the interest rate the IRS will apply to how much you still owe. Paying quarterly helps to prevent this.
What happens if I overpay my tax estimate?
You will receive an overpayment credit of the refund that you can either receive or ask the IRS to use as an advanced payment towards next year’s taxes.
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Many individuals find it difficult to manage their estimated taxes because they are scared of messing up. Having a better understanding of how they function makes it easier to process your payments each year. For more information, call our business today!
Bookkeeping & Accounting Tips for Small Business Owners
Running a small business is a 
demanding task, requiring you to wear many hats, from managing operations to marketing and customer service. Among these responsibilities, bookkeeping and accounting are crucial for the financial health and sustainability of your business. While it may seem daunting, effective financial management doesn’t have to be overly complicated. Here are some essential bookkeeping and accounting tips to help small business owners stay organized, compliant, and financially sound.
1. Separate Personal and Business Finances
One of the first steps for any small business owner is to separate personal and business finances. Open a dedicated business bank account and use it exclusively for business transactions. This separation simplifies bookkeeping, aids in tax preparation, and ensures legal protection of personal assets.
2. Use Accounting Software
Investing in accounting software can save you time and reduce the risk of errors. Tools like QuickBooks, Xero, or FreshBooks offer user-friendly interfaces and automate many bookkeeping tasks, such as invoicing, expense tracking, and financial reporting. Many of these platforms also integrate with your bank account, further streamlining the process.
3. Track All Expenses
Maintain meticulous records of all business expenses. Use your accounting software or apps to capture and categorize receipts immediately. Keeping a detailed record of expenses not only helps in managing cash flow but also ensures you can claim all possible tax deductions.
4. Regularly Reconcile Bank Statements
Reconcile your bank statements at least once a month. This process involves comparing your accounting records with your bank statements to ensure they match. Reconciling accounts helps identify discrepancies, catch errors, and detect potential fraud early.
5. Implement a Consistent Invoicing System
A consistent invoicing system ensures you get paid on time. Send out invoices promptly, set clear payment terms, and follow up on overdue payments. Using accounting software for invoicing can automate reminders and track outstanding invoices.
6. Monitor Cash Flow
Cash flow is the lifeblood of any small business. Regularly monitor your cash flow to ensure you have enough funds to cover operating expenses and invest in growth opportunities. Create cash flow projections to anticipate future needs and adjust your operations accordingly.
7. Set Aside Money for Taxes
Avoid the year-end scramble by setting aside money for taxes throughout the year. Estimate your tax liability and regularly deposit a portion of your revenue into a separate tax account. Consider consulting with a tax professional to understand your tax obligations and maximize deductions.
8. Maintain Accurate Financial Records
Accurate financial records are essential for making informed business decisions. Regularly update your books and keep records of all financial transactions, including sales, purchases, payroll, and other expenses. Accurate records are also crucial for compliance with tax laws and regulations.
9. Prepare for Financial Reporting
Prepare financial statements, such as the balance sheet, income statement, and cash flow statement, on a regular basis. These reports provide insights into your business’s financial health and performance. Use these reports to identify trends, assess profitability, and make strategic decisions.
10. Seek Professional Advice
Consider hiring a professional accountant or bookkeeper, especially if your business finances become complex. A professional can provide valuable insights, ensure compliance with tax laws, and help you optimize your financial strategy. Many small business owners find that the cost of professional advice is outweighed by the benefits of improved financial management and peace of mind.
Effective bookkeeping and accounting are fundamental to the success of any small business. By implementing these tips, small business owners can maintain financial order, make informed decisions, and ensure their business thrives. While it may require an initial investment of time and resources, the long-term benefits of sound financial practices are well worth the effort.
Understanding Total Return
A mutual fund’s performance — its total return — can be either positive or negative. In other words, a fund either made or lost money for a measured time period. There are three separate elements that contribute to total return: the distribution of fund income (interest and dividends received on the fund’s investments); the distribution of capital gains; and the rise or fall in the price of fund shares. A fuller understanding of these three elements can help you make more informed decisions as an investor.
Fund Income
Bond issuers, such as corporations and the U.S. government, pay interest on the money loaned to them by the investors that buy the bonds. If you buy a government bond, for example, you know how much interest the bond will pay you over the life of the bond. Bonds are also known as “fixed-income” investments because you can anticipate your earnings.
If you own shares in a bond fund rather than an individual bond, you will share in the interest earned by the bonds in the fund. However, if you own your bond fund through an employer’s retirement plan, you do not actually receive your share of the interest income in cash. Instead, your share of the interest is reinvested in the fund and is used to buy additional shares for your account.
If you own shares in a stock fund, you may receive a distribution of dividends the fund received on its various stock holdings. Your share of the dividends paid to a stock fund you own through an employer’s retirement plan is reinvested in that fund and used to buy additional shares.
Capital Gains Distributions
When fund managers sell an investment that has increased in price, the fund will have a capital gain. Funds, of course, have losers as well as winners. When a fund sells an investment for less than it paid for it, the fund suffers a loss. Most mutual funds distribute capital gains (minus capital losses) to their shareholders at the end of the year. If you own funds through a retirement account, then the capital gains distributions are reinvested in additional fund shares.
Rise or Fall in Fund Share Prices
The market prices of stocks and bonds rarely remain static — they typically rise and fall each trading day. Thus, the share price of a fund depends on the current value of the investments it holds in its portfolio, after deduction of expenses and liabilities. As an investor, it’s important to understand that until you sell your shares in a fund, any gain or loss in their value is only a gain or loss on paper.
Total Return and Fund Performance
There are several ways to measure fund performance, and total return plays a part in each method.
- Average annual total return: One way to measure the performance of a mutual fund is to look at its average annual total return for different periods of time. A comparison of a fund’s return to a benchmark will show how the fund has performed relative to an index.
- Cumulative total return: Looking at a fund’s cumulative total return shows how much a fund has earned over a specific period.
- Year-by-year returns: It can be helpful to compare a fund’s performance from one year to the next. If you notice a wide variation year to year, the fund is most likely a highly volatile one.
You should consider the fund’s investment objectives, charges, expenses, and risks carefully before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information about the fund. Read the prospectus carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.
Prices of fixed income securities may fluctuate due to interest rate changes. Investors may lose money if bonds are sold before maturity.
Stock investing involves a high degree of risk. Stock prices fluctuate and investors may lose money.
Estate Settlement Services
Like most successful people, you want to be certain that what you have spent a lifetime building will be passed on to your heirs in the manner you desire. Retaining an attorney to draft a will is a critical first step in achieving this goal. It’s equally important that you carefully select a personal representative (or executor) to carry out the instructions in your will.
What Is at Stake
Your choice of personal representative may determine how effectively and quickly your estate is settled. Ideally, your personal representative should have the skills and experience to ensure that your estate will be administered properly under your state’s laws. Also, you should have a level of trust that your representative will carry out your instructions in a way that protects your heirs financially.
Estate Settlement Is a Complex Undertaking
A qualified personal representative will:
- Locate your will
- Consult with your attorney
- Obtain court authority (probate the will)
- Determine your family’s immediate needs and arrange for support and maintenance payments to be made to dependents while your estate is being settled, as allowed under the terms of your will
Once the estate administration process starts, he or she will:
- Keep estate assets secure
- Contact life insurance companies
- File claims for any retirement, Social Security, and veterans benefits
- Collect outstanding debts
- Inform creditors of your death
- Pay bills
- Sell property as you have directed or that needs to be sold within the executor’s discretion to meet estate taxes or debts or to facilitate bequests under your will
- Maintain timely and accurate records of all estate-related transactions
- Record and inform your heirs and the probate court of all estate transactions
- Prepare and file all required federal and state income and estate tax returns
- Distribute probate property to your beneficiaries
Another Option
Given the complexity of all that’s involved in settling an estate, it may make sense to name an institution as your personal representative. If, however, you are more comfortable with the thought of a relative or friend settling your estate, you have the option of naming the individual and the institution as co-personal representatives. The person you’ve selected will be involved in all estate-related decisions but can leave the administrative and asset management duties in the hands of the institution.
Filing Taxes as a Single Parent
Filing taxes can be a daunting task for anyone, but for single parents, it often comes with added complexities. As a single parent, you may be eligible for various tax benefits and credits designed to alleviate some of the financial burdens of raising children on your own. To ensure you’re maximizing your tax return while staying in compliance with tax laws, it’s crucial to understand the process thoroughly. In this comprehensive guide, we’ll walk you through the steps of filing taxes as a single parent.
1. Determine Your Filing Status
The first step in filing your taxes as a single parent is to determine your filing status. Most single parents will file as “Head of Household,” which offers more favorable tax rates and a higher standard deduction compared to “Single” status. To qualify as Head of Household, you must meet the following criteria:
- You must be unmarried or considered unmarried on the last day of the tax year.
- You must have paid more than half the cost of keeping up a home for the year.
- A qualifying child must have lived with you for more than half the year.
2. Gather Your Income Documents
Collect all your income documents, including W-2s, 1099s, and any other relevant financial statements. These documents provide essential information about your earnings and will help you accurately report your income on your tax return.
3. Claim Dependents
As a single parent, you can claim your child or children as dependents, which can significantly impact your tax liability. To claim a child as a dependent, they must meet certain criteria, including:
- Relationship: The child must be your biological child, adopted child, stepchild, foster child, or a sibling, half-sibling, or descendant of one of these.
- Residency: The child must have lived with you for more than half the year.
- Age: The child must be under 19 years old (24 if a full-time student) or have a permanent disability.
Claiming dependents can make you eligible for tax credits like the Child Tax Credit or the Earned Income Tax Credit (EITC), which can reduce your tax liability or result in a refund.
4. Gather Deduction Information
Single parents can potentially benefit from various tax deductions, including:
- Childcare Expenses: If you paid for childcare to work or look for work, you may be eligible for the Child and Dependent Care Credit.
- Education Expenses: You may qualify for education-related deductions or credits if you pursued higher education.
- Medical Expenses: Keep records of medical expenses for potential deductions if they exceed a certain percentage of your income.
5. Explore Tax Credits
In addition to the Child Tax Credit and EITC mentioned earlier, single parents should consider other tax credits such as:
- Child and Dependent Care Credit: This credit helps cover a portion of childcare expenses.
- American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit: These credits are available for qualified education expenses for yourself or your dependent children.
- Adoption Tax Credit: If you’ve adopted a child, you may be eligible for a tax credit to help cover related expenses.
6. File Your Tax Return
Now that you have gathered all necessary documents and information, it’s time to file your tax return. You can choose to file your taxes electronically using tax preparation software, hire a tax professional, or file a paper return. Filing electronically is often faster and more convenient.
7. Consider Tax Planning
Throughout the year, it’s a good practice to engage in tax planning. This involves keeping track of expenses, maximizing contributions to tax-advantaged accounts (such as a 401(k) or an Individual Retirement Account), and staying informed about any changes in tax laws that may affect you.
Filing taxes as a single parent can be challenging, but with careful planning and attention to detail, you can ensure you’re taking advantage of all available tax benefits and credits. Remember to keep accurate records, claim eligible dependents, explore tax deductions and credits, and consider seeking professional help if you’re unsure about any aspect of your tax return. By following these steps, you can optimize your financial situation and provide the best possible future for yourself and your children.
Beneficial Ownership Information Reporting Under the Corporate Transparency Act
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What is Beneficial Ownership Information Reporting?
Beneficial Ownership Information (BOI) reporting is a federal requirement by the Corporate Transparency Act (CTA). BOI reports include information about all the company’s beneficial owners.
Who is considered a Beneficial Owner?
A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company or owns or controls at least 25 percent of the company’s ownership interests.
What is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a United States federal law that aims to increase transparency in corporate ownership. The law requires that individuals considered beneficial company owners in the U.S. provide the Financial Crimes Enforcement Network (FinCEN) with specific information.
For individuals, that includes:
- their full name
- date of birth
- current residential address
- a federally issued identification number from a driver’s license or passport
For companies, that includes:
- legal entity name or DBA name
- business address
- state jurisdiction of formation of registration
- IRS TIN
Any changes to the above reporting information must be updated with the FinCEN within 30 days of the change.
What is considered a Reporting Company?
Companies required to report a BOI are referred to as reporting companies. There are two types of reporting companies: domestic and foreign. They are defined as follows:
- Domestic reporting companies are corporations, limited liability companies (LLC), and other entities created by filing a document with a secretary of state or similar office in the U.S.
- Foreign reporting companies are entities (including corporations and LLCs) formed under a foreign country’s law and registered to do business in the U.S. by filing a document with a secretary of state or similar office.
There are 23 types of entities that are exempt from the reporting requirements. Those entities can be found on the FinCEN website.
What is the Reporting Process?
The reporting process takes place via an online portal on the FinCEN’s website. Filing begins January 1, 2024, with an initial filing window of one year (i.e., initial BOI reporting can be done from January 1, 2024, through January 1, 2025). The FinCEN will not accept BOI reporting before January 1, 2024. There is no fee for submitting this information.
New entities established after December 31, 2023, must report within 90 days of establishment.
Hefty civil ($500/day) and criminal penalties (up to $10,000) can be imposed on companies that fail to file a complete report.
To be sure that you and your firm comply with BOI reporting requirements, check with your trusted tax accountant or CPA.
Back to Business Basics
It’s reassuring to remember that downturns are a normal part of the business cycle. And, just as there are
strategies that help businesses thrive during profitable times, there are basic survival tactics that businesses can employ when the outlook is less than rosy.
Control Spending
Finances should be your fundamental concern when economic conditions are unsettled. When sales are slow, it’s time to preserve your cash. Look closely at how you can reduce overhead. Make certain that all your operating expenses are necessary. Even if you’ve recently made cuts, see if there are other measures you can take. Unless absolutely necessary, consider putting plans that call for capital investment on the back burner until conditions improve.
Maintain Customers
While containing costs is essential, maintaining your customer base is also crucial. So, when you’re deciding how to trim spending, make sure you don’t make cuts in areas that deliver real value to your customers. At the same time, watch your receivables. Make sure your customers’ accounts stay current.
Think Short Term
Plan purchases for the short term, keeping a minimum of cash tied up in inventory. At the same time, however, make sure you’ll be able to restock quickly. Your suppliers may be able to suggest ways you can cut costs (perhaps by using different materials or an alternative manufacturing process). See if you can negotiate better credit terms.
Plan for Contingencies
There’s a big difference between imagining that you might have to seriously scale back your business and having an action plan in place that you can quickly execute. To develop a realistic contingency plan, prepare a budget based on the impact you imagine an extended downturn would have on your business. Then outline the steps you would need to take to survive those conditions. For an added level of preparedness, draw up a second, “worst case scenario” budget and chart the cost-cutting steps you’d need to take to outlive those more dire circumstances.
Many businesses will survive challenging economic times by being informed about their financial condition and by planning ahead to succeed.
A Checklist for Plan Sponsors
Once a retirement savings plan has been approved and is in place, it’s tempting to sit back and adopt an “I’m done,” hands-off attitude. However, to ensure that a plan will continue to operate effectively, employers should periodically review plan provisions and features. Here are some points to check.
- How the plan is presented. The more convinced employees are of the wisdom of saving for retirement, the greater the level of employee participation. The greater the participation, the more the plan can benefit all employees — including highly compensated ones. Regular meetings, newsletters, and handouts are effective means of communicating plan advantages. Check to make sure printed materials are up to date and easy to understand, and distribute them frequently.
- Plan investments. Employers that sponsor participant-directed plans can limit potential legal liability for losses caused by employees’ investment decisions if plan investment choices meet certain requirements under Section 404(c). Very generally, where 404(c) protection is sought, a plan should offer at least three “core” investment choices, allow employees to switch investments at least once each quarter, and provide participants with adequate disclosure of specified investment information.
- Administration. Participants and beneficiaries must be given a copy of the Summary Plan Description (SPD) within 120 days after a plan is adopted or within 90 days after becoming eligible to participate in the plan or receive benefits. Review the SPD to make sure it accurately describes the provisions of your plan. If changes have been made to the plan document — which is likely, given the recent tax law changes — then all participants must receive a notification of these changes within 210 days after the end of the plan year in which the changes were adopted. Generally, all participants must receive a copy of the SPD every five years.
- Summary annual reports (SARs). Summary annual reports must be distributed to participants within nine months after the close of the plan year. If a plan receives an extension to file its annual report (Form 5500) with the IRS, then the SAR must be distributed within two months after the end of the extension.
- Plan rollovers. Qualified plans must allow a participant to elect direct rollover of any eligible distribution to an IRA or another employer-sponsored retirement plan. Your plan should have procedures in place to handle direct rollovers.
- Bonding. Generally, plan fiduciaries and others who handle the assets of a plan must be bonded. The bond must be equal to at least 10% of the funds handled by the bonded individual, but cannot be for less than $1,000 and need not be for more than $500,000.
- Loans to participants. Loans that are not properly administered may be treated as constructive distributions resulting in taxable income to the recipients. Review loans to make sure that loan balances do not exceed the maximum limitations. Unless used to finance the purchase of a principal residence, all loans must be repaid within five years. A plan may impose more stringent conditions on loans than the law requires.
- Plan forms. All forms should meet current requirements. Forms that may need updating include beneficiary designation forms, benefit election forms, and the notice of distribution options.