One of the many services A Plus Benefits provides to clients is sending out W-2’s to all employees at the end of the year.

Year 2007 W-2’s will be sent out the third week in January to the home address listed on each employee’s pay stub. Employees can expect to receive their W-2 by the end of the month.

If your address is incorrect in the system please notify your supervisor and call 1-800-748-5102 to request that your W-2 be sent to your new address. You will be transfered to a voicemail system where you can leave your information to be processed for the next mailing.

Employees who have set up their online access through www.aplusbenefits.com can go online and print their W-2.

If you have any other questions regarding your W-2 please feel free to contact us at 1-800-748-5102.

Samantha Bushard is an HR Employee for the Idaho office of A Plus Benefits, Inc.

In this blog I would like to entertain a high-level discussion of valuing a business by employing the Discounted Cash Flow methodology. Creating a discounted cash flow model does require some basic understanding of the principle of “time value of money,” discount rate and some skill in Excel. The intention of this blog is not to teach these principles in detail, rather to serve merely as an “eye-opener” and encourage small business owners to think more critically about valuing their business.

Discounted Cash Flow analysis consists of two steps. The first is to determine future cash flows for the business or entity being valued. In determining future cash flows there are a few things that should be taken into consideration.

1. What is cash flow? The definition of cash flow, sometime called “free cash flow” can vary slightly depending on the desired approach. However, cash flow is typically defined as cash flow after removing all expenses necessary to run and grow a business over time. Mathematically cash flow can be calculated by taking cash flows after all operating expenses less taxes less necessary investments in working capital and property plant and equipment plus all non-cash expenses (i.e. depreciation).

2. How many years of cash flow should I use in my analysis? Typically the further out you forecast cash flows the less accurate they become. This is where your judgment and expertise in your industry will come into play. If you feel strongly that you understand the industry and that the industry is relatively stable, you may be able to project further into the future. Although somewhat arbitrary, most practitioners limit cash flow projections to 5 years.
As with all analysis, the old adage “Garbage in, Garbage out” holds true with Discounted Cash Flow analysis. The validity of your analysis depends on your ability to make solid cash flow projections. Doing so will require you to understand the drivers of your business as well as industry dynamics.

The second step in the Discounted Cash Flow methodology is to determine a discount rate. A discount rate represents the rate of return you require on an investment and it is the rate at which you will discount future cash flows. It is derived by understanding two things: what is my cost of capital and what is the appropriate risk premium for this organization. Both cost of capital and risk premium will be unique to each individual organization.

1. Cost of capital is a function of the sources of capital an organization chooses to use in order to finance its operations. For example if an organization funds all of its capital expenditures by taking out debt, the cost of capital would simply be the cost of interest paid on that debt. If however, an organization uses equity, the cost of capital on the equity would be the “opportunity cost” of investing the capital in another opportunity. Typically your cost of capital can be calculated by taking a weighted average of the cost of debt and equity financing.

2. Risk premium is much less lucid than cost of capital and will vary greatly with the perspective of the investor or entity valuing your business. For example you may assign a lower risk premium to your business because you understand the industry in which you compete and have existing expertise. However, for a potential acquirer lacking similar expertise, your business may pose more risk, thus requiring the use of a higher risk premium.

After determining cost of capital and risk premium, the sum of the two will comprise your discount rate. Per the principles of “time value of money,” the higher the discount rate used to discount cash flows, the less those cash flows will be worth. So a higher risk premium will lower the value of your business.

The intricacies and nuances of developing a sound Discounted Cash Flow analysis clearly can not be captured in one short blog. However, there are various resources including templates available online that will walk you through, in more detail, the steps of developing a solid analysis. Your effort to value your business before you sell it will empower you when it comes time to negotiate a selling price.

Richard Zollinger is a finance manager at American Express.

In a previous blog I discussed what HSAs are and who qualifies to participate in them. Now I would like to discuss some of the benefits for HSAs in a series of blogs.The first benefit of HSAs is the tax savings associated with the program. Contributions to your HSA are made with pre-tax money which decreases your overall taxable income and any earnings made on money in your HSA are not considered a part of your gross income.Additionally, all distributions from your HSA used for qualified medical expenses for you, your spouse or your eligible dependents are also tax free. Consider the money you could save in taxes by using an HSA.

Samantha Bushard is an HR employee for the Idaho office of A Plus Benefits, Inc.

Summer is upon us and its time to load up the wife and kids and head out on vacation. If you’re anything like most of my clients, you are looking for ways to turn personal expenses into legitimate business expenses—there are many ways to accomplish this when combining personal and business travel. As always when dealing with saving taxes, planning in advance and good record keeping is key.

Mixing Business and Pleasure with Travel

Michael Bartholomew is a CPA at Jensen & Keddington, P.C. in Salt Lake City, UT. He can be reached at (801) 262-4554 or mikeb@jensenkeddington.com.

When it comes to charitable contributions, giving may be better than receiving, but receiving a tax deduction now requires a little more effort, in light of new substantiation rules introduced in the summer of 2006 (but not effective until 2007 for calendar taxpayers). To ensure that you can claim the charitable deductions to which you’re entitled, we want to make you aware of these new recordkeeping rules.

Cash Contributions of Less than $250 in Single Donation. For cash contributions, it’s not unusual to give small amounts without expecting a receipt, such as when you drop a $20 bill into the collection plate at church. These amounts may accumulate to a sizeable sum by year-end. Previously, if the donations were less than $250, you could either keep cancelled checks or reliable records, such as a list that you’ve prepared showing the dates, amounts donated, and charities. Under the new rules, however, it’s no longer sufficient to simply keep good records of these donations when you tally up the amount to claim as charitable contributions. Instead, cash contributions of less than $250 given in a single contribution are only deductible if you keep a bank record (most likely a cancelled check, wire transfer acknowledgement, or credit card record) or written acknowledgement from the charity (donee) showing the name of the donee organization, the date of the contribution, and the amount of the contribution.

If you are likely to itemize deductions on your income tax return and typically make cash contributions of less than $250, you should make donations by check rather than cash, because that will easily satisfy the documentation requirements. Simply keeping good records of the donations will no longer be enough to claim the deduction.

Contributions of Used Clothing and Household Items. If you typically donate used clothing or household items to charities, such as Goodwill, the items must be in “good condition or better” unless the items were worth more than $500 and a qualified appraisal report is attached to your tax return. The IRS has not yet defined what is meant by “good condition or better.” Thus, you might consider keeping a detailed list and photos of contributed items (unless the property is appraised). No new documentation is required, but to protect yourself in case of an IRS audit, you should, at a minimum, document that the donations were in good condition. Furthermore, the use of unattended drop-off sites should be reserved for items of minimal value. It may be difficult to substantiate the contributions without a receipt.

Vehicle Contributions. If you’re planning to donate a car, boat, or plane that’s valued over $500, you have to follow strict substantiation rules in order to claim the contribution deduction. Under these rules, you must receive, and attach to your tax return, a written acknowledgment from the charity within 30 days after the donated vehicle is sold (or within 30 days of the contribution if the charity uses the vehicle significantly in its exempt purpose, makes major improvements to the vehicle, sells it for a significantly discounted price, or gives it to a needy person in furtherance of the charity’s exempt purpose). The information needed in the written acknowledgement from the charity should include the (a) name and taxpayer identification number of the donor and (b) vehicle identification number (or similar number) of the vehicle.

The IRS has just issued new rules that require donors of vehicles valued at more than $500 to attach a special form (Form 1098-C—Contributions of Motor Vehicles, Boats and Airplanes), which is received from the charity and reports the necessary information about the vehicle donation. (The form is optional for vehicle donations of $500 or less.) To claim the deduction for the vehicle valued at more than $500, you should attach Copy B to your tax return.

Property Contributions of More Than $5,000. If you’re planning to contribute property (other than of publicly traded securities) valued at more than $5,000 ($10,000 for closely held stock), please discuss these plans with us as soon as possible. Although the rules for substantiating this type of property haven’t changed, there are now stricter rules for what is considered a “qualified appraisal” and who is considered a “qualified appraiser.” You must have the appraisal done not earlier than 60 days before the donation and received by the due date (including extensions) of your tax return.

To claim the deduction, it’s important to dot all the “i’s” and cross all the “t’s” in following the requirements of a qualified appraisal. Furthermore, stiffer penalties now apply to both appraisers and taxpayers for substantial valuation misstatements.

I hope this information is helpful as you plan for your charitable contributions. It’s important to follow these recordkeeping requirements if you hope to claim the deduction for your donations because the IRS can and will disallow charitable deductions if these requirements aren’t met. If you would like more details about these or any other aspect of the new rules, please don’t hesitate to call.

Michael Bartholomew is a CPA at Jensen & Keddington, P.C. in Salt Lake City, UT. He can be reached at (801) 262-4554 or mikeb@jensenkeddington.com.