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Is your company laying out the welcome mat for potential fraud? If you're not focused on fraud prevention then it may be time to rethink your priorities. It's no secret that these concerns arc across all sectors of business today including the construction industry and they aren't going away. What's missing within your business and what can you do better? Here are three overarching priorities when it comes to fraud detection and prevention:

• Establish a culture of integrity and honesty
• Implement sound policies and practices
• Be vigilant with checks and balances

Gilmore Jasion Mahler Partner Bob Bobek is on a team presenting at the upcoming Construction Financial Management Association (CFMA) 2016 annual conference and exhibition"Build it Forward" in San Antonio, Texas on June 25-29. Fraud detection and prevention is part of the team's Treasury Management Series presentation at the conference. Gilmore Jasion Mahler's Construction & Real Estate Team works to provide advisory and other services to support financial and strategic goals for businesses within the construction, real estate and utilities industries. Bob Bobek is an active member both locally and nationally with CFMA.

Construction companies must continually monitor the industry outlook to prepare for the year ahead. Since the construction industry is so closely married to the economy, including consumer spending habits, a close inspection of the current climate is required when planning for the next year.

Below, we break down the steps that every contractor should take when planning projects for the coming year.

Understand Your Niche Market

Overall, conditions for industrial construction in 2020 look good. Consumer spending was up 2.5% in 2019. Compared to the previous year, the economy grew 1.8% in 2019 and is expected to grow an additional 1.5% in 2020. Employment is strong; wage gains have been modest across the board. This kind of boost in the economy is good for industries across the board.

It is still important to understand the exact conditions within your niche market, however. When there’s more growth in commercial businesses, industrial businesses organically expand, creating more opportunities for commercial contractors. Understanding the exact factors that affect your niche market can help your 2020 plans.

Plan for New Technology

Those who can leverage new technology will stay ahead of the game, and the same goes for the construction industry. Automation, for example, can eliminate or at least reduce redundancies in your work operations.

Plan for Your Workforce

The industry outlook for construction is generally positive, but the voluntary quit rate is the highest it has been in over a decade. Unemployment is low, which means there are more available jobs than there are people to fill them. As such, it is important for employers to assure workplace satisfaction and promote engagement within their workforce. Offering attractive benefits, such as a competitive retirement package, can help promote employee retention.

“Prequalification of subcontractors is also a crucial step that can help ensure contractors have the workforce necessary to complete all aspects of any project they are taking on,” says Bob Bobek, CPA, who leads GJM’s Construction Specialist Team and works closely with many contractors.

Finally, leveraging technology to find quality employees will be an essential aspect of recruitment in 2020 and beyond.  

Consider, too, holding your profit margins steady with controlled growth. With all the available work and a limited workforce, you want to grow at a pace you can staff. Rapid growth resulting in large receivables and retainage at lower profits can starve a company of its cash.

Stay On Top of Industry News

Contractors will be continually subject to evolving federal regulations, both with regard to employment, construction of projects, and purchase of raw materials. It is essential to stay abreast of industry news and legislation that may affect practice. A commitment to technology, employee retention, and understanding external factors that affect business will help drive your company forward in the New Year.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Mark your calendar for the Construction Financial Management Association (CFMA) 2016 Annual Conference & Exhibition on June 25-29 in San Antonio, Texas.  Building it Forward: The Conference to Build Success will feature speakers from across the country, including some presenters from the Northwest Ohio Chapter of CFMA.  Gilmore Jasion Mahler Partner Bob Bobek and Art Iron, Inc. Chief Financial Officer Tom Walsh will team up to offer the Treasury Management Course. Bob Bobek, CPA is a partner in the GJM audit and accounting department with over thirty years of public accounting experience and leads our Construction Specialist Team.

The Tax Cuts and Jobs Act (TCJA) brought the most significant changes to our country’s tax law in over thirty years when it was signed into law on December 22, 2017. Most of the changes in the new law first applied to 2018 tax returns, so it’s our first chance to really see its impact. Since December of 2017 there have been several notices and regulations clarifying the new tax law, but further guidance is still needed in many areas. In this article, we’ll take a look at some of the key issues impacting businesses, particularly those businesses in the construction industry.

Qualified Business Income (QBI) Deductions Clarified

TCJA introduced a new deduction under IRS Code Section 199A for up to 20% of an eligible taxpayer’s qualified business income (QBI). Final regulations clarifying Section 199A were released in late January. The deduction, which is not available to C corporations, is calculated based on the qualified business income of each trade or business, subject to limitations based on wages and fixed assets. If the individual taxpayer’s taxable income is under $157,500 ($315,000 married filing jointly), the taxpayer is not subject to these limitations.  

Aggregation

The final regulations added the option to aggregate at the entity level, reducing the reporting obligations of the taxpayer. This is welcome news for many contractors, as it is common in the construction industry to have multiple entities for different geographic regions or service lines.

Aggregation can also be done at the individual level, allowing a taxpayer to combine activities that would otherwise be limited from taking the deduction. This individual level of aggregation now allows a taxpayer to combine wages and assets to maximize the QBI deduction. This aggregation will also simplify the new tax return disclosures required under the Tax Cuts and Jobs Act.

Assuming the individual taxpayer’s taxable income is in excess of the thresholds, the 20% deduction is limited based on a percentage of the entity’s wages and/or fixed assets. The final regulations also allow the entity to include wages of common law employees paid by another entity. This could be a significant benefit for related entities that may have differing ownership or those who use staffing companies, certainly something seen often in the construction industry.

Planning Opportunities

It’s also important to carefully analyze other planning opportunities and pitfalls. It will generally be beneficial for partners to take distributions in lieu of guaranteed payments since guaranteed payments don’t qualify for the 20% deduction. Also, entities will need to monitor the level of any consulting or other specified service income within an otherwise qualified trade or business. Specified service income over thresholds could cause an entire trade or business to be disqualified.

Bonus Depreciation and Section 179 Changes

Most owners of construction companies can never have enough equipment! Many of these businesses are smart and buy new equipment for economic reasons and not for tax reasons. If it’s necessary to buy new equipment to grow your company, some changes in bonus depreciation can really pay off. In fact, we’ve seen an increase in activity in the buying and selling of construction companies because this same rule applies to equipment acquired when you buy a new construction business.

The TCJA expanded accelerated depreciation, increased the Section 179 limits, and allows for 100% bonus depreciation on both new and used property. There are not any limits on the amount of bonus depreciation that can be taken, but Section 179 is still limited by the asset acquisitions of the taxpayer as well as taxable income. Qualified Improvement Property, a new class of property, includes nonresidential improvements to the interior of a building. Qualified Improvement Property is eligible for Section 179 depreciation, but currently is not eligible for bonus depreciation due to technical oversights when the TCJA was drafted. 

Meals and Entertainment Deductions: Not What They Used to Be

In the past, taxpayers could deduct 50% of the costs of business-related meals and entertainment expenses. The new tax law has eliminated any deduction for entertainment-related expenses. In general, the 50% deduction remains for most business-related meals, and the 100% deduction for employee social and recreational meals still exists.

Ohio Municipal Income Tax: Easier Filing

Beyond the federal tax law changes, there have also been significant changes to Ohio municipal income taxation. This was the first filing season allowing business taxpayers to file a single, combined municipal income tax return instead of filing separate returns for each city. This is a welcome change for contractors working in communities across Ohio, eliminating the need for potentially dozens or maybe hundreds of separate filings. Before a business can begin filing a combined return, it must first make a one-time election and notify each of the cities within 60 days of the beginning of their tax year. Businesses with a December year end would have had to file the election by March 1, 2019 in order to be able to file a combined 2019 return.  

The application of the new tax law can be complicated for both individuals and businesses. It’s safe to say we can expect to see more clarifications from the IRS in the months ahead. While the Tax Cuts and Jobs Act simplified tax filing for some of the most basic tax returns, many taxpayers and businesses are likely to struggle to digest and apply the new law now and for some time to come.

CPA Mary Jo Pitzen contributed this article. It was also published in the May 2019 edition of the CFMA Northwest Ohio Ledger, the organization's online newsletter. Mary Jo is a senior tax manager at Gilmore Jasion Mahler, LTD. She is a member of the firm’s Construction & Real Estate Specialist Team. Mary Jo is also a member of the Northwest Ohio chapter of the Construction Financial Management Association (CFMA) and the Toledo chapter of The National Association of Women in Construction (NAWIC).

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.  

If you’re looking for a profession that’s all about people, community and service to others… may we suggest accounting? That’s right, accounting. Gilmore Jasion Mahler, the largest public accounting firm in Northwest Ohio, recently launched a high school initiative to help area young people better understand what the accounting profession is all about.

The firm is taking professionals into area high schools for presentations on trends and opportunities in the field. The program is in conjunction with an initiative from the Ohio Society of Certified Public Accountants (OSCPA), aimed at educating high school students about the abundant opportunities and highly competitive salaries in the accounting industry right now.

“I have talked with accounting students who sometimes have five to six offers for full-time employment upon their college graduation,” says GJM Recruiting Manager Carrie Giannetti. She’s overseen recruiting for GJM for about five years, but has been recruiting in the accounting industry for two decades. “Most skilled accountants who present themselves well will have no problem finding a job, whether it be their first job out of college or making a change with some experience under their belt.”

Recent numbers from the Robert Half Salary Guide for Accounting & Finance show that salaries in public accounting continue to increase, with 2017 compensation (entry level to 3 years’ experience) ranging from about $50,000 to $90,000 a year, depending upon the size and geographic location of the accounting firm. The study shows that professional certifications and graduate work can further increase compensation by about 15%.

Giannetti is coordinating GJM’s high school initiative. She says competitive salaries certainly are a factor for young people in considering a career, but so are opportunities for professional development, company culture and other factors. A key focus of the GJM presentation is to help students understand that accounting may be a real option for them as a potential career... and what they think accounting is… may not be the reality at all.  

“What I find is that a lot of people have a misperception of what accountants actually do,” she says.  “Most people think of money, taxes, and sitting at a desk all day when they think of a career in accounting when in all actuality, people are our business. There are also many more aspects to accounting other than taxes, such as auditing, IT, and consulting and many accountants are barely in the office. Rather, they’re working out at the client site, establishing networks within our community, and helping others which can be very fun, social, and rewarding.”

The GJM high school presentations kicked off in the fall of 2017 with visits to Perrysburg, Bowling Green, and St. Francis De Sales High Schools. The firm plans more scheduled visits toward the end of the school year in May, 2018. GJM staff members helping with the presentations so far include Alex Spieker, Matt Cavanagh, Nick Jackson, Matt Hoverman and Krista Huff. Matt Cavanagh, a graduate of Bowling Green High School, even had an opportunity to visit his old locker the day of the presentation. Krista Huff helped with the Perrysburg High School presentation and is also part of GJM’s recruiting team, which engages quite a bit with college level accounting students at The University of Toledo and Bowling Green State University.

“I think it’s a great idea to educate high school students about accounting because I know at that age I didn’t know anything about the career or the opportunities it can offer,” she says. “Getting in early and introducing them to the industry is really a win-win for everyone. They can better prepare for their future and we can get even more excited and interested candidates in the future.”  

GJM also hopes the sessions will help address a lack of diversity in the industry, exposing students to a career path they may not have considered and one that can serve them well.

“No matter what type of business or industry you might want to pursue, whether you want to be an entrepreneur or work in management or supply chain, accounting will always be the most valuable subject to learn in order to be successful,” adds Krista. “Many people get discouraged by accounting because they think it’s difficult and heavily math-based and that is very much a misconception. Accounting is definitely difficult, but the opportunities and success that can come out an accounting degree and career are certainly worth it.”

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. Learn more about GJM opportunities at GJMLTD.com/careers.