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I need this two The first portion of the project will be a research memorandum that is prepared for a client based on a set
I need this two
The first portion of the project will be a research memorandum that is prepared for a client based on a set of facts. The research memorandum will not exceed a page and half. The second portion of the project will be a client letter to explain the results of your research. The client letter should not exceed 3/4s of a page.
Background for Research Project- Due April 18, 2017 (Draft due March 23, 2017) February 11, 2017 Michael Johnson, your friend from ASU just started his new job at XCite Biotechnology, Inc. on February 1, 2017. He called you on a quick question because he needs to make an election on how much to defer for his 401(k) Plan. You write down everything he says. His company was newly formed company in April, 2015 and is backed by several venture capital firms. They currently have just a small number of employees and four principals or owners. It is off to a great start. It is likely to be very successful based on recent FDA approvals on their prototype. It already has the interests of larger Biotech private equity firms in the medical device industry sector. The office manager was working with Michael to complete his paper work on the number of exemptions for income tax withholdings, the enrollment in employee benefit plans and other related payroll matters. She gave Michael his 401(k) election form and asked him how much he wanted to defer into the 401(k) plan. The office manager has only been there since January 3, 2017 and she had decided not to defer anything into the plan. Michael recalls learning from his ASU tax professor how important it is to start early in saving for retirement and 401(k) plan seemed like a great idea because of its favorable tax status. Here is what Michael knows: The Company adopted and implemented a 401(k) profit sharing plan effective January 31, 2017. It was a proto type plan sponsored by Fidelity Investments. Each of the owners completed and signed their election forms for the deferral of 15% of their compensation on the date the plan was adopted. The 401(k) plan provides for employee deferrals of 0 to 15% of compensation of which the employer will match 50% of the employee's deferral but only up to the extent of 10% of the compensation. Meaning the employer will match 50% up to the first 10% of compensation deferred. Michael is the financial accountant, tax accountant and IT person (all around get it done person) for the company. He and the office manager do everything else not done by the primary principals and the business development person. He and the office manager are scheduled to be paid $75,000 of gross pay per year that translates to $2885 of gross pay per payroll period over 26 pay periods. He is also scheduled to receive a year-end bonus of $10,000 at the end of 2017. This is the target amount. In other words, the bonus amounts for Michael and Office Manager could be zero to $20,000. He will not know his final bonus until after the 2017 year end when the financial statements are complete and the March board meeting is conducted. He expects it will take about 2 months to 2 months to finalize financials, obtain approvals and get checks issued to employees and owners for their bonuses. He also understands that the principals make about $200,000 per year in salary or approximately $7,700 per pay period over 26 pay periods. They can also earn up to $200,000 of bonus while the business development executive makes $100,000 per year and can earn up to $100,000 of bonus. There is not a bonus for the owners for 2016 being paid in 2017 as they only got the recent FDA approval. You had recently started working at a CPA firm. Michael called you to ask: What do you know about 401(k) plans? How much should I defer? Can I also defer my bonus for 2017? He also asked about extending the tax return because it was unlikely he will get the corporate tax return complete by March 15, 2017. \"Sure\". \"You can extend the due date of your tax return beyond March 15, but you cannot extend the tax payment due date.\" As for the 401(k) plan, if you remember what our tax professor said in class; \"defer as much as you can and as early as you can.\" In addition, the employer is going to match you 50% on the first 10% of income you defer. That would be nearly $3,700 of a match for you if you deferred 10% of your income not considering the bonus. The other question about the bonus on the 401(k) plan I will need to look into them. You ask one your friends at work what they think and your friend at the office says: \"You better go check with the Coordinating or Tax Partner; because I worked on a question for that company. We do work for them; maybe you can have a chance to charge your time. \" Stop for now. XCite Biotechnology, Inc 277 Lemon Drive Tempe, AZ 85283 Oral Background for Research Project- Due April 18, 2017 (Draft due March 23, 2017) February 14, 2017 and February 16, 2017 Meeting with Coordinating Partner: Michael Johnson: I wanted to let you know a friend called me from Xcite Biotechnology, Inc. He just started working there this month. I also understand this maybe a client of the firm. Coordinating Partner: Come on in; let's talk because coincidentally, I just received a call from the President of Xcite Biotechnology, Inc.. Cameron Ortiz. He mentioned Michael Johnson had stopped by his office with some questions. Cameron had the same questions. Coordinating Partner: Cameron Ortiz is one of 4 principals owning the business 20% each. They are a fast growing company with a lot of funding from local angel investors and several venture capital firms owning the remaining 20%. They have been our client for the last 18 months or so. Coordinating Partner: I have to admit I do not know a lot about 401(k) plans except to the extent I participate in one at the firm and I am the audit partner on 10 clients that have one. Cameron mentioned the following to me. They have a Fidelity 401(k) standard proto type 401(k) profit sharing plan. They adopted it on January 31, 2017 effective to January 31, 2017. The plan provides that employees may defer up to 15% of their W-2 earnings. The company will match 50% of the employee's deferral up to 10% of compensation earned by the employee. I think this means that if I defer 10% of $100,000 salary; the company will match 50% of the deferral or $5,000. If I earned 100,000 and deferred 15% or $15,000; they would only match 50% or $5,000 based on the 10% rule. The plan also provides for a discretionary match and profit sharing contribution that may be made by the employer. Coordinating Partner: I am not sure what the implications are but thought I better note this: He mentioned that the owners and the other employees completed their enrollment forms and made elections on how much to defer. The four owners all elected 15% of their compensation while the other employees as of that date had an average deferral of 5%. Coordinating Partner: He also mentioned the compensation amounts to me. Owners will receive $200,000 of salary throughout the year and have the potential to earn up to another $200,000 in bonuses. The bonuses will be paid in the year following the corporate year end of December 31 based on the financial performance and achieving certain milestones for the corporation during the year. Likewise, the office manager, your friend Michael, and the business development executive are also under a bonus program based on $75,000 salary and $100,000 base salary respectively where they will be paid bonuses of zero to $20,000 and 0 to $100,000 respectively. The first bonuses will be paid in 2018 for the 2017 calendar year. There are 20 other employees who handle shipping and distribution but they earn between $25,000 and $60,000. Coordinating Partner: Cameron asked that we do some research to determine how much salary the owners and employees can defer into the 401(k) plan including how much of the bonus can they defer? He wanted to budget the fees for the research at $3,500. He requested us to prepare a \"scope of services\" letter to document our agreement and describe the scope of work. I know we have a \"master services agreement\" for all of our services dated April 25, 2015. Please prepare a scope of services letter for Cameron as he is the President of the Company. We typically keep scope of services letters brief. It should have three paragraphs. First is an introduction including mentioning or referring to the \"master services agreement\" dated April 25, 2015. A second paragraph describing what we will do for Xcite Biotechnology, Inc and what we will provide to them. The third paragraph should disclose the fees and mentioned that we will notify them if we anticipate the fees to be greater than $3,500. Subject Matter Specialist: As I listened to the conversation with the Coordinating Partner, I was very disappointed in the fact that you did not take many notes. IT IS CRITICAL YOU TAKE LOTS OF NOTES!!!!! Fortunately, I took the notes for you but I want it to be known how disappointed I was with the note taking. The next time you will be in a meeting without anyone and you will not have notes to refer. PLEASE REMEMBER THIS; IT WILL PAY DIVIDENDS IN THE FUTURE. START THE HABIT NOW. Subject Matter Specialists: Here are a couple observations I made on the comments about the issue or question that Cameron and Michael have raised: 1. The 401(k) plan was adopted this year effective January 31, 2017. It is important to note that no deferrals could be made prior to the plan's adoption. 2. Also, the owner-employees as we call working owners and the other employees completed enrollment forms for participation in the 401(k); the owner employees who make 200,000 are deferring 15% while the rest of the employee population is deferring on average 5%. The deferrals cannot start until the plan is effective and the enrollment is complete and employees can only defer income they have not earned yet. 3. The owner employee's match will be limited to 50% of 10% and the other employee's will be limited to 50% up to 10% of compensation. Seeing that the average employee deferral is only 5%, this may also create a problem with the so called nondiscrimination rules called ADP and ACP tests where certain highly compensated employees will be limited in what they can defer and contribute. 4. Also, by the 401(k)'s plan nature, there are other limits that will apply to all participants. Limits on compensation levels, deferrals, total employee and employer contributions, etc. But we understand that the employee deferrals reduce the taxable compensation of the owneremployee and employee as well as the match is very nice addition. Other comments made by the subject matter specialist covered: Standard Prototype Plan from Fidelity means it is a standard plan with limited exceptions in its design and choices. It is typically put in place quickly without a lot of guidance and the investments are typically from the company sponsoring the standard prototype plan. Explanation of Masters Service Agreement (MSA) and Scope of Services letter Memorandum format should be standard and include a highly technical discussion. The format is in the text book in Chapter 5Step by Step Solution
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