Volume XXV No. 4 Winter 2019 Blackburn, Childers & Steagall, PLC Quarterly Newsletter

As we continue to look forward and plan for our future long term success, the partners are very pleased to announce effective

January 1, 2020 Andy Hatfield will begin serving as the new Managing Partner of the Firm. Andy’s desire to do things the

right way with quality, his vision and his character will serve us all well in the years to come.

Tommy Greer, who has served as Managing Partner of the firm for over 25 years, will still be actively involved in the Firm.

Continued on page 2

ANDY HATFIELD NAMED BCS MANAGING PARTNER

TOMMY GREER, ANDY HATFIELD AND CHARLES STEAGALL

ANDY & JESSICA HATFIELD, CAY & TOMMY GREERTOMMY’S FAMILY

ANDY’S FAMILY

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Continued from front page

“After 25 years as Managing Partner, I think the timing is

right for transition. I love BCS and the people here. My

plan, which the partners have graciously accepted, is to be

here for a long time but to just work a little less. I would like

to spend more time with my family and work on service/

mission projects. I will continue to support Andy and the

partners in an administrative

role and work with the other

companies while continuing

to maintain some client

work,” said Tommy.

“We’ve tried to practice what

we preach. When it comes

to succession planning, you

want to start the process as early as possible to make the

transition seamless. In fact, we’ve been working on this for

the last two years and will continue over the next couple of

years,” said Tommy. “Andy has great experience not only

at the national level but also with BCS over the last 10+

years as Partner in Charge of our Tax Department and of our

Kingsport office. The timing is definitely right for him to

take this next step to ensure the long term success of BCS.”

Andy Hatfield will be the Firm’s fourth Managing Partner

in its 58 year history. Joe Blackburn was the Firm’s first

Managing Partner in 1961,

handing over the role to Charles

Steagall in 1977. Tommy Greer

became the third Managing

Partner in 1995.

Andy and his wife Jessica have

three children. He is on the

board for United Way of Greater

Kingsport, YoungLife Kingsport, and Abundantly Blessed

Ministries. Andy enjoys all UT sports, hanging out with the

family and coaching his kids’ various sports teams.

“I’M GRATEFUL FOR THE TRUST THE PARTNERS OF BCS HAVE PLACED IN ME TO LEAD THE FIRM. TOMMY’S LEADERSHIP HAS BEEN A GREAT EXAMPLE OVER THE

YEARS.” - ANDY HATFIELD

SNAPSHOT OF BCS IN MID-NINETIES

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Take required minimum distributions (RMDs): If you are

70½ or older, the IRS requires you to take RMDs from

certain retirement accounts by December 31—or face a

penalty equal to 50% of the sum you failed to withdraw.

If you turned 70½ this year, you have until April 1, 2020

to take your first RMD. Be aware, however, that if you

wait to take your first RMD between January 1, 2020 and

April 1, 2020, you still must take your regular 2020 RMD.

Therefore, waiting to take your first RMD would double the

tax implication in that year.

Consider qualified charitable distributions (QCDs): If

you are age 70 ½ or older and do not need the funds from

your required minimum distributions, consider QCDs.

Each individual can direct up to $100,000 of their annual

RMD to a charity, and that amount will be exempt from

federal income taxes. Because the amount is excluded from

taxable income, the taxpayer does not use the QCD amount

as a charitable contribution for itemization. For the many

taxpayers who no longer itemize under the Tax Cuts and

Jobs Act, this is a strategy that both rewards charitable intent

and reduces taxes.

Maximize contributions to your retirement accounts:

Many companies that offer a 401(k) plan offer matching

contributions to your personal contributions. At a minimum,

you should contribute enough to get the full company

match. You are simply leaving money on the table if you

do not take advantage of this. This is FREE money and

should not be discounted. It is a best practice to contribute

the maximum amount to your retirement accounts. Here are

those amounts:

• 401(k), 403(b), 457 Plans: $19,000. Age 50 and older

additional allowed contribution: $6,000

• SIMPLE Plan: $13,000. Age 50 and older additional

allowed contribution: $3,000

• IRA or Roth IRA: $6,000. Age 50 and older additional

allowed contribution: $1,000

Review your tax situation in taxable investment accounts:

Before year-end, you still have the opportunity to reduce

taxes that may be owed due to realized capital gains. Any

realized capital losses can help offset any realized gains.

This can be done even while preserving your investment

allocation and diversification.

Spend your Flexible Savings Account (FSA) money: Any

funds in your FSA are typically forfeited at the end of the

year, so if you have eligible health and medical needs, make

sure to take advantage of the accumulated dollars in your

account before they go away. We advise confirming your

plan’s deadlines with your employer before doing this.

Fully fund your Health Savings Account (HSA): An HSA

is a unique, tax-advantaged account that can be used for

current or future healthcare expenses. For 2019, if you have

a high-deductible health insurance plan, you can save as

much as $3,500 (single) or $7,000 (family). If you are 55 or

older you can contribute an additional $1,000. These dollars

do not go away at year-end. The account can accumulate,

and even be invested, for future years.

OTHER ITEMS TO CONSIDER• Review and/or establish estate planning documents.

• Confirm beneficiary designations.

• Review your investment portfolio to make sure your risk

tolerance and spending needs still match your portfolio

objectives.

• Review your insurance needs.

YEAR-END FINANCIAL PLANNING CHECKLIST FOR INDIVIDUALS

BY NICK CLAY AND BRANDY BRADLEY

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We had a false alarm in 2016 when the U.S. Department of

Labor announced that it planned to issue new minimum salary

thresholds for overtime exemption. The increase was too much,

so the U. S. Department of Labor decided not to issue final

rulings at that time.

Fast-forward three years, the U. S. Department of Labor adjusted

the increase to a more reasonable amount, asked for public

opinion, and issued a final ruling in September 2019.

The final rule updates the earnings thresholds necessary to

exempt executive, administrative and professional employees

from the Fair Labor Standards Act’s (FLSA) minimum wage

and overtime pay requirements, and allows employers to count a

portion of certain bonuses and commissions towards meeting the

salary level. (WHD-USDOL Release Statement)

THE NEW RULINGUnder this new ruling, in order for salary employees to be

exempt from overtime pay, the minimum standard level pay

increases from $455 to $684 per week ($35,568 per year). If

salary employees are paid less than $684 per week, they must be

paid overtime pay for hours worked over 40 hours during work

week.

This new ruling allows employers to use annual nondiscretionary

bonuses and incentive payments (including commissions)

to satisfy up to 10% ($3,536 per year) of the new minimum

standard salary level. However, this is only available if the salary

employee receives at least 90% of minimum salary level - $616

per week.

If this bonus/incentive payment plus the salary paid during

the year does not equal the required minimum salary level,

the employer may make a “catch-up” payment to achieve the

required level within one pay period of the end of the 52-week

period. The employer may use any 52-week period, such as a

calendar year, fiscal year or work anniversary year.

HOW TO CLAIM AN EXEMPTIONFor an employer to claim an exemption for a particular employee,

three tests generally need to be satisfied:

• PAYMENT ON A SALARY BASIS: The employee must be

paid a predetermined and fixed salary that is not subject to

reduction because of variations in the quality or quantity of

work performed;

• PAYMENT OF A MINIMUM SALARY LEVEL: The

amount of salary paid must meet a specified minimum

amount; and

• A DUTIES TEST: The employee’s job duties must

primarily involve those associated with exempt executive,

administrative, professional, outside sales, or computer

employees.

The U. S. Department of Labor estimates that 1.3 million

workers are currently paid $455 per week; another 4.1 million

are paid between $455 and $684 per week. These workers will

become eligible for overtime pay unless their weekly salary is

increased to meet the new salary threshold.

The U. S. Department of Labor has issued a Small Business

Compliance Guide to assist employers as they transition to their

salary employees to the new standard salary level. This guide can

be found at https://www.dol.gov/whd/overtime2019/index.htm

or by calling our offices.

SALARY EMPLOYEES MAY BE ELIGIBLE FOR OVER-TIME STARTING JANUARY 1, 2020

BY GINA LEMONS

TAX ORGANIZERS ARE COMING YOUR WAY!

We encourage you to fill out your tax organizer to remember significant

events over the past year. Please sign the engagement letter, then return it

and the organizer with your source documents during tax season.

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BCS IN THE COMMUNITYCOALITION 4 KIDS TRUNK OR TREAT, MAKING STRIDES AGAINST BREAST CANCER, HUNGER TO HOPE,

SECOND HARVEST FOOD BANK, GOOD SAMARITAN MINISTRIES

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HOW COLLEGE SAVINGS, SCHOLARSHIPS & LOANS AFFECT YOUR TAX BY ALYSSA REED

As the cost of post – secondary education continues to

increase, many families pursue tax incentives to assist with

college costs. One of the most common ways to save for

post – secondary education is a 529 plan. There are two main

types of 529 plans – Prepaid Tuition and College Savings. The

prepaid tuition plan enables an individual to purchase tuition

from a system of universities at the current price, effectively

locking in today’s rate rather than paying the inflated price 18

years later when a student enrolls in college. For the College

Savings variation of 529 plans, an individual does not receive

a federal deduction when contributing to the plan but, if the

beneficiary uses the plan to pay for educational expenses, all

the earnings of the plan are not reported as income. This

is the most popular due to high contribution limits (up to

$500,000 per year in some states) and high income phase

outs for contributors.

During college, educational expenses incurred may provide

a tax credit. The American Opportunity Credit (AOC) is a

$2,500 credit on educational expenses and can be used for

each student the taxpayer has enrolled in college. However,

the student must be in their first four years of post – secondary

education. If the student has already completed the first four

years but is still enrolled at a post – secondary institution,

they may qualify for the Lifetime Learning Credit (LLC).

This is a $2,000 credit but is only permissible once per

return regardless of the number of students the taxpayer has

enrolled in college. Nevertheless, the LLC is an excellent

option for individuals who are not degree seeking; such as

dual enrollment students or enrolled beyond a bachelor’s

degree, such as masters or PhD students.

While in school, a student may receive a scholarship and

question if it is taxable income. Students who are required to

perform work for the scholarship have a taxable scholarship.

However, the IRS provides an exception that work that is

teaching or researching is not considered taxable income as

long as the scholarship proceeds are used for educational

expenses. If the services required are not teaching or

researching, then the scholarship is taxable but the amount

of expenses can be used for a credit (AOC or LLC).

One key compliance area is that a student not “double dip”

when considering the non – taxable effect of scholarships and

529 distributions on education credits. If a scholarship is

non – taxable, the expenses it covered cannot be used for an

education credit. Likewise, for the earnings of a 529 plan

to be tax – free, they must be used for educational expenses.

The expenses the 529 plan covers cannot be used as expenses

eligible for a credit.

Post college, a student may seek a benefit for paying student

loans. The interest paid on the loan, up to $2,500 per return,

is deductible. In order for a parent to claim the interest,

they must be a co – signor on the loan and not have income

exceeding the phase outs, starting at $65,000 for single filers.

SARAH PRESNELL AWARDED 40 UNDER FORTYCongrats to Sarah Presnell for being named one of the Tri-Cities Business Journal’s 40 Under 40! Sarah is a

joy to work with. Not only is she a great leader within the Firm, she’s deeply committed to our community

and spends much of her time serving others!

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PERSONAL LINES

ANDY CLARK

Andy and his wife Katie wel-

comed their son Owen David

Clark. Owen joins his three

big sisters, Annie, Eliza, and

Lilly.

KIM HALL, CPA

Kim is new in the Johnson

City MAS department. She is

a graduate of the University of

Alabama and has over 17 years

of accounting experience.

DEBRA ALLEN

Debra is new to the Kingsport

MAS department. She is a

graduate of Texas A&M and

has over 20 years of experience

in public accounting.

TYLER TROUTMAN

Tyler is the newest tax staff

in Johnson City. He holds a

bachelors from King Univer-

sity, where he played baseball,

and a masters from ETSU.

BCS PARTNER MIKE EDDY BACKS THE BUCS!

The Fleming Eddy Clan won Food City’s

Tailgater of the Year Award.

BCS & APP STATE ACCOUNTING SUMMIT IN BOONE IF YOU WOULD LIKE AN INVITATION TO NEXT YEAR’S SUMMIT, PLEASE CONTACT

KENDRA AT KHOPSON@BCSCPA.COM.

801 B Sunset Drive | Johnson City, TN 37604

Johnson City | Kingsport | GreenevilleCHANGE SERVICE REQUESTED

PRSRT STDUS POSTAGE

PAIDJOHNSONCITY, TN

PERMIT NO. 26

Merry Christmas&

Happy Holidays