2021 Year-End Tax Planning for Individuals

As we approach year end, now is the time for individuals, business owners, and family offices to review their 2021 and 2022 tax situations and identify opportunities for reducing, deferring, or accelerating tax obligations. Areas potentially impacted by proposed tax legislation still in play should be reviewed, as well as applicable opportunities and relief granted under legislation enacted during the past year.
The information contained within this article is based on tax proposals as presented in the November 3, 2021, version of the Build Back Better Act. Our guidance is subject to change when final legislation is passed. Taxpayers should consult with a trusted advisor when making tax and financial decisions regarding any of the items below.
Individual Tax Planning Highlights
2021 Federal Income Tax Rate Brackets

2022 Federal Income Tax Rate Brackets

Proposed Surcharge on High-Income Individuals, Estates and Trusts

The draft Build Back Better Act released on November 3, 2021 would impose a 5% surcharge on modified adjusted gross income that exceeds $5 million for married individuals filing separately, $200,000 for estates and trusts and $10 million for all other individuals. An additional 3% surcharge would be imposed on modified adjusted gross income in excess of $12.5 million for married individuals filing separately, $500,000 for estates and trusts and $25 million for all other individuals. The proposal would be effective for taxable years beginning after December 31, 2021 (i.e., beginning in 2022).

While keeping the proposed surcharges in mind, taxpayers should consider whether they can minimize their tax bills by shifting income or deductions between 2021 and 2022. Ideally, income should be received in the year with the lower marginal tax rate, and deductible expenses should be paid in the year with the higher marginal tax rate. If the marginal tax rate is the same in both years, deferring income from 2021 to 2022 will produce a one-year tax deferral and accelerating deductions from 2022 to 2021 will lower the 2021 income tax liability.

Actions to consider that may result in a reduction or deferral of taxes include:

  •  Delaying closing capital gain transactions until after year end or structuring 2021 transactions as installment sales so that gain is deferred past 2021 (also see Long Term Capital Gains, below).
  •  Considering whether to trigger capital losses before the end of 2021 to offset 2021 capital gains.
  •  Delaying interest or dividend payments from closely held corporations to individual business-owner taxpayers.
  •  Deferring commission income by closing sales in early 2022 instead of late 2021.
  •  Accelerating deductions for expenses such as mortgage interest and charitable donations (including donations of appreciated property) into 2021 (subject to AGI limitations).
  •  Evaluating whether non-business bad debts are worthless by the end of 2021 and should be recognized as a short-term capital loss.
  •  Shifting investments to municipal bonds or investments that do not pay dividends to reduce taxable income in future years.

On the other hand, taxpayers that will be in a higher tax bracket in 2022 or that would be subject to the proposed 2022 surcharges may want to consider potential ways to move taxable income from 2022 into 2021, such that the taxable income is taxed at a lower tax rate. Current year actions to consider that could reduce 2022 taxes include:

  • Accelerating capital gains into 2021 or deferring capital losses until 2022.
  •  Electing out of the installment sale method for 2021 installment sales.
  •  Deferring deductions such as large charitable contributions to 2022.

Long-Term Capital Gains

The long-term capital gains rates for 2021 and 2022 are shown below. The tax brackets refer to the taxpayer’s taxable income. Capital gains also may be subject to the 3.8% Net Investment Income Tax.

2021 Long-Term Capital Gains Rate Brackets

2022 Long-Term Capital Gains Rate Brackets

Long-term capital gains (and qualified dividends) are subject to a lower tax rate than other types of income. Investors should consider the following when planning for capital gains:

  • Holding capital assets for more than a year (more than three years for assets attributable to carried interests) so that the gain upon disposition qualifies for the lower long-term capital gains rate.
  • Considering long-term deferral strategies for capital gains such as reinvesting capital gains into designated qualified opportunity zones.
  • Investing in, and holding, “qualified small business stock” for at least five years. (Note that the November 3 draft of the Build Back Better Act would limit the 100% and 75% exclusion available for the sale of qualified small business stock for dispositions after September 13, 2021.)
  • Donating appreciated property to a qualified charity to avoid long term capital gains tax (also see Charitable Contributions, below).

Net Investment Income Tax

An additional 3.8% net investment income tax (NIIT) applies on net investment income above certain thresholds. For 2021, net investment income does not apply to income derived in the ordinary course of a trade or business in which the taxpayer materially participates. Similarly, gain on the disposition of trade or business assets attributable to an activity in which the taxpayer materially participates is not subject to the NIIT.

The November 3 version of the Build Back Better Act would broaden the application of the NIIT. Under the proposed legislation, the NIIT would apply to all income earned by high income taxpayers unless such income is otherwise subject to self-employment or payroll tax. For example, high income pass-through entity owners would be subject to the NIIT on their distributive share income and gain that is not subject to self-employment tax. In conjunction with other tax planning strategies that are being implemented to reduce income tax or capital gains tax, impacted taxpayers may want to consider the following tax planning to minimize their NIIT liabilities:

  • Deferring net investment income for the year.
  • Accelerating into 2021 income from pass-through entities that would be subject to the expanded definition of net investment income under the proposed tax legislation.

Social Security Tax

The Old-Age, Survivors, and Disability Insurance (OASDI) program is funded by contributions from employees and employers through FICA tax. The FICA tax rate for both employees and employers is 6.2% of the employee’s gross pay, but only on wages up to $142,800 for 2021 and $147,000 for 2022. Self-employed persons pay a similar tax, called SECA (or self-employment tax), based on 12.4% of the net income of their businesses.

Employers, employees, and self-employed persons also pay a tax for Medicare/Medicaid hospitalization insurance (HI), which is part of the FICA tax, but is not capped by the OASDI wage base. The HI payroll tax is 2.9%, which applies to earned income only. Self-employed persons pay the full amount, while employers and employees each pay 1.45%. An extra 0.9% Medicare (HI) payroll tax must be paid by individual taxpayers on earned income that is above certain adjusted gross income (AGI) thresholds, i.e., $200,000 for individuals, $250,000 for married couples filing jointly and $125,000 for married couples filing separately. However, employers do not pay this extra tax.

Long-Term Care Insurance and Services

Premiums an individual pays on a qualified long-term care insurance policy are deductible as a medical expense. The maximum deduction amount is determined by an individual’s age. The following table sets forth the deductible limits for 2021 and 2022 (the limitations are per person, not per return):

Retirement Plan Contributions

Individuals may want to maximize their annual contributions to qualified retirement plans and Individual Retirement Accounts (IRAs) while keeping in mind the current proposed tax legislation that would limit contributions and conversions and require minimum distributions beginning in 2029 for large retirement funds without regard to the taxpayer’s age.

  • The maximum amount of elective contributions that an employee can make in 2021 to a 401(k) or 403(b) plan is $19,500 ($26,000 if age 50 or over and the plan allows “catch up” contributions). For 2022, these limits are $20,500 and $27,000, respectively.
  • The SECURE Act permits a penalty-free withdrawal of up to $5,000 from traditional IRAs and qualified retirement plans for qualifying expenses related to the birth or adoption of a child after December 31, 2019. The $5,000 distribution limit is per individual, so a married couple could each receive $5,000.
  • Under the SECURE Act, individuals are now able to contribute to their traditional IRAs in or after the year in which they turn 70½.
  • The SECURE Act changes the age for required minimum distributions (RMDs) from tax-qualified retirement plans and IRAs from age 70½ to age 72 for individuals born on or after July 1, 1949. Generally, the first RMD for such individuals is due by April 1 of the year after the year in which they turn 72.
  • Individuals age 70½ or older can donate up to $100,000 to a qualified charity directly from a taxable IRA.
  • The SECURE Act generally requires that designated beneficiaries of persons who die after December 31, 2019, take inherited plan benefits over a 10-year period. Eligible designated beneficiaries (i.e., surviving spouses, minor children of the plan participant, disabled and chronically ill beneficiaries and beneficiaries who are less than 10 years younger than the plan participant) are not limited to the 10-year payout rule. Special rules apply to certain trusts.
  • Small businesses can contribute the lesser of (i) 25% of employees’ salaries or (ii) an annual maximum set by the IRS each year to a Simplified Employee Pension (SEP) plan by the extended due date of the employer’s federal income tax return for the year that the contribution is made. The maximum SEP contribution for 2021 is $58,000. The maximum SEP contribution for 2022 is $61,000. The calculation of the 25% limit for self-employed individuals is based on net self-employment income, which is calculated after the reduction in income from the SEP contribution (as well as for other things, such as self-employment taxes).
  • 2021 could be the final opportunity to convert non-Roth after-tax savings in qualified plans and IRAs to Roth accounts if legislation passes in its current form. Proposed legislation would prohibit all taxpayers from funding Roth IRAs or designated Roth accounts with after-tax contributions starting in 2022, and high-income taxpayers from converting retirement accounts attributable to pre-tax or deductible contributions to Roths starting in 2032.
  • Proposed legislation would require wealthy savers of all ages to substantially draw down retirement balances that exceed $10 million after December 31, 2028, with potential income tax payments on the distributions. As account balances approach the mandatory distribution level, extra consideration should be given before making an annual contribution.

Foreign Earned Income Exclusion

The foreign earned income exclusion is $108,700 in 2021, to be increased to $112,000 in 2022.

Alternative Minimum Tax

A taxpayer must pay either the regular income tax or the alternative minimum tax (AMT), whichever is higher. The established AMT exemption amounts for 2021 are $73,600 for unmarried individuals and individuals claiming head of household status, $114,600 for married individuals filing jointly and surviving spouses, $57,300 for married individuals filing separately and $25,700 for estates and trusts. For 2022, those amounts are $75,900 for unmarried individuals and individuals claiming the head of household status, $118,100 for married individuals filing jointly and surviving spouses, $59,050 for married individuals filing separately and $26,500 for estates and trusts.

Kiddie Tax

The unearned income of a child is taxed at the parents’ tax rates if those rates are higher than the child’s tax rate.

Limitation on Deductions of State and Local Taxes (SALT Limitation)

For individual taxpayers who itemize their deductions, the Tax Cuts and Jobs Act (TCJA) introduced a $10,000 limit on deductions of state and local taxes paid during the year ($5,000 for married individuals filing separately). The limitation applies to taxable years beginning on or after December 31, 2017 and before January 1, 2026. Various states have enacted new rules that allow owners of pass-through entities to avoid the SALT deduction limitation in certain cases.

The November 3 draft of the Build Back Better Act would extend the TCJA SALT deduction limitation through 2031 and increase the deduction limitation amount to $72,500 ($32,250 for estates, trusts and married individuals filing separately). An amendment currently on the table proposes increasing the deduction limitation amount to $80,000 ($40,000 for estates, trusts and married individuals filing separately). The proposal would be effective for taxable years beginning after December 31, 2020, therefore applying to the 2021 calendar year.

Charitable Contributions

The Taxpayer Certainty and Disaster Relief Act of 2020 extended the temporary suspension of the AGI limitation on certain qualifying cash contributions to publicly supported charities under the CARES Act. As a result, individual taxpayers are permitted to take a charitable contribution deduction for qualifying cash contributions made in 2021 to the extent such contributions do not exceed the taxpayer’s AGI. Any excess carries forward as a charitable contribution that is usable in the succeeding five years. Contributions to non-operating private foundations or donor-advised funds are not eligible for the 100% AGI limitation. The limitations for cash contributions continue to be 30% of AGI for non-operating private foundations and 60% of AGI for donor advised funds. The temporary suspension of the AGI limitation on qualifying cash contributions will no longer apply to contributions made in 2022. Contributions made in 2022 will be subject to a 60% AGI limitation. Tax planning around charitable contributions may include:

  • Maximizing 2021 cash charitable contributions to qualified charities to take advantage of the 100% AGI limitation.
  • Deferring large charitable contributions to 2022 if the taxpayer would be subject to the proposed individual surcharge tax.
  • Creating and funding a private foundation, donor advised fund or charitable remainder trust.
  • Donating appreciated property to a qualified charity to avoid long term capital gains tax.

Estate and Gift Taxes

The November 3 draft of the Build Back Better Act does not include any changes to the estate and gift tax rules. For gifts made in 2021, the gift tax annual exclusion is $15,000 and for 2022 is $16,000. For 2021, the unified estate and gift tax exemption and generation-skipping transfer tax exemption is $11,700,000 per person. For 2022, the exemption is $12,060,000. All outright gifts to a spouse who is a U.S. citizen are free of federal gift tax. However, for 2021 and 2022, only the first $159,000 and $164,000, respectively, of gifts to a non-U.S. citizen spouse are excluded from the total amount of taxable gifts for the year. Tax planning strategies may include:

  • Making annual exclusion gifts.
  • Making larger gifts to the next generation, either outright or in trust.
  • Creating a Spousal Lifetime Access Trust (SLAT) or a Grantor Retained Annuity Trust (GRAT) or selling assets to an Intentionally Defective Grantor Trust (IDGT).

Net Operating Losses

The CARES Act permitted individuals with net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, to carry those losses back five taxable years. The unused portion of such losses was eligible to be carried forward indefinitely and without limitation. Net operating losses generated beginning in 2021 are subject to the TCJA rules that limit carryforwards to 80% of taxable income and do not permit losses to be carried back.

Excess Business Loss Limitation

A non-corporate taxpayer may deduct net business losses of up to $262,000 ($524,000 for joint filers) in 2021. The limitation is $270,000 ($540,000 for joint filers) for 2022. The November 3 draft of the Build Back Better Act would make permanent the excess business loss provisions originally set to expire December 31, 2025. The proposed legislation would limit excess business losses to $500,000 for joint fliers ($250,000 for all other taxpayers) and treat any excess as a deduction attributable to a taxpayer’s trades or businesses when computing excess business loss in the subsequent year.

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April 10, 2024Your business should generally maximize current year depreciation write-offs for newly acquired assets. Two federal tax breaks can be a big help in achieving this goal: first-year Section 179 depreciation deductions and first-year bonus depreciation deductions. These two deductions can potentially allow businesses to write off some or all of their qualifying asset expenses in Year 1. However, they’re moving targets due to annual inflation adjustments and tax law changes that phase out bonus depreciation. With that in mind, here’s how to coordinate these write-offs for optimal tax-saving results. Sec. 179 Deduction Basics Most tangible depreciable business assets — including equipment, computer hardware, vehicles (subject to limits), furniture, most software and fixtures — qualify for the first-year Sec. 179 deduction. Depreciable real property generally doesn’t qualify unless it’s qualified improvement property (QIP). QIP means any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building is placed in service — except for any expenditures attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework. Sec. 179 deductions are also allowed for nonresidential building roofs, HVAC equipment, fire protection systems and security systems. The inflation-adjusted maximum Sec. 179 deduction for tax years beginning in 2024 is $1.22 million. It begins to be phased out if 2024 qualified asset additions exceed $3.05 million. (These are up from $1.16 million and $2.89 million, respectively, in 2023.) Bonus Depreciation Basics Most tangible depreciable business assets also qualify for first-year bonus depreciation. In addition, software and QIP generally qualify. To be eligible, a used asset must be new to the taxpayer. For qualifying assets placed in service in 2024, the first-year bonus depreciation percentage is 60%. This is down from 80% in 2023. Sec. 179 vs. Bonus Depreciation The current Sec. 179 deduction rules are generous, but there are several limitations: The phase-out rule mentioned above, A business taxable income limitation that disallows deductions that would result in an overall business taxable loss, A limited deduction for SUVs with a gross vehicle weight rating of more than 6,000 pounds, and Tricky limitation rules when assets are owned by pass-through entities such as LLCs, partnerships, and S corporations. First-year bonus depreciation deductions aren’t subject to any complicated limitations. But, as mentioned earlier, the bonus depreciation percentages for 2024 and 2023 are only 60% and 80%, respectively. So, the current tax-saving strategy is to write off as much of the cost of qualifying asset additions as you can with Sec. 179 deductions. Then claim as much first-year bonus depreciation as you can. Example: In 2024, your calendar-tax-year C corporation places in service $500,000 of assets that qualify for both a Sec. 179 deduction and first-year bonus depreciation. However, due to the taxable income limitation, the company’s Sec. 179 deduction is limited to only $300,000. You can deduct the $300,000 on your corporation’s 2024 federal income tax return. You can then deduct 60% of the remaining $200,000 ($500,000 − $300,000), thanks to first-year bonus depreciation. So, your corporation can write off $420,000 in 2024 . That’s 84% of the cost! Note that the $200,000 bonus depreciation deduction will contribute to a corporate net operating loss that’s carried forward to your 2025 tax year. Managing Tax Breaks As you can see, coordinating Sec. 179 deductions with bonus depreciation deductions is a tax-wise idea. We can provide details on how the rules work or answer any questions you have. © 2024       [...] Read more...
April 10, 2024If your small business is strapped for cash (or likes to save money), you may find it beneficial to barter or trade for goods and services. Bartering isn’t new — it’s the oldest form of trade — but the internet has made it easier to engage in with other businesses. However, if your business begins bartering, be aware that the fair market value of goods that you receive in these types of transactions is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties. Fair Market Value Here are some examples of an exchange of services: A computer consultant agrees to offer tech support to an advertising agency in exchange for free advertising. An electrical contractor does repair work for a dentist in exchange for dental services. In these cases, both parties are taxed on the fair market value of the services received. This is the amount they would normally charge for the same services. If the parties agree to the value of the services in advance, that will be considered the fair market value unless there’s contrary evidence. In addition, if services are exchanged for property, income is realized. For example: If a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the fair market value of the inventory. If an architectural firm does work for a corporation in exchange for shares of the corporation’s stock, it will have income equal to the fair market value of the stock. Joining a Club Many businesses join barter clubs that facilitate barter exchanges. These clubs generally use a system of “credit units,” which are awarded to members who provide goods and services. The credits can be redeemed for goods and services from other members. In general, bartering is taxable in the year it occurs. But if you participate in a barter club, you may be taxed on the value of credit units at the time they’re added to your account, even if you don’t redeem them for actual goods and services until a later year. For example, let’s say that you earn 2,500 credit units one year, and that each unit is redeemable for $2 in goods and services. In that year, you’ll have $5,000 of income. You won’t pay additional tax if you redeem the units the next year, since you’ve already been taxed on that income. If you join a barter club, you’ll be asked to provide your Social Security number or Employer Identification Number. You’ll also be asked to certify that you aren’t subject to backup withholding. Unless you make this certification, the club is required to withhold tax from your bartering income at a 24% rate. Tax Reporting By January 31 of each year, a barter club will send participants a Form 1099-B, “Proceeds from Broker and Barter Exchange Transactions,” which shows the value of cash, property, services and credits that you received from exchanges during the previous year. This information will also be reported to the IRS. Exchanging Without Exchanging Money By bartering, you can trade away excess inventory or provide services during slow times, all while hanging on to your cash. You may also find yourself bartering when a customer doesn’t have the money on hand to complete a transaction. As long as you’re aware of the federal and state tax consequences, these transactions can benefit all parties involved. Contact us if you need assistance or would like more information. © 2024       [...] Read more...
April 10, 2024Here are some of the key tax-related deadlines that apply to businesses and other employers during the second quarter of 2024. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. April 15th If you’re a calendar-year corporation, file a 2023 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004) and pay any tax due. For corporations, pay the first installment of 2024 estimated income taxes. Complete and retain Form 1120-W (worksheet) for your records. For individuals, file a 2023 income tax return (Form 1040 or Form 1040-SR) or file for an automatic six-month extension (Form 4868) and pay any tax due. For individuals, pay the first installment of 2024 estimated taxes, if you don’t pay income tax through withholding (Form 1040-ES). April 30th Employers report income tax withholding and FICA taxes for the first quarter of 2024 (Form 941) and pay any tax due. May 10th Employers report income tax withholding and FICA taxes for the first quarter of 2024 (Form 941), if they deposited on time, and fully paid, all of the associated taxes due. May 15th Employers deposit Social Security, Medicare and withheld income taxes for April if the monthly deposit rule applies. June 17th Corporations pay the second installment of 2024 estimated income taxes. © 2024       [...] Read more...
April 8, 2024At Financial Executives International’s Corporate Financial Reporting Insights Conference last November, staff from the Securities and Exchange Commission (SEC) expressed concerns related to the use of financial metrics that don’t conform to U.S. Generally Accepted Accounting Principles (GAAP). Companies continue to have trouble complying with the SEC’s guidelines on non-GAAP reporting, said Lindsay McCord, chief accountant of the SEC’s Division of Corporation Finance. Here’s some guidance that may help as you prepare your company’s financial statements for the first quarter of 2024. Ongoing Concerns GAAP is a set of rules and procedures that accountants typically follow to record and summarize business transactions. These guidelines provide the foundation for consistent, fair, honest and accurate financial reporting. Private companies generally aren’t required to follow GAAP, but many do. Public companies don’t have a choice; they’re required by the SEC to follow GAAP. Over the years, the use of non-GAAP measures has grown. These unaudited figures can provide added insight when they’re used to supplement GAAP performance measures. But they can also be used to mislead investors and artificially inflate a public company’s stock price. Specifically, companies may include unaudited performance figures — such as earnings before interest, taxes, depreciation and amortization (EBITDA) — to cast the company in a more favorable light. Non-GAAP metrics may appear in the management, discussion and analysis section of their financial statements, earnings releases and investor presentations. For example, a company’s EBITDA is typically higher than its GAAP earnings. That’s because EBITDA is commonly adjusted for such items as stock-based compensation, nonrecurring items, intangibles and other company-specific items. In addition, non-GAAP metrics or adjustments may be cherry-picked to present a stronger financial picture than what appears in audited financial statements. Some companies also may erroneously present non-GAAP metrics more prominently than GAAP numbers — or fail to clearly label and describe non-GAAP measures. 10 Key Questions The Center for Audit Quality (CAQ) recommends considering the following 10 questions to help ensure transparent non-GAAP metric disclosures: What’s the purpose of the non-GAAP measure, and would a reasonable investor be misled by the information? Has the non-GAAP measure been given more prominence than the most comparable GAAP measure? How many non-GAAP measures have been presented, and are they all necessary and appropriate for investors to understand performance? Why has management selected a particular non-GAAP measure to supplement GAAP measures that are already established and consistently applied within its industry or across industries Does the company’s disclosure provide substantive detail on its purpose and usefulness for investors? How is the non-GAAP measure calculated, and does the disclosure clearly and adequately describe the calculation, as well as the reconciling items between the GAAP and non-GAAP measures? How does management use the measure and has that use been disclosed? Is the non-GAAP measure sufficiently defined and clearly labeled as non-GAAP or could it be confused with a GAAP measure? What are the tax implications of the non-GAAP measure, and does the calculation align with the tax consequences and the nature of the measure? Does the company have material agreements, such as a debt covenant, that require compliance with a non-GAAP measure? If so, are they disclosed? The CAQ provides additional questions that address the consistency and comparability of non-GAAP metrics. We Can Help Non-GAAP metrics can provide greater insight into the information that management considers important in running the business. However, care should be taken not to mislead investors and lenders. Contact us to discuss your company’s non-GAAP metrics and disclosures. © 2024       [...] Read more...
April 8, 2024Stay abreast of the continuing new regulations impacting the nonprofit industry, and catch up on new key trends in the nonprofit industry!   HIGHLIGHTS FROM THIS ISSUE Engaging Donors at Every Level: A Checklist OMB Issues the 2022 Compliance Supplement GASB Statement No. 99  Executive Compensation Excise Tax: Challenging and Strategies Salary Increase Budgets Jump for Nonprofits Click below to view the file.     Nonprofit and Government Page   [...] Read more...
April 8, 2024When’s the last time you evaluated your not-for-profit’s social media strategy? Are you using the right platforms in the most effective way, given your mission, audience and staffing resources? Do you have controls to protect your nonprofit from reputation-damaging content? These are important questions — and it’s critical you review them regularly. At the very least, you need a social media policy that sets some ground rules Annual Reviews As you know, the social media landscape changes quickly. The platform that’s hot today may be decidedly not hot tomorrow. So review your online presence at least once a year to help ensure you’re dedicating resources to the right spaces. Most nonprofits maintain a presence on Facebook and LinkedIn because that’s where likely donors tend to be. But if you’re an arts nonprofit or visually oriented, Instagram may be a better venue. And if your constituents are teenagers or young adults, you’re most likely to find them on TikTok. In general, fresher, frequently updated accounts get more traffic and engagement. So try not to overextend your organization by posting on multiple platforms with only limited staff resources. Determine where you’ll get the most bang for your buck by surveying supporters and observing where peer nonprofits post. Content Monitoring Social media is 24/7, and incidents can escalate quickly. So closely monitor your accounts, as well as conversations that refer to your nonprofit. A “social listening” tool that scans the web for your nonprofit’s name can be extremely helpful. But the best defense against reputation-busting events is a formal social media policy. Your policy should set clear boundaries about the types of material that are and aren’t permissible on your nonprofit’s official accounts and those of staffers. For example, it should prohibit employees, board members and volunteers from discussing nonpublic information about your organization on their personal accounts. With organizational accounts, limit access to passwords and regularly check posts and comments. Content from your feeds can easily go viral and create controversy. Make sure your staff knows when to engage with visitors, particularly difficult ones, and maintains a zero-tolerance policy for offensive comments. Crisis Plan Mistakes, or even intentionally damaging posts, can occur despite comprehensive policies. Create a formal response plan so you’ll be able to weather such events. The plan should assign responsibilities and include contact information for multiple spokespersons, such as your executive director and board president. Identify specific triggers and a menu of potential responses, such as issuing a press release or bringing in a crisis management expert. Be sure to include IP staffers or consultants on your list. Hopefully, a crisis won’t occur. But if it does, you’ll want to sit down and review your plan’s effectiveness after the situation has been resolved. Select and Protect These days, no nonprofit can afford to ignore social media. Just make sure you’re applying your time and effort to the right platforms and protecting your accounts from those who would harm your organization. © 2024     [...] Read more...
April 8, 2024Even if your not-for-profit organization rarely needs to reimburse staffers, board members or volunteers, reimbursement requests almost certainly will occasionally appear. At that point, will you know how to pay stakeholders back for expenses related to your nonprofit’s operations? If you have a formal reimbursement policy, you will. Plus, you’ll be able to direct individuals with reimbursement questions to your formal document and minimize the risk of disagreements. 2 Categories In the eyes of the IRS, expense reimbursement plans generally fall into two main categories: 1. Accountable plans. Reimbursements under these plans generally aren’t taxable income for the employee, board member or volunteer. To secure this favorable tax treatment, accountable plans must satisfy three requirements: 1) Expenses must have a connection to your organization’s purpose; 2) claimants must adequately substantiate expenses within 60 days after they were paid or incurred; and 3) claimants must return any excess reimbursement or allowance within 120 days after expenses were paid or incurred. Arrangements where you advance money to an employee or volunteer meet the third requirement only if the advance is reasonably calculated not to exceed the amount of anticipated expenses. You must make the advance within 30 days of the time the recipient pays or incurs the expense. 2. Nonaccountable plans. These don’t fulfill the above requirements. Reimbursements made under nonaccountable plans are treated as taxable wages. Policy items Your reimbursement policy should make it clear which types of expenses are reimbursable and which aren’t. Be sure to include any restrictions. For example, you might set a limit on the nightly cost for lodging or exclude alcoholic beverages from reimbursable meals. Also be sure to require substantiation of travel, mileage and other reimbursable expenses within 60 days. The documentation should include items such as a statement of expenses, receipts (showing the date, vendor, and items or services purchased), and account book or calendar. Note that the IRS does allow some limited exceptions to its documentation requirements. Specifically, no receipts are necessary for: A per diem allowance for out-of-town travel, Non-lodging expenses less than $75, or Transportation expenses for which a receipt isn’t readily available. Your policy should require the timely (within 120 days) return of any amounts you pay that are more than the substantiated expenses. Standard Rate vs. Actual Costs Finally, address mileage reimbursement, including the method you’ll use. You can reimburse employees for vehicle use at the federal standard mileage rate of 67 cents per mile for 2024, and volunteers at the charity rate of 14 cents per mile. Unlike employees, however, volunteers can be reimbursed for commuting mileage. Alternatively, you can reimburse employees and volunteers for the actual costs of using their vehicles for your nonprofit’s purposes. For employees, you might reimburse gas, lease payments or depreciation, repairs, insurance, and registration fees. For volunteers, the only allowable actual expenses are gas and oil. What Makes Sense You don’t need to craft a reimbursement policy on your own. We can help ensure you include the elements that make sense given your nonprofit’s size, mission and activities and update it as your organization grows and evolves. © 2024     [...] Read more...
March 19, 2024Boise, Idaho (March 6, 2024) – Harris CPAs is pleased to announce that it has a received a significant investment from DFW Capital, a private equity investment firm. This capital will allow Harris CPAs to continue to achieve its vision, to stay at the forefront of the profession, and to continue advancement in technology, improving operations and expansion into new markets at an accelerated pace. Additionally, the firm will have the ability to provide additional resources and value to employees, clients and the community—the very core of the Harris CPAs mission. Josh Tyree, the current President for Harris CPAs, has been with the firm since 2009. He is eager to build on this partnership with DFW, to expand both organically and through investment into other accounting service organizations. “We are looking forward to this new venture and all the possibilities it opens up for our firm and our clients. Working with DFW will allow us to achieve our firm’s vision, to grow into new markets and to gain new opportunities for our clients, while still maintaining our current model, core beliefs and values.” Harris CPAs Chief Practice Officer, Cheryl Guiddy said, “This investment allows us to expand on our client service in a way that will help us stand out from others in the industry. I am looking forward to the benefits it will provide as we continue to adapt to the changing landscape in our industry.” Robert Shappee, the Chief Financial Officer adds, “This partnership puts Harris CPAs in an exciting financial situation, allowing the firm to capitalize on and support its clients and the industries and communities who have shown us support over the years.”   [...] Read more...
February 21, 2024by Terry Kissler, CPA Insights on 2023 tax return changes and anticipated tax revisions post-2025, including adjustments to deductions, tax bracket and estate tax limits. As we turn the calendar and gear up for another tax season, it’s never too soon to look ahead and prepare for the upcoming landscape of the tax world. Our profession and taxpayers alike can take some solace in the fact that for 2023, there weren’t a whole lot of changes that will impact the 2024 filing season. By now, the COVID-19 relief packages, which so abruptly altered our rules and filings, have since fizzled out for the most part. I’ll touch on a couple of those changes that we as taxpayers got to enjoy the last few years that no longer are in effect. However, the purpose of this article is to look ahead to what’s changing down the road. Let’s start with the immediate changes you’ll notice on your 2023 tax returns. As part of the COVID-19 relief tax packages, the IRS incentivized business owners to spend money at their local restaurants. For 2021 and 2022, business meals were 100% deductible to the business. For 2023, the deductibility of business meal expenses reverted back to 50%. You also may notice some standard inflation adjustments for various retirement plans and health savings plans. On your individual returns, there will be an increase in the standard deduction and, of course, a shift in tax brackets. To highlight a few of these changes, this is what you’ll see: The standard deduction for married couples has increased from $25,900 to $27,700, while single individuals will see that rise from $12,950 to $13,850 The maximum 401(k) contribution limit has gone from $20,500 in 2022, up to $22,500 in 2023. For your Roth and traditional IRAs, you’ll see that limit go from $6,000 ($7,000 if age 50 or older) to $6,500 ($7,000 if age 50 or older) in 2023. Keep in mind, you have until April 15 of 2024 to max out your 2023 IRA contribution. Changes to Know Let’s shift gears to tax changes a little further on the horizon. These we can actually plan for and be prepared when it happens. The Tax Cuts and Job Act (TCJA), put into action on Jan. 1, 2018, drastically changed the federal tax code. These changes, however, will sunset after 2025, meaning in 2026 our tax laws as we’ve grown to know and understand will shift back to how it was in 2017 – adjusted for inflation, of course. Here is what to expect, just to name a few important points: The tax bracket rates will change. The lowest bracket of 10% for low-income earners should remain the same. But the rates on the various brackets working up to the highest earners will increase by 1% to 4%, depending on the bracket. The high standard deductions that taxpayers have enjoyed over the past several years, along with the increased child tax credit, are set to expire and return back to pre-TCJA levels. This means it’s likely more individuals will be itemizing deductions again. Charitable donations have been deductible as an itemized deduction up to 60% of your adjusted gross income (100% during the COVID-19 relief years) and will return back to 50% of adjusted gross income after the TCJA expires. For example, if your adjusted gross income (AGI) is $100,000, you could deduct up to $50,000 as charitable donations on your tax return. Any donations above that would be carried forward to deduct in a later year. Since the TCJA rules came into effect, we’ve seen drastic changes in estate tax exemption limits. Pre-TCJA, the estate tax exemption for individuals was $5.49 million, and married couples was $10.98 million. We’ve seen those figures climb to $13.61 million for individuals and $27.22 million for married couples in 2024. The inflation-adjusted estimate for 2026 estate tax exemption limits is currently around $7 million for individuals and $14 million for married couples. With the distinctly higher limits we’re experiencing now, the next two years may be your prime opportunity to transfer assets out of your control and into that of your heirs. As farmers and ranchers, your most valuable asset is likely the land you own. Keep in mind, that upon your passing, that land, along with all your other assets, gets valued as of the date of your death and added to that estate limit. So if you are someone whose land, investments, cash and other assets (including your ownership if these assets are held in LLCs or other entities) exceed those $7 or $14 million dollar values, it very well could impact those beneficiaries of your estate. Don’t wait to speak to your attorney and accountant about these possible issues. These are just a few examples of changes to be aware of. Your trusted tax adviser can help you navigate these changes, along with others that will change the tax landscape in the near future. This article was featured as a blog on the AG Proud Idaho website, February 12, 2024. Link to full article here.   Construction & Engineering Page Real Estate Page [...] Read more...
January 25, 2024  Beginning in 2024, small businesses will need to comply with the Corporate Transparency Act. Harris CPAs is excited to work with our clients that are impacted and we are close to selecting a third party provider to assist our clients with these filings. We will have that information available soon! In the meantime we wanted to provide a brief overview of the Act and its requirements. Corporate Transparency Act – What is it and what does it mean for me? In 2021, Congress enacted the Corporate Transparency Act. This now requires some businesses to file a Beneficial Ownership Information (BOI) report with FinCEN (Financial Crimes and Enforcement Network) of the United States Treasury. In preparing the filing, there are several steps to go through to be in compliance with the new reporting requirement. We hope to walk you through these important steps to make the process a bit more understandable. Here is an overview and checklist of the Corporate Transparency Act guidelines to follow: Determine if you are a “reporting company.” Define who the beneficial owners are – spoiler alert, it’s not just members of the LLC or shareholders. Identify up to two company applicants. Understand the timeline and file electronically on the Treasury Department’s website (which went live on January 1, 2024). How do I determine if I have a “reporting company”? A “reporting company” is a corporation, Limited Liability Company (LLC), or other entity created by filing a document. This must be filed with a Secretary of State, a similar office under the law of state or Indian tribe, or a foreign company registered to do business in the U.S. at any Secretary of State or Indian Tribe filing. There are twenty-three types of entities that are exempt from filing. Many of the exemptions are publicly traded companies, nonprofits (organized under 501(c) of the Internal Revenue Code) and certain large operating companies. Large operating companies are defined as having average gross receipts over the past three taxable years in excess of $5 million AND employing more than 20 full-time staff members. I have determined that I have a “reporting company”; who are my beneficial owners? Once you determine that you have a filing requirement, you must determine who has to be reported as a beneficial owner. A beneficial owner is defined as any individual who directly or indirectly exercises substantial control over a reporting OR owns at least 25% of the ownership interest in the company. Ownership interests include any items that may be converted to ownership in the future (i.e., stock options, restricted stock units or debt that may be converted to equity). There are 5 exceptions to the definition of a beneficial owner. This includes: (1) a minor child; (2) a nominee/intermediary/custodian/agent; (3) employees who are not senior officers, do not exercise substantial control over the business, or do not have an economic benefit of the business other than wages earned; (4) ownership through future inheritance; and (5) a creditor holding non-convertible debt instrument. Who are the company applicants? The company is able to report up to two applicants on the filing of the BOI. The company applicant would be the person(s) who filed the original organizational documents with the Secretary of State when the entity was created. If a third party was used, the individual within the company who authorized the third party to create the entity would be the applicant. Company applicants are only required to be disclosed if the entity was created on or after January 1, 2024. For entities created before this date, company applicants are not required to be disclosed. What information do I need to collect and report for the beneficial owners of my business? For a “reporting company”, you will need to report: (1) the full legal name of the business along with any trade names used; (2) the complete current U.S. address; (3) the state of registration; and (4) the taxpayer ID number used by the business for tax filings. For each beneficial owner, you will need their full legal name, date of birth, complete current address and a copy of one of the following non-expired documents: U.S. Passport, State Driver’s license or identification document issued by a state, local government or tribe. These documents will need to be uploaded to the Treasury Department portal. When is my report due? New entities filed with a Secretary of State after 12/31/2023 and before 12/31/2024 must file within 90 days of creation of the entity. Entities filed with a Secretary of State after 12/31/2024 will have to prepare the initial filing 30 days after the initial Secretary of State filing. However, existing companies created with a Secretary of State have to file their initial report by December 31, 2024. Once the initial report is filed, there is no additional filing needed until you experience a change in the BOI report. All companies who have a change in their BOI after initial filing are required to file an updated report within 30 days of the change. Examples of changes include changes to name, address, obtaining a new driver’s license or passport, changes to officer positions, and registering a DBA. If a beneficial owner becomes deceased, the report needs to be filed within 30 days of settling the owner’s estate. What happens if companies do not file? Penalties accrue at $591 per day, up to 2 years in prison, and/or up to $10,000 in fines. Hopefully the information provided below leaves you feeling a bit more informed on the steps needed to properly file with the new reporting requirement. Obviously working with your accountant can greatly help in navigating any questions or challenges that arise for your business, as it relates to the Corporate Transparency Act.   Harris will be providing more information to assist you in the filing requirement. Look for this communication to come soon.   [...] Read more...
January 23, 2024American workers are facing a savings crisis made more acute by soaring interest rates, persistent inflation, and other economic stressors. In its 2023 Workplace Wellness Survey, the Employee Benefit Research Institute (EBRI) found that 30% of workers could not pay for an unexpected $500 expense, while half of EBRI’s respondents considered their retirement savings to be their only “significant emergency savings.” This dependence on retirement savings is also rising according to Vanguard research that reveals hardship withdrawals from workplace retirement plans increased from 2021 to 2022. About 80% of those withdrawals were taken by lower-income participants (defined as the participants with an annual income of between $30,000 and $75,000) to avoid losing their home or to pay for unexpected medical bills. Further, one-third of the participants who took a hardship withdrawal in 2022 had previously taken a withdrawal in 2021. This data underscores an important challenge facing employees and employers alike: near-term financial needs may sabotage the long-term financial security and retirement outcomes of many Americans. And while today only 20% of workers have access to an emergency savings account at work, EBRI’s survey found that more than 80% of those without such a benefit want one and would prioritize it above other benefits, such as health savings accounts and additional paid time off. How Employers Can Help: The In-Plan Options To help address this issue, the Secure 2.0 Act of 2022 offers plan sponsors a way to include an emergency-savings benefit, also known as pension-linked emergency savings accounts or PLESAs, as an add-on to an existing retirement plan program. The Act permits PLESAs to be added as of January 1, 2024. Here are a few things to know about PLESAs: PLESAs are intended for non-highly-compensated employees (as defined by the IRS). Employees can contribute up to $2,500 (or a lesser amount determined by the plan sponsor) on an after-tax (Roth) basis. Employees may take withdrawals as frequently as monthly. Employers have the option of auto-enrolling employees in a PLESA up to a rate of 3% of compensation. Employers may match contributions to a PLESA, but must: Match at the same rate that applies to any retirement plan match. Make matching contributions to the participant’s retirement account, not the PLESA. Employees are not required to document a hardship or immediate financial need to take a withdrawal. PLESA contributions must be held as cash in interest-bearing deposit accounts or in regulated principal preservation investment products. While the intended goal of PLESAs is positive — to promote healthy saving habits while helping to preserve the retirement savings of employees — there remain many open questions about key aspects of the legislation including eligibility, employee and employer contributions, and distributions. The DOL and IRS have been directed to study emergency savings in defined-contribution plans and to report their findings to Congress, but the deadline for doing so isn’t until December 29, 2029. For plan sponsors concerned about the complexity and lack of regulatory clarity around setting up and administering PLESAs, a standalone emergency savings product is an alternative. Out-of-Plan Alternatives A growing number of retirement plan recordkeepers are partnering with plan sponsors to add out-of-plan (sometimes referred to as à la carte) emergency savings products to their menu of benefits. Financial wellness nonprofit Commonwealth interviewed plan recordkeepers and noted that eight out of nine recordkeepers offered or are planning to offer an emergency savings product. One such program recently initiated by some plan sponsors allows employees to contribute a portion of their net pay to an account maintained by the company’s 401(k) recordkeeper. Financial education modules and one-on-one financial coaching sessions are also being offered in conjunction with the program. Insight: Weigh the Pros and Cons When considering either approach, plan sponsors need to think through what they are trying to achieve. If it is a behavioral shift they are seeking, the in-plan option may make sense because once participants reach the $2,500 contribution limit, any overflow of funds automatically goes into the participant’s Roth retirement savings along with any employer matching contributions. In this way, plan sponsors are encouraging better short- and long-term saving habits, while also helping to reduce hardship withdrawals and loans from retirement plans along with the associated penalties and fees. For other employers, particularly smaller companies, the out-of-plan option may be a more easily implemented choice because employers are not required to already have a retirement plan in place. Also, because standalone savings plans are not subject to ERISA, there are no regulatory hurdles, auto-enrollment, auto-escalation, or fiduciary obligations for sponsors. The relative simplicity of implementing these out-of-plan savings vehicles could offer an attractive option for smaller employers. However, while out-of-plan products are attractive for their ease of use, they do not include an employer matching contribution feature. From a behavioral perspective, the out-of-plan product lacks the employee behavioral trigger that some employers want to achieve. Employers who are looking to modify employee savings habits could consider other options. We recommend sponsors clarify the goals for your employees and your benefits program and consider whether adding some type of emergency savings option (in or out-of-plan) may complement your overall objectives.   [...] Read more...
January 15, 2024While Accounting Standards Codification (ASC) Topic 842 is applicable to all entities, the adoption of the new leasing standard by nonprofit organizations is bringing into focus some unique considerations that may impact the conclusion of whether a contract actually contains a lease. What is a Lease? To set the stage for some of the nonprofit-specific lease considerations to follow, it is important to understand the definition of a lease under Topic 842. A lease is defined as follows: “A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.” Free or Reduced Rent A nonprofit organization may be given space, equipment or other assets to use free of charge, or be charged below-market rates for these items. For these types of transactions, a nonprofit organization must consider whether to apply ASC Topic 842, Leases, ASC Topic 958-605, Not-for-Profit Entities Revenue Recognition – Contributions, or a combination of both standards. Let’s illustrate these concepts with some specific examples. Example 1: Free Rent Company A provides Nonprofit B with the right to use office space free of charge for five years. Company A retains legal title to the office building but allows Nonprofit B to use the space in furtherance of Nonprofit B’s mission. If Company A had rented the space to another entity, Company A would have charged $1,000 per month for the first year of the lease with a 3% annual escalation of rent for each additional year of the five-year term, which is considered to be the market value. What’s the accounting for that? On day one of the arrangement, Nonprofit B would record a contribution receivable, and related contribution revenue, for the full amount of rent payments over the five-year period ($63,710), discounted to present value using an appropriate discount rate. The revenue is donor-restricted due to time and is released from donor restrictions as the contributed asset (the office space) is used each period. On a straight-line basis each reporting period, Nonprofit B reduces the contribution receivable balance and records rent expense representing its use of the office space. What’s the basis for the accounting? The transaction in this example falls within the scope of contribution accounting under Topic 958-605 but not lease accounting under Topic 842, because Topic 842 requires an exchange of consideration. In other words, because Nonprofit B does not pay Company A cash (or other assets) for the use of the office space, the transaction falls outside of Topic 842. If the contributed assets are being provided for a specific number of periods (in this example, the period is five years), the contribution revenue (and related receivable) should be recorded in the period received for the market value of the lease payments discounted to present value. If the arrangement in this example had not specified the period of use, Nonprofit B would have recorded contribution revenue and the related rent expense each reporting period based on the fair value of the space for that period. Example 2: Below-Market Rent Company C provides Nonprofit D with the right to use office space for $250 per month for five years. Company C retains legal title to the office building, but allows Nonprofit D to use the space in furtherance of Nonprofit D’s mission. If Company C had rented the space to another entity instead, Company C would have charged $1,000 per month for the first year of the lease with a 3% annual escalation for each additional year of the five-year term, which is considered to be the market value. For purposes of this example, there is no variable lease cost, no non-lease components, no prepaid rent, no initial direct costs, and no lease incentives. We will assume a 3.5% risk-free rate for the calculation of the lease liability. We will also assume Nonprofit D will use 3.5% as the discount rate for the contribution. What’s the accounting for that? On the commencement date of the lease, Nonprofit D would record a lease liability equal to the present value of the lease payments totaling $13,550 (rounded) and a right-of-use asset in the same amount. For simplicity purposes, the present value calculations in this example are based on annual rather than monthly payment amounts. The contribution portion of this arrangement is calculated as the difference between the fair market value of rent ($63,710) and lease payments ($15,000) over the lease term totaling $48,710. Nonprofit D should record contribution revenue and a related contribution receivable at present value of $43,870 on the commencement date of the lease. Similar to the first example, the revenue is donor restricted due to time and would be released from donor restrictions as the contributed asset (the office space) is used each period. On a straight-line basis each reporting period, Nonprofit D reduces the contribution receivable balance and records rent expense representing its use of the office space. This example assumes a known fair market value for the rental payments. When such information is not known, organizations need to obtain such information directly from the lessor or find comparable market data for a similar asset with a similar rental term. What’s the basis for the accounting? The transaction above falls within the scope of both Topic 842 and Topic 958-605. Because ASC 842 defines consideration as cash or other assets exchanged, as well as non-cash consideration (subject to certain exceptions), only the portion of the transaction requiring payment is considered to be a lease within the scope of Topic 842. The fair value of the lease minus the cash payments made represents the contribution revenue and related receivable. In both of the illustrative examples above, the contribution of free or reduced-rate office space represents a non-financial asset. Nonprofit organizations must consider the revised presentation and disclosure requirements for contributed non-financial assets as outlined in Accounting Standards Update 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets. This standard is effective for periods beginning after June 15, 2021. Embedded Leases As nonprofit organizations review their activities and agreements to determine the universe of lease transactions, in both the year of adoption of Topic 842 and in subsequent periods, management should be aware that there may be leases “hiding” within service or other contracts. These types of contracts are referred to as contracts with embedded leases. The following chart provides some examples of service or other contracts where embedded leases may be present: Information Technology: May contain embedded assets like phones, computers, copies, servers, etc. Advertising: May contain embedded assets such as the use of a billboard. Inventory Management: Third parties may be engaged to assist a non-profit organization with inventory management. Use of warehouse space could be an embedded asset. Shipment of Goods or Materials: Use of a rail car or semi-truck. Food Service: Some organizations provide on-site cafeterias or vending machines. The use of the vending machines, freezers, refrigerators, soft-drink dispensers, etc. could represent an embedded lease. As part of internal policies and procedures related to accounting for leases, management should document, in the year of adoption and annually, how the universe of leases was determined, as well as how management considered the possible existence of embedded leases. While embedded leases may not be material to a nonprofit organization’s financial statements, an analysis to determine the relative value of such transactions should be performed nonetheless. Use of the Risk-Free Rate As an accounting policy election, Topic 842 permits nonprofit organizations (specifically entities that are not public business entities) to use a risk-free discount rate for leases instead of an incremental borrowing rate, determined using a period comparable with that of the lease term. The use of the risk-free rate may be a more expeditious approach for organizations that do not have a readily available incremental borrowing rate. As a reminder, Topic 842 defines the incremental borrowing rate as “the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to lease payments in a similar economic environment.” If an organization has a real estate lease with lease payments totaling $700,000 over the 10-year lease term, it would not be appropriate for the organization to use its $5 million, one-year, line-of-credit borrowing rate as the incremental borrowing rate because the term and amount of the borrowing is not similar. Organizations wishing to use an incremental borrowing rate that do not have such a rate readily available may need to use external parties such as banks or other lending institutions or valuation professionals to determine an appropriate collateralized rate for certain lease agreements. In summary, nonprofit organizations should take the time to examine all their agreements to assess whether they have any embedded leases or other arrangements that are subject to lease accounting. Written by Amy Duffin. © 2023 BDO USA, LLP. All rights reserved. www.bdo.com   See 1 ASC 842-10-15-3. [...] Read more...
December 16, 2023  As we approach the new year, it is time for businesses to review their 2023 and 2024 tax situations and identify opportunities to reducing, deferring or accelerating their tax obligations. Click the the picture below to read the full issue on 2023 Year-End Tax Planning for Businesses. This year’s guide is compiled into chapters for easy reference: Tax Accounting Methods Business Incentives & Tax Credits Customs & International Trade Financial Transactions & Instruments Global Employer Services Income Tax – ASC 740 International Tax Partnerships Real Estate State & Local Tax Transfer Pricing [...] Read more...
December 16, 2023As we approach the new year, it is time for individuals to review their 2023 and 2024 tax situations and identify opportunities to reducing, deferring or accelerating their tax obligations. Click the the picture below to read the full issue on 2023 Year-End Tax Planning for Individuals: Highlights from this guide: Individual Tax Planning Highlights with tax brackets Timing of Income and Deductions Long-Term Capital Gains with rate brackets Retirement Plan Contributions Foreign Earned Income Exclusion Kiddie Tax Alternative Minimum Tax Limitations on Deduction of State and Local Taxes ( Salt Limitations) Charitable Contributions Estate and Gift Taxes Net Operating Losses and Excess Business Loss Limitation [...] Read more...
December 11, 2023  While, the IRS’ announcement last month provides significant compliance relief for processing catch-up contributions as after-tax “Roth” contributions, the focus now for plan sponsors should be on proper implementation of the guidance. IRS Notice 2023-62 established a two-year administrative extension window for plan sponsors to delay their implementation of mandated changes required by the SECURE 2.0 Act of 2022 until January 1, 2026. It also clarified that the IRS will allow catch-up contributions to continue to be made under pre-SECURE 2.0 law for plan years starting in 2024. The IRS took this action to address a drafting mistake in Section 603 of SECURE 2.0 that technically eliminated all catch-up contributions by accidentally deleting IRC Section 402(g)(1)(C). Legislators have indicated Congress intends to resolve this error with a future technical correction. This extension was welcomed by the defined contribution retirement plan community, which had previously voiced concerns about having insufficient time to update their systems to implement the provision. Section 603 of SECURE 2.0 had originally required catch-up contributions made to a qualified retirement plan — such as 401(k), 403(b), or 457(b) plans — by higher income employees (who earned $145,000 or more in the prior year) to be made on a Roth basis beginning January 1, 2024. Despite the recent extension, additional clarification is needed for plan administrators, sponsors, and other key stakeholders to fully understand their regulatory burden. Execution Challenges The new so-called “Rothification” rules had generated numerous questions from key retirement plan industry stakeholders, including large employers. There were also requests for additional implementation time as well as for more detailed and clarifying regulatory guidance. For instance, the ERISA Industry Committee (ERIC) published an open letter in July 2023 that cited a number of administrative hurdles for implementation and the need for transition relief. One concern cited was the new $145,000 income limit imposed on Roth catch-up contributions. Because it is a brand-new threshold (and not part of any existing qualified plan rule or requirement), implementation would require plan sponsors to coordinate closely with their payroll administrators, recordkeepers, and other service providers to make the necessary system updates. The new income limit is also anticipated to have a significant trickle-down impact on both sponsor and provider systems and processes. Plan sponsors also need to develop and roll out communication of the changes to employees, which requires IRS guidance that had not yet been provided. As ERIC’s open letter indicated, the industry had concerns that starting implementation before the issuance of IRS guidance could result in costly re-work. Additionally, employers whose plans do not currently allow for Roth plan contributions faced a dilemma as to whether to eliminate catch-up contributions entirely (at least, until they were able to implement a Roth program) or attempt to quickly implement a Roth option. Welcome Relief The IRS notice provides a two-year administrative transition period during which qualified retirement plans offering catch-up contributions will be treated as satisfying the new rules in Section 414(v)(7)(A) even if the contributions are not designated as Roth contributions throughout the transition period (or until December 31, 2025). Additionally, a plan that does not currently provide for any designated Roth contributions will still be treated as satisfying the new requirements. The notice also identifies some topics for expected future regulatory guidance, including the following proposed IRS positions on important open questions: Higher-income employees with no FICA income in the preceding year would not be subject to the requirements of the new catch-up rules. Plan sponsors may treat higher-income earners’ pre-tax, catch-up contributions elections as default Roth catch-up elections when they become subject to the mandatory Roth catch-up treatment. For plans maintained by more than one employer, the preceding calendar year wages for an eligible participant would not be aggregated with wages from another participating employer for purposes of determining whether the participant’s income meets the $145,000 threshold.   [...] Read more...
November 6, 2023Stay abreast of the continuing new regulations impacting the nonprofit industry, and catch up on new key trends in our Nonprofit Fall 2023 Newsletter!   HIGHLIGHTS FROM THIS ISSUE Cash Benefits for Supporting ESG – New Markets Tax Credit The IRS Weighs in on Nonprofit NIL Collectives  GASB Implementation Guide No. 2023-1, Implementation Guidance Update-2023 The Evolving Role of CFOs in Driving ESG Initiatives Are Your Processes Innovative or Merely Electronic? Leverage Technology the Right Way BDO Professionals in the News Form 990 Review: What Nonprofit Boards Should Look For … Click below to view the file.   Nonprofit and Government Page   [...] Read more...
October 16, 2023Corporate sponsorships represents a significant funding source for tax exempt organizations and an important business strategy for taxable organizations. Sponsorships creates identification with charitable activity. This type of identification is valuable to those organizations. Sponsorship payments received by tax-exempt organizations has been an issue that the IRS has struggled with, first focusing the nature of the services provided by the exempt organization rather than the benefit received by the sponsor, and distinguishing advertising (which is an unrelated trade or business activity) from acknowledgements (which are not UBTI). Then section 513(i) was added to the law, which defines qualified sponsorship payments and provides that they are not subject to unrelated business income tax. What are Qualified Sponsorship Payments? Treas. Reg 1.513-4(c)(i) defines a qualified sponsorship payments as any payment of money, transfer of property or the performance of services, by any person engaged in a trade or business, where there is no arrangement or expectation that the person will receive any substantial return benefit in exchange for the payment. What are NOT Qualified Sponsorship Payments? Treas. Reg 1.513-4(b) states that a qualified sponsorship payment does not include: Any payment if the amount of such payment is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. Any payment which entitles the payor to the use or acknowledgement of the name or logo (or product lines) of the payor’s trade or business in regularly scheduled and printed material (periodicals) published by or on behalf of the exempt organization that is not related to and primarily distributed in connection with a specific event conducted by the payee organization; or Any payment made in connection with any qualified convention or trade show activity. (The term “convention and trade show activity” means any activity of a kind traditionally conducted at conventions, annual meetings, or trade shows.) Any payment which entitles the payor to acknowledgement containing qualitative or comparative language, price information or other indications of savings or value associated with a productor service, an endorsement or an inducement to purchase, sell or use the sponsor’s company, service, facility or product. These are considered advertising. A single message that contains both advertising and acknowledgement is considered advertising. What is Substantial Return Benefit? Treas. Reg 1.513-4(c)(2) provides that if there is an arrangement or expectation that the payor will receive a substantial return benefit with respect to any payment, then only the portion of the payment thatexceeds the fair market value of the substantial return benefit is a qualified sponsorship payment. However, if the exempt organization does not establish that the payment exceeds the fair market value of any substantial return benefits, the no portion of the payment constitutes a qualified sponsorship payment. More information on Qualified Sponsorship Payments can be found at https://www.irs.gov/charities-non-profits/advertising-orqualified-sponsorship-payments.   Nonprofit and Government Page   [...] Read more...
September 7, 2023What are In-Kind Contributions In-kind contributions are a wonderful way for your nonprofit organization to receive support that goes beyond monetary donations. These unique contributions involve the transfer of assets, such as goods or services, and can come from individuals, organizations, or companies. Goods: In-kind donations can include physical materials that can be of great value to your organization. For example, someone might generously donate office furniture or computer equipment, which you can use to further your mission. Services: Talented professionals can also contribute their skills and expertise as in-kind donations. This could be anything from accounting and legal assistance to free use of meeting spaces. Recording In-Kind Donations Properly documenting in-kind donations serves several important purposes. It ensures that both you and your donors have the necessary records for tax purposes, and it allows you to accurately report these contributions in your annual tax forms. Additionally, properly recording in-kind documents is arequirement for following Generally Accepted Accounting Principles (GAAP). When you receive in-kind donations, it’s essential to promptly estimate their value and record them in your organization’s chart of accounts. You can create separate accounts like “In-Kind Contributions – Goods” and “In-Kind Contributions – Services” in your chart of accounts to differentiate between tangible goods and professional services received. Let’s say a lawyer generously donates $2,000 worth of services. To record this in your books, you would make the following entry: Debit in-kind Contributions – Services $2,000 Credit in-kind Contributions – Services $2,000 Remember, the aim is to maintain a net zero balance in the account since the contribution doesn’t directly affect your bank account balance. While your cash remains the same, the in-kind donation enhances your flexibility by eliminating the need to spend money on the donated item or service. Tax Considerations There are two aspects to consider: the forms your nonprofit organization needs to submit annually, and the taxes your supporters pay. Are In-Kind Donations Tax-Deductible for Donors? Absolutely! In-kind donations are tax-deductible for your donors, which is a fantastic incentive for them to contribute. To help your supporters claim a tax deduction for their in-kind donations, it’s important to provide a written acknowledgment. This acknowledgment should include your nonprofit’s name, Employer Identification Number (EIN), date of receipt or service, a description of the donation or service contributed, and a statement confirming that the donor didn’t receive anything in return for their gift. Unlike monetary donations where your organization provides the value, in-kind donations require the donor to determine the fair value of their contribution. However, you can offer a good-faith estimate to assist them. When drafting your acknowledgment letters, make sure to review the IRS guidelines to ensure compliance and convey your appreciation effectively. Do In-Kind Donations Need to be Reported on the Form 990? Yes, they do! Tangible in-kind donations should be recorded and reported on Form 990. Keep in mind that if your in-kind donations are valued at more than $25,000 or include art or historical artifacts, there may be additional paperwork involved. Although intangible donations like services are not mandatory to report on this form, it’s still a good idea to record them to maintain compliance with GAAP standards. Remember to thoroughly research IRS guidelines to understand specific rules, regulations, and reporting requirements for different types of in-kind donations. For example, if you receive vehicle donations valued over $500, there are specific IRS rules you need to follow. Ensuring compliance with IRS guidelines is essential to properly accept and report in-kind contributions. Nonprofit and Government Page [...] Read more...
August 22, 2023    The U.S. Department of Labor (DOL) has issued its long-awaited Final Rule to revise the Davis Bacon Act (DBA) regulations. The Final Rule will be effective 60 days after the date of publication in the Federal Register, which currently is scheduled for August 23rd. While we are still analyzing all the regulatory changes in the 812 pages Final Rule, it is clear (like the DOL’s Notice of Proposed Rulemaking (NPRM) issued March 18, 2022) that the Final Rule contains only a few changes that will be beneficial to contractors, while most of the changes heavily favor workers and unions and enhance the DOL’s enforcement tools. Examples of key changes in the latter category include: Changing the way wage and fringe rates are developed in wage determinations to favor adoption of union rates which will result in higher wage and benefits Broadening the definition of “site of the work” to include locations where “significant portions” of a project (such as prefabricated materials manufacturing facilities) are produced Expanding DBA coverage of truck drivers and material suppliers Making DBA contract clauses and applicable wage determinations effective by “operation of law” even where a contracting agency fails in include them in a contract or funding agreement Requiring DOL approval of vacation and holiday plans for fringe credit Requiring contractors to consent to cross withholding for back wages owed on contracts held by different but related legal entities (those controlled by the same controlling shareholder or entities that are joint venturers or partners on a federal contract) Expanding record-keeping obligations These changes in the DBA regulation will impact not only Davis Bacon Act contracts, but also the DBA requirements in over 70 statutes (DBA Related Acts). As a result, federal agencies provide funding assistance for construction projects primarily through direct funding, grants, loans, loan guarantees, or insurance. Also impacted, at least in part, will be the prevailing wages requirements of the Inflation Reduction Act, which provides enhanced tax credits for certain clean energy projects in exchange for compliance with prevailing wage and apprenticeship requirements. We anticipate multiple legal challenges to the Final Rule by construction trade associations and other interested parties, and that these court filings will be accompanied by requests for temporary injunctions of the Final Rule. Construction contractors and other impacted parties should start gearing up now for compliance with the Final Rule. Construction & Engineering Page Real Estate Page [...] Read more...
July 13, 2023The Department of Labor (DOL) released the final changes to Form 5500 relating to the September 2021 notice of proposed form revisions (NPFR) to amend the Form 5500. The changes fall into seven major categories. These changes are effective for plan years beginning on or after January 1, 2023 and will be incorporated into the 2023 Form 5500. As a reminder, the Form 5500 provides the DOL, Internal Revenue Service and the Pension Benefit Guaranty Corporation with information about a retirement plan’s operations, qualifications, financial condition, and compliance with government regulations. Below, we review some of the key changes to Form 5500 and what the adjustments are. Are You a Large Plan or a Small Plan? The Rules Have Changed Historically, determining whether your plan was “large” versus “small” was based on the number of eligible participants in your plan. If your plan had at least 100 eligible participants on the first day of the plan year, you were considered a large plan—regardless of how many participants had accounts or elected to participate in the plan. As a result, the DOL’s recent changes to Form 5500 redefine large plans by the number of participants with account balances on the first day of the plan year. If your plan has at least 100 participants with active accounts, then you are a large plan, and an annual audit is required. (Note that this provision only applies to defined contribution plans and is in effect for plan years that begin on or after January 1, 2023.)This provision will significantly change the threshold for the status of large versus small plans. The DOL estimates 19,500 large plans will no longer be subject to the annual audit requirement relating to this participant-count methodology change. While this change is likely good news for many plan sponsors, there are some potential issues. For example, a failed compliance test or the allocation of forfeitures could push plans over the 100-participant threshold. If a plan fails the Actual Deferral Percentage or the Actual Contribution Percentage test, participants who closed out their accounts may need to be reinstated for reimbursement purposes. To avoid this issue, plan sponsors should carefully review their plan documents to determine whether they are able to “push out” participants with account balances under $5,000. More Updates Coming Down the Pike The DOL’s final changes includes several other changes. Mock-ups of the new forms and instructions for the following items will be available later this year at Reginfo.gov: Consolidated Form 5500 for Defined Contribution Groups Streamlined reporting on the 5500 for pooled employer plans and multiple-employer plans New breakout categories for administrative expenses (Schedule H) Revisions to the financial and funding reporting requirements for defined benefit plans New Internal Revenue Code (IRC) compliance questions to improve tax oversight Certain revisions from the NPFR have been delayed including proposed revisions to the content requirements for the schedules of assets filed by large plans. The DOL wants to modernize data reported in a plan’s individual investments to improve consistency, transparency, and usability of plan investment information, but feedback revealed that service providers need more time. Insight: Partner With Service Providers to Build Your Strategy Most plan sponsors process distributions with the help of service providers, so it is important to partner with such service providers to keep an eye on your number of participants—especially if you are close to the threshold of 100 active plan participants. Plan sponsors should clarify if it is their goal to remain a small plan, familiarize themselves with the options presented in the plan document to move participants out of the plan, and determine the procedure for a potential distribution. Learn how Harris CPAs can help you here! Employee Benefit Plan Page   [...] Read more...
May 31, 2023Stay abreast of the continuing new regulations impacting the nonprofit industry, and catch up on new key trends!   HIGHLIGHTS FROM THIS ISSUE Is that a Lease? A Focus on Nonprofit Lease Considerations under ASC Topic 842 The Great Resignation, Talent Shortages, Inflation, Recession … Maybe Bonuses Can Help! Pay Transparency –  Is Your Organization Ready? The Inflation Reduction Act of 2022: New Incentives for your College or University Implementation of GASB Statement No. 94, Public and Public-Public Partnerships and Availability Payment Arrangements Updates Guidance: Federal Perkins Loan Closeout Endowment Woes! Navigating the Nuances With Endowments ESG: An Opportunity for Nonprofits Click below to view the file.   Newsletter Nonprofit and Government Page   [...] Read more...
May 18, 2023by Drew Mansell, CPA Introduction The Inflation Reduction Act (IRA) increased the potential benefit of several energy efficiency tax incentives. These include the Section 179D energy efficient commercial buildings deduction and the Section 45L new energy efficient home credit. A more detailed description of these incentives is below. These changes warrant a renewed look at these incentives by companies looking to build or remodel real property. The Inflation Reduction Act’s stated goals include reducing carbon emissions and encouraging domestic energy production and manufacturing. The law introduces and expands existing tax incentives available for those investing in clean energy projects. It also increased the time horizon for these incentives, in many cases by up to 10 years. Importance of Extension Many tax credits and incentives available have limited time horizons, often requiring annual renewal by congress. This has caused uncertainty about their benefits, especially in industries where projects typically take multiple years to complete. With the extension of these incentives for the next ten years, that uncertainty is eliminated and developers can build these incentives into project costs for the foreseeable future. Tax Incentives to Watch New Energy Efficient Home Credit (IRC Sec. 45L) A $2,000 credit per single family residential housing unit. Available to multifamily developers, investors, and construction companies that build energy efficient properties sold or leased through Dec. 31, 2022. Increased to $2,500 per unit under Energy Star and $5,000 per unit under the Zero Energy Ready Homes program from Jan. 1, 2023, through Dec. 31, 2032. Energy Efficient Commercial Buildings Deduction (IRC Sec. 179D) Deduction available to building owners for installing qualifying energy systems. The deduction can be up to $1.88 per sq. ft. through Dec. 31, 2022 and increases up to $5.00 per sq. ft. beginning in 2023 if the project meets prevailing wage, and apprenticeship requirements. See below. The Feasibility Study Real estate and construction companies should discuss these incentives with their tax advisors who can connect them with experts to determine project feasibility. These professionals, usually engineers, evaluate a company’s projects and consider incentives that are likely applicable. The study can be used to make businesses decisions about next steps. A feasibility analysis can follow five simple steps: Consider the project’s goals. Look into intended investments your company plans to make for its building project. Split investments up into distinct groups. Section off relevant investments into qualifying and nonqualifying categories. Match investments to potential IRA incentives. Compare the list of planned investments with the list of available tax incentives and determine overlap. Conduct a cost-benefit analysis of implementing a tax incentive. Calculate the degree of investment required to achieve eligibility and the return on investment the tax incentives would offer. Identify requirements to substantiate claims to incentives. Pull together the documentation required to prove existing or intended adherence to tax incentive requirements. Prevailing Wage & Apprenticeship Requirements A key hurdle to qualify for these incentives are the prevailing wage and apprenticeship requirements. Companies must pay workers wages and benefits that meets standards for their geographical area set by the government. A certain portion of the labor on each project must also be performed by certified apprentices. It is important to understand these requirements before beginning a project. A feasibility study could include an analysis of these requirements and whether adjustments would be required to meet them. Conclusion These incentives have often been overlooked by taxpayers and practitioners alike due to their relatively minor potential benefits and complex rules to navigate. However, after the “remodel” of these incentives in the IRA, they deserve another look. We recommend reaching out to Harris or your preferred advisor if you think a project in your pipeline could qualify for one of these incentives.   Full Magazine Issue here: https://www.idahoagc.org/blog/spring-2023-buildingidaho   Construction & Engineering Page   Real Estate Page   [...] Read more...
February 21, 2023SECURE 2.0 was signed into law on December 29, 2022, makes sweeping changes to retirement savings plans. Before plan sponsors can take advantage of the many provisions in SECURE 2.0, the DOL will need to provide additional regulations and guidance on some of the provisions. In other words, there is more to come on SECURE 2.0. In the meantime, the DOL is focused on 17 items recently released in its biannual regulatory agenda. Plan sponsors and other industry experts should pay attention to this agenda to be sure they understand how these changes may affect them—particularly in areas such as changes to the fiduciary rule, updates on pooled employer plans, and final rules on lifetime income illustrations. In total, the Employee Benefits Security Administration (EBSA) listed three pre-rule stage items, nine proposed rule stage items, and five final rule stage items in its recently released regulatory agenda. Pre-Rule Stage: Improving Participant Engagement and Effectiveness: The DOL’s EBSA has been tasked with finding ways to improve retirement plan disclosures to enhance outcomes for employees. The EBSA will start by consulting with plan sponsors and other stakeholders to explore ways to improve such disclosures. Pooled Employer Plans: The SECURE Act of 2019 amended the Employee Retirement Income Security Act of 1974 (ERISA) to allow pooled employer plans to be a type of single employer pension benefit plan. The EBSA will begin exploring the need for regulatory guidance to run these plans. Requirements Related to Advanced Explanation of Benefits and Other Provisions Under the Consolidated Appropriations Act of 2021: The EBSA is reviewing whether regulation or guidance is needed to ensure patients have transparency in their health care treatment options and expected costs before a scheduled service. Request for comments closed in November 2022 and an analysis is expected in April 2023. Proposed-Rule Stage Definition of the Term “Fiduciary”: The DOL’s is proposing to amend ERISA’s definition of fiduciary to more closely reflect today’s relationships between participants, service providers, and others who provide investment advice for a fee. This proposal has been carried over since the Spring 2021 regulatory agenda and has no timeline for completion. Improvement of the Form 5500 and Implementing Related Regulations: Working with the Internal Revenue Service and Pension Benefit Guaranty Corporation, the DOL intends to modernize the Form 5500 to make investment data more mineable. This proposal has been carried over since Fall 2021 and movement on it is expected by June 2023. Definition of Employer Under Section 3(5) of ERISA – Association Health Plans: The EBSA will explore whether to replace or remove its 2018 final rule that set alternative criteria when an employer association could act on behalf of an employer to create a multiple employer group health plan. Action on this is expected in March 2023. Adoption of Amended and Restated Voluntary Fiduciary Correction Program: The EBSA took public comments until January 20, 2023 on its plan to expand the scope of transactions eligible for self-correction. Final Rule Stage Pension Benefit Statements – Lifetime Income Illustrations: The SECURE Act added a lifetime income illustration requirement for certain defined contribution plans. The final rule is expected to be released in May 2023. Prohibited Transaction Exemption Procedures: An April 2023 final rule is expected that would modify the DOL’s process for granting prohibited transaction exemption. Independent Contractor Classification Under the Wage and Hour Division agenda, the DOL announced that it expects to issue a final rule clarifying independent contractor status in May 2023. This ruling has been issued, delayed, and debated in court by the Biden and Trump administrations. The current administration believes the 2021 regulation does not reflect what is written in the Fair Labor Standards Act and will issue its updated rule to complement the law. Employee Benefit Plan Page [...] Read more...
January 11, 2023Harris CPAs has announced a merger with HH & Associates, Inc. of Meridian, Idaho and Thomas & Johnston, Chtd of Ketchum, Idaho. The mergers add a total of 8 professionals to the Harris CPAs team, and a new office location in Ketchum. HH & Associates offers tax planning and preparation, advisory and accounting services and has worked side by side with their business owners to help them stay competitive and profitable for over 30 years. David Hutchison and his team of 2 other professionals have relocated to Harris’ Meridian office. Thomas & Johnston, Chtd is located in Ketchum, Idaho, and provides tax planning and preparation, advisory and accounting services. They have an established reputation for quality service and deep client relationships in the area. Ryan Still, Tim Thomas, Lori Johnston and their team of professionals remain in their current location at 680 N Second Ave in Ketchum. Harris CPAs has been a leading provider of assurance, tax, accounting, and advisory services in Idaho since 1996. They serve clients throughout the United States and in all stages of the business cycle. “Creating a positive impact throughout Idaho has been a priority for Harris, and we are excited to now be able to service our clients in the Wood River Valley from our new office, as well as welcome the clients of both Thomas & Johnston and HH & Associates. Both firms have a deep commitment to their client relationships, which mirror our own values. In addition, this merger allows us to add industry-leading expertise to our team with the addition of 4 new partners with decades of experience,” said Josh Tyree, CEO at Harris CPAs. An open house reception for clients and the community will take place on January 19, 2023 at 680 N Second Ave, Ketchum. For more information, please contact Tara Davis, Marketing Manager for Harris CPAs at (208) 333-8965 or taradavis@harriscpas.com. [...] Read more...
January 9, 2023The Winter Nonprofit Standard Newsletter 2022 is here! Stay abreast of the continuing new regulations impacting the nonprofit industry, and catch up on new key trends in the nonprofit industry!   HIGHLIGHTS FROM THIS ISSUE How Will CECL Affect Your Non-For-Profit? Presentation and Disclosure Examples for FASBA ASU on Contributed Nonfinancial Assets GASB Statement No. 101 Compensated Absences New Data on Nonprofit Challenges and Opportunities; Benchmark Yourself Against Industries Peers Navigating FEMA’s COVID-19 Appeals Process Click below to view the file.   Winter Nonprofit Standard Newsletter 2022   Nonprofit and Government Page   [...] Read more...
December 9, 2022by Kevin Hatrick Small business owners are always looking for ways to protect against catastrophic risks while improving cash flows. One tool that can help you do both is using a captive insurance company. A captive insurance company is a small insurance company created by a business to help hedge against specific risks – generally risks that a company cannot protect against using available insurance, such as supply-chain interruption or key employee loss. It is an increasingly popular tool for risk management, currently being used by over 90% of Fortune 1000 companies. By creating and using a captive insurance company, a business essentially pays insurance premiums to a company they own. The insurance company then keeps that money available – usually in low risk investment vehicles – to be used to protect against the specified risks if and when they occur.There are three main advantages of captive insurance: Increased protection – Captive insurance companies allow businesses to be ready for business disruptions that would previously have gone uninsured. Also, because captive insurance inherently offers financial rewards for effectively controlling losses, safety and loss control get a higher level of attention. Improved profitability – There are a number of ways in which captive insurance companies help businesses increase profitability.a. They provide the opportunity to capture investment income from the reserves.b. They reduce the expense factors associated with commercial insurance.c. They minimize the impact of specific losses and risks. Tax savings – Captive insurance companies can elect to be taxed only on its investment income and not on the insurance premiums it receives. This allows for potential short-term and long-term tax savings opportunities. If you want to minimize risks while simultaneously improving cash flows, protect your business against disruptions, increase profitability, and increase your company’s tax savings; using a captive insurance company can be extremely beneficial. If you think this may be an option for your company, consult with your tax professional for more guidance.   Construction & Engineering Page   Real Estate Page   [...] Read more...
December 8, 2022Help your neighbors in need this holiday season! We are partnering with various organizations across Idaho to help provide books and meals for kids from food-insecure homes this holiday season! Each office is holding their own drive, let us know how you can help! Meridian Office Book Drive (Benefiting Book it Forward! Idaho): Did you know that in low-income homes there is on average only 1 book for every 300 children? Kids who only read in school will rarely be great readers. The availability of reading material in the home is directly associated with children’s achievement in reading. The Details: All books will be donated to Book it Forward! Idaho Donated books should be for kids age 1-18 Books should be in nearly new condition Books can be dropped off at our Meridian office through December 15th Location:Harris CPAs Meridian – 1120 S Rackham Way, Suite 100 (In the Kiln Building) Coeur d’Alene Office book Drive (Benefiting the Coeur d’Alene Public Library) Help us support the Coeur d’Alene Public Library Book drive, Jólabókaflóð (pronounced yo-la-bok-a-flot). This is an Icelandic tradition of book giving. It began in WWII, when paper was far cheaper than imported goods. People began giving books as gifts. The Coeur d’Alene Library is bringing this tradition to you! Books will be wrapped and given away by the Library for free in late December! The Details: All books will be donated to Coeur D’Alene Library to support their Jólabókaflóð Holiday Book Giveaway Donated books should be for kids age 1-18 Books should be new, or mint condition Books can be dropped off at our Meridian office through December 13th Location:Harris CPAs – 560 W Canfield Ave, Coeur d’Alene Twin Falls, Buhl, and Ketchum Office Food Drives Help your neighbors in need this holiday season! We are partnering with the Harrison Elementary Food Pantry in Twin Falls, the West End Ministerial Association Food Pantry in Buhl, and the Hunger Coalition in the Wood River Valley to help provide meals for kids from food-insecure homes this holiday season. Most Needed Items: Granola bars Boxed mac and cheese Canned fruit (w/ pop tops preferred) Canned pasta (w/ pop tops preferred) Chili with meat Soup with meat (w/ pop tops preferred) Boxed oatmeal packets Cold cereal Peanut butter Applesauce But we’ll take all non-perishable foods! Items can be dropped off at our Twin Falls, Buhl, or Ketchum offices through December 15th! We appreciate your support, and hope you have a wonderful holiday season! Locations:Harris CPAs Twin Falls – 161 5th Ave S, Ste 200Harris CPAs Buhl – 1020 Main StreetHarris CPAs Ketchum – 680 Second Ave Don’t have books or food but still want to donate? Monetary donations are accepted too! Use the “Pay Online” button at www.harriscpas.com, and we’ll deliver the donated amount in your name! Just include “Holiday Drive” and the office name you are donating to in the invoice field. [...] Read more...

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