Category Archives: Raleigh CPA Firm

To find new revenue opportunities, think like an auditor

Want to increase your not-for-profit’s revenue? First try analyzing current income as a professional auditor might. Then, you can apply your conclusions to setting annual goals, preparing your budget and managing other aspects of your organization.

Compare contributions

Compare the donation dollars raised inpast years to pinpoint trends. For example, have individual contributions been increasing over the past five years? What campaigns have you implemented during that period? You might go beyond the totals and determine if the number of major donors has grown.

Also estimate what portion of contributions is restricted. If a large percentage of donations are tied up in restricted funds, you might want to re-evaluate your gift acceptance policy or fundraising materials.

Measure grants

Grants can vary dramatically in size and purpose — from covering operational costs, to launching a program, to funding client services. Pay attention to trends here, too. Did one funder supply 50% of total revenue in 2015, 75% in 2016, and 80% last year?

A growing reliance on a single funding source is a red flag to auditors and it should be to you, too. In this case, if funding stopped, your organization might be forced to close its doors.

Assess fees

Fees from clients, joint venture partners or other third parties can be similar to fees that for-profit organizations earn. They’re generally considered exchange transactions because the client receives a product or service of value in exchange for its payment.

Sometimes fees are charged on a sliding scale based on income or ability to pay. In other cases, fees are subject to legal limitations set by government agencies. You’ll need to assess whether these services are paying for themselves.

Membership dues

If your nonprofit is a membership organization and charges dues, determine whether membership has grown or declined in recent years. How does this compare with your peers? Do you suspect that dues income will decline? You might consider dropping dues altogether and restructuring. If so, examine other income sources for growth potential.

By performing these exercises, you should be able to gain a basic understanding of where funds are coming from and where greater potential lies. For specific tips and help applying revenue data strategically, contact us.

© 2020

What to do when the audit ends

Financial audits conducted by outside experts are among the most effective tools for revealing risks in not-for-profits. They help assure donors and other stakeholders about your stability — so long as you respond to the results appropriately. In fact, failing to act on issues identified in an audit could threaten your organization’s long-term viability.

Working with the draft

Once outside auditors complete their work, they typically present a draft report to an organization’s audit committee, executive director and senior financial staffers. Those individuals should take the time to review the draft before it’s presented to the board of directors.

Your organization’s audit committee and management also should meet with the auditors prior to the board presentation. Often auditors will provide a management letter (also called “communication with those charged with governance”), highlighting operational areas and controls that need improvement. Your nonprofit’s team can respond to these comments, indicating ways they plan to improve the organization’s operations and controls, to be included in the final letter. The audit committee also can use the meeting to ensure the audit is properly comprehensive.

Executive director’s role

One important audit committee task is to obtain your executive director’s impression of the auditors and audit process. Were the auditors efficient, or did they perform or require redundant work? Did they demonstrate the requisite expertise, skills and understanding? Were they disruptive to operations? Consider this input when deciding whether to retain the same firm for the next audit.

The committee also might want to seek feedback from employees who worked most closely with auditors. In addition to feedback on the auditors, they may have suggestions on how to streamline the process for the next audit.

No material misrepresentation

The final audit report will state whether your organization’s financial statements present its financial position in accordance with U.S. accounting principles. The statements must be presented without any inaccuracies or “material” — meaning significant — misrepresentation.

The auditors also will identify, in a separate letter, specific concerns about material internal control issues. Adequate internal controls are critical for preventing, catching and remedying misstatements that could compromise the integrity of financial statements. The auditors’ other suggestions, presented in the management letter, should include your organization’s responses.

If the auditors find your internal controls weak, promptly shore them up. You could, for example, implement new controls or new accounting practices.

Contact us if you have questions about audits and post-audit procedures.

© 2020

IRS Backlog – UPDATE

Everyone knows COVID-19 pandemic has affected all of us.  The IRS is no exception.

There can be communication issues when dealing with mixed media: manual, paper letters along with electronic systems on a good day.  When you add the slowed USPS system to the mix, it is only making the IRS processing system more strained.  Currently, there are computer-generated notices going out from the IRS that do not properly reflect the taxpayers’ account status because of this delay.  The IRS is stating online that they are experiencing high call volumes and have issued an “E-News for Tax Professionals Issue 2020-33“.  There are many people who are simply calling to follow up on manual payments that were sent in weeks ago.

If you are frustrated with the IRS, know you are not alone.  The issue is acknowledged and they are trying to resolve the backlog by bringing in additional help. The Journal of Accountancy published an article on this same topic as well.

As of August 21, the IRS has temporarily suspended the mailing of all notices to taxpayers with balances due. The latest article shared by the IRS explains more about the steps the System is taking to eliminate confusion and keep the process moving as smoothly as possible.

Please contact our office if we can answer any of your questions.

SBA loans may be more difficult than we thought

Small businesses looking to get some relief from the Payroll Protection Program may run into a snag or two.  Because this stimulus package was passed so quickly, the banks are not necessarily prepared to handle the loans like the media initially described.  This article from Fortune provides some additional insight.

If you are a small business looking to apply for one of these loans, here is a link to help you find a lender along with a sample application.

We understand how difficult this time is for you.  If we can be of any assistance, we will be happy to help!  Please contact our office if you have questions or would like to know more about other COVID-19 relief options.

PRESS RELEASE: NC Deferring Interest

FOR IMMEDIATE RELEASE                                        Contact: Joseph Kyzer<mailto:[email protected]>

Tuesday, March 31, 2020

 

North Carolina Leaders Announce Shared Support for Deferring Interest on Income Tax Until July 15

Raleigh, N.C. – North Carolina leaders announced shared bipartisan support for deferring the accrual of interest on state income taxes filed before July 15, 2020, in a joint statement released by General Assembly lawmakers and Governor Cooper on Tuesday.

View on SpeakerMoore.com<http://speakermoore.com/north-carolina-leaders-announce-shared-support-deferring-interest-income-tax-july-15/>

The deadline for state and federal tax filings were recently delayed to July 15, 2020, and penalties for late payments were also waived.

However, the North Carolina General Assembly and Governor must approve legislation to defer accrual of interest on income taxes, an action that state leaders announced shared support for approving retroactively on Tuesday.

State Senate Democratic Leader Dan Blue (D-Wake), Senate Leader Phil Berger (R-Rockingham), House Speaker Tim Moore (R-Cleveland), and House Democratic Leader Darren Jackson (D-Wake) released a joint statement with Governor Cooper on Tuesday.

“One of the biggest questions we are getting on economic issues is whether families and businesses will be responsible for paying interest on their income taxes now that the filing deadline is delayed,” the five state leaders said in a joint statement Tuesday.

“Today, we can announce our shared support for retroactively waiving the accrual of those interest payments to provide further tax relief for North Carolinians amid the COVID-19 crisis, an important step to offer certainty and recovery assistance for millions of our state’s residents.”

Under North Carolina law, the liability for failure to pay estimated income tax on time is the accrual of interest. The Secretary of the Department of Revenue is not authorized to waive interest and the agency is required to charge interest on any unpaid tax.

Therefore, the General Assembly and Governor must approve legislation to ensure taxpayers are not liable for such interest between April 15, 2020, and July 15, 2020, the extended deadline.

____________________________________________________________________________________

NORTH CAROLINA GENERAL ASSEMBLY

Legislative Building | 16 West Jones Street | Raleigh, NC 27601 | 919-733-4111

 

COVID-19 Links

In an effort to streamline the ever-changing world we live in with the COVID-19 virus, here are some links that are all related to updated tax changes, small businesses, individual sick leave, and other filing requirements.  As more information is released, it will be added at the top of this list.

 

 

 

Have you been using zoom?  https://www.forbes.com/sites/leemathews/2020/04/13/500000-hacked-zoom-accounts-given-away-for-free-on-the-dark-web/#58a7fbc858c5

US Dept of Treasury Grants Additional Income Tax Filing and Payment Relief https://www.irs.gov/pub/irs-drop/n-20-23.pdf

New NonProfit Extensions https://home.treasury.gov/news/press-releases/sm970

CDC Recommendations https://www.cdc.gov/coronavirus/2019-ncov/index.html

COVID-19 Relief Tracker https://www.forbes.com/sites/briannegarrett/2020/03/20/small-business-relief-tracker-funding-grants-and-resources-for-business-owners-grappling-with-coronavirus/#1e1e001bdd4c

There’s hope for Small Businesses! https://www.wraltechwire.com/2020/04/03/bank-of-america-accepting-virus-crisis-loan-applications-receives-10000-in-first-hour/

Key Highlights of the CARES Act and the FFCRA Relief Provisions https://www.langdoncpa.com/?p=4717&preview=true

SBA loans more difficult than we thought https://www.langdoncpa.com/2020/04/03/sba-loans-may-be-more-difficult-than-we-thought/

Employer tax credits, and more https://www.journalofaccountancy.com/news/2020/apr/irs-new-employer-tax-credits-form-employee-retention-credit-guidance-coronavirus.html

More Assistance for Nonprofits https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132

NC Press Release: Deferred Interest https://www.langdoncpa.com/2020/04/01/press-release-nc-deferring-interest/

Applications for Small Business Paycheck Protection Program https://www.journalofaccountancy.com/news/2020/mar/paycheck-protection-loan-for-small-businesses-coronavirus-pandemic.html

Employer questions answered! https://www.dol.gov/agencies/whd/employers

SBA debt relief related to COVID-19 https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-4

Gift tax returns extended too! https://www.journalofaccountancy.com/news/2020/mar/gift-gst-tax-returns-postponed-filing-deadlines-coronavirus-pandemic.html

Assisted Living Resources for COVID-19 https://www.ncala.org/covid-19.html

How much COVID-19 stimulus will I receive? https://www.cnbc.com/2020/03/27/the-stimulus-payment-calculator-tells-you-how-much-money-you-could-get.html

Possible Increase for VA Nursing Facilities https://www.vhca.org/publications/careconnection/march-26-2020/vhca-vcal-seeking-additional-funding-for-nf-care-under-covid-19-emergency/

COVID-19 Resources for Non-Profits https://www.ncnonprofits.org/resources/pandemicresources

The CARES Act questions answered https://www.journalofaccountancy.com/news/2020/mar/cares-act-economic-relief-coronavirus-tax-provisions.html?utm_source=mnl:alerts&utm_medium=email&utm_campaign=25Mar2020&utm_content=headline

NC DHHS provides additional COVID-19 support https://www.ncdhhs.gov/news/press-releases/nc-medicaid-increases-support-protect-those-most-risk-serious-illness-covid-19

Clarification on NC Tax Deadlines https://www.ncacpa.org/wp-content/uploads/2020/03/Frequently-Asked-Questions-COVID-final.pdf?utm_source=Google&utm_medium=Referral&utm_campaign=NCACPA&_zs=fG9HX&_zl=MMK22

Employers using Payroll Tax Credits for Paid Leave due to Coronavirus https://www.accountingtoday.com/news/employers-can-begin-using-payroll-tax-credits-for-paid-leave-for-coronavirus

CMS extends Cost Report Deadlines https://www.palmettogba.com/palmetto/providers.nsf/ls/JM%20Part%20A~BMYLSN5443?opendocument&utm_source=J11AL&utm_campaign=JMALs&utm_medium=email

Small Business Q&A https://sbshrs.adpinfo.com/covid19-faqs

IRS push back tax FILING deadline https://abc11.com/business/tax-day-pushed-back-amid-viral-outbreak-mnuchin/6031749/

Bill to address paid sick leave related to COVID-19 (FFCRA) https://www.forbes.com/sites/tomspiggle/2020/03/17/the-families-first-coronavirus-response-act-what-it-does-for-employees-who-need-paid-sick-leave/#615dd2f06f1a

HUD and Single Audit Extension https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-17.pdf?utm_medium=email&SubscriberID=111017000&utm_source=GAQC20&Site=AICPA&LinkID=8741972&utm_campaign=GAQC_AlertMAR20&cid=email:GAQC20:GAQC_AlertMAR20:https%3a%2f%2fwww.whitehouse.gov%2fwp-content%2fuploads%2f2020%2f03%2fM-20-17.pdf:AICPA&SendID=266068&utm_content=A20MAR400_GAQC_Alert401

IRS Press Release “Payment Relief” https://www.langdoncpa.com/2020/03/19/official-guidance-for-tax-deadlines/

Single Audit Submission Info https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-11.pdf

US Department of Labor defines FMLA related to COVID-19 https://www.dol.gov/agencies/whd/fmla/pandemic

IRS extends PAYMENT deadline https://www.cnbc.com/2020/03/17/treasury-and-irs-to-delay-tax-deadline-by-90-days.html

https://www.cpapracticeadvisor.com/tax-compliance/news/21129660/2020-tax-season-payment-deadline-extended-to-july-15-as-nation-fights-coronavirus-irs-news?utm_source=CPA+Other+Communications&utm_medium=email&utm_campaign=CCSN200317002&o_eid=9442A3978623C7T&rdx.ident=[object+Object]

 

Official Guidance for Tax Deadlines

From IRS Press Release:

March 18, 2020

The Treasury Department and the Internal Revenue Service are providing special payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns remains April 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the April 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return.

This payment relief includes:

Individuals: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.

Corporations: For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of their 2019 tax due.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If you file your tax return or request an extension of time to file by April 15, 2020, you will automatically avoid interest and penalties on the taxes paid by July 15.

The IRS reminds individual taxpayers the easiest and fastest way to request a filing extension is to electronically file Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses must file Form 7004.

This relief only applies to federal income tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

5 ways to strengthen your business for the new year

The end of one year and the beginning of the next is a great opportunity for reflection and planning. You have 12 months to look back on and another 12 ahead to look forward to. Here are five ways to strengthen your business for the new year by doing a little of both:

1. Compare 2019 financial performance to budget. Did you meet the financial goals you set at the beginning of the year? If not, why? Analyze variances between budget and actual results. Then, evaluate what changes you could make to get closer to achieving your objectives in 2020. And if you did meet your goals, identify precisely what you did right and build on those strategies.

2. Create a multiyear capital budget. Look around your offices or facilities at your equipment, software and people. What investments will you need to make to grow your business? Such investments can be both tangible (new equipment and technology) and intangible (employees’ technical and soft skills).

Equipment, software, furniture, vehicles and other types of assets inevitably wear out or become obsolete. You’ll need to regularly maintain, update and replace them. Lay out a long-term plan for doing so; this way, you won’t be caught off guard by a big expense.

3. Assess the competition. Identify your biggest rivals over the past year. Discuss with your partners, managers and advisors what those competitors did to make your life so “interesting.” Also, honestly appraise the quality of what your business sells versus what competitors offer. Are you doing everything you can to meet — or, better yet, exceed — customer expectations? Devise some responsive competitive strategies for the next 12 months.

4. Review insurance coverage. It’s important to stay on top of your property, casualty and liability coverage. Property values or risks may change — or you may add new assets or retire old ones — requiring you to increase or decrease your level of coverage. A fire, natural disaster, accident or out-of-the-blue lawsuit that you’re not fully protected against could devastate your business. Look at the policies you have in place and determine whether you’re adequately protected.

5. Analyze market trends. Recognize the major events and trends in your industry over the past year. Consider areas such as economic drivers or detractors, technology, the regulatory environment and customer demographics. In what direction is your industry heading over the next five or ten years? Anticipating and quickly reacting to trends are the keys to a company’s long-term success.

These are just a few ideas for looking back and ahead to set a successful course forward. We can help you review the past year’s tax, accounting and financial strategies, and implement savvy moves toward a secure and profitable 2020 for your business.

© 2019

Does your team know the profitability game plan?

Autumn brings falling leaves and … the gridiron. Football teams — from high school to pro — are trying to put as many wins on the board as possible to make this season a special one.

For business owners, sports can highlight important lessons about profitability. One in particular is that you and your coaches must learn from your mistakes and adjust your game plan accordingly to have a winning year.

Spot the fumbles

More specifically, your business needs to identify the profit fumbles that are hurting your ability to score bottom-line touchdowns and, in response, execute earnings plays that improve the score. Doing so is always important but takes on added significance as the year winds down and you want to finish strong.

Your company’s earnings game plan should be based partly on strong strategic planning for the year and partly from uncovering and working to eliminate such profit fumbles as:

  • Employees interacting with customers poorly, giving a bad impression or providing inaccurate information,
  • Pricing strategies that turn off customers or bring in inadequate revenue, and
  • Supply chain issues that slow productivity.

Ask employees at all levels whether and where they see such fumbles. Then assign a negative dollar value to each fumble that keeps your organization from reaching its full profit potential.

Once you start putting a value on profit fumbles, you can add them to your income statement for a clearer picture of how they affect net profit. Historically, unidentified and unmeasured profit fumbles are buried in lower sales and inflated costs of sales and overhead.

Fortify your position

After you’ve identified one or more profit blunders, act to fortify your offensive line as you drive downfield. To do so:

Define (or redefine) the game plan. Work with your coaches (management, key employees) to devise specific profit-building initiatives. Calculate how much each initiative could add to the bottom line. To arrive at these values, you’ll need to estimate the potential income of each initiative — but only after you’ve projected the costs as well.

Appoint team leaders. Each profit initiative must have a single person assigned to champion it. When profit-building strategies become everyone’s job, they tend to become no one’s job. All players on the field must know their jobs and where to look for leadership.

Communicating clearly and building consensus. Explain each initiative to employees and outline the steps you’ll need to achieve them. If the wide receiver doesn’t know his route, he won’t be in the right place when the quarterback throws the ball. Most important, that wide receiver must believe in the play.

Win the game

With a strong profit game plan in place, everyone wins. Your company’s bottom line is strong, employees are motivated by the business’s success and, oh yes, customers are satisfied. Touchdown! We can help you perform the financial analyses to identity your profit fumbles and come up with budget-smart initiatives likely to build your bottom line.

© 2019

Employer Shared Responsibility Penalties

by Tony Pandiscia

The Internal Revenue Service “IRS” has recently been issuing “226J Letters” to businesses to conduct inquiry into whether compliance was properly maintained under the Affordable Care Act [“ACA”] for the 2016 Tax Year.  While the IRS has been authorized to issue this correspondence in the past, the 2016 Tax Year is significant because it marks the first year following the sunset of favorable “transitional relief” rules that had been available in prior years for businesses that were not in compliance with the ACA.  When a business is not in compliance with the ACA healthcare mandate, the result is exposure to the “employer shared responsibility penalty” [or “ESRP”].

A business may incur the “ESRP” under the ACA when it is an applicable large employer [“ALEs”] whom fails to offer:

  • “minimum essential” health insurance coverage to its full-time employees and their children, or
  •  insurance coverage that is “considered affordable”.

Technical rules help determine exactly whom is an ALE [i.e. how to properly count the “full-time equivalent” employees], what would be considered “minimum essential” [health insurance coverage], as well as whether the premiums charged employees were “considered affordable”.  Most businesses confronted the myriad of health insurance options designed to meet ACA compliance beginning back in 2013 when the law was initially announced, although various provisions of the law effectively delayed the assessment of penalties until after January 1, 2015 to give businesses ample time to implement suitable health insurance programs and permit the IRS opportunity to develop adequate record keeping and tracking mechanisms.

It is important to understand that receipt of a the 226J Letter is not the actual assessment of the liability.  Instead it is a notification from the IRS that based on certain records in its database, the business may be subject to the ESRP and the business now has the responsibility to formally contest or confirm the assertion.  [Typically the records the IRS has analyzed include Forms 1094, 1095, W-2 along with the Premium Tax Credit database that is populated through the “Exchange” where individuals obtained coverage through “Healthcare.gov”.]  The formal response to the 226J Letter must be submitted to the IRS using Form 14764, plus attachments.  Included in the 226J Letter will be a “response deadline” [generally 30 days from the date of the letter] for which a business owner must submit the response or by default the IRS will assume no additional evidence is available to refute the ESRP assertion.

Due to the complexity and time-constraints involved, upon receipt of a 226J Letter a business owner should immediately contact a Tax Professional to assist with the response process.  The format of the Form 14764 allows for submission of explanations and substantive documentation that may help update or correct the IRS’ records, as well as counter (if applicable) the government’s ESRP assertion.  As with other IRS dispute resolution matters, reliance on a qualified Tax Professional will permit the business owner to avail him/herself of all applicable ESRP response strategies (including extensions of time, available exemptions, review of formula computations and ratios, and even installment payment plan negotiation attempts, as necessary).  Langdon & Company LLP is well-versed in ESRP issues, so feel free to connect with us if you have any questions.