Category Archives: Raleigh CPA Firm

There is an App for that

by Dwayne Murphy

Are expense reports frustrating to fill out? Can’t find that receipt you need? Keeping up with travel expenses can be a nightmare but with our technology today and smartphone capability, keeping up with travel expenses can be, and should be easy. There are a number of apps that will make the difficulty of expense tracking and reporting a thing of the past. Below is a brief description of just a few of the very many apps that that are available to help track and report expenses.

TripitTripIt_icon_flat

  • Automated travel management app that requires little or no data entry. For example it gathers all of the information from the confirmation (e.g. airline, hotel, car rental & restaurant confirmations) when you email it to the app.
  • Organizes everything by day, trip and time and forms an itinerary that you can access and share with others.
  • Edit plans manually and sync with your calendar.
  • There is a free version and a paid version with the paid version including extra benefits such as flight tracking and reward program tracking.

BizXpense Tracker

  • This paid app records all of your expenses and provides a running total for each business trip you take and also has the ability to track time as well
  • Easy mileage tracking by entering total distance or start and stop odometer reading and will remember odometer readings for your next trip.
  • Remembers total mileage from previous trips and will pre-fill mileage when locations are entered.
  • Create and manage categories and sub-categories and mark as “reimbursed” or “submitted”.
  • Print finished expense reports in multiple formats.

Expensifyexpensify

  • This free app lets you snap a quick picture of your receipt and select which report it goes on then Expensify does the rest.
  • Tracks your mileage through your phone’s GPS and allows time entry as well.
  • Easy report submission by use of email or the option to save to a PDF.
  • Integrates with any accounting, payroll, CRM or ERP solution including QuickBooks and ADP.

We all have enough to worry about and expense reports should not be one of them.  There are plenty of apps out there to make life easier and hopefully the list above can give you an idea of which one will be the perfect fit for you.

Dwayne ([email protected]) is an audit senior with Langdon & Company LLP.  He works with a variety of non-profit clients

How to Prepare for an Audit

binderby Lee Byrd

For many organizations, an audit is an annual process that requires the Organization’s personnel to devote additional time and effort above and beyond their day-to-day responsibilities. It can be tiresome and unwelcome to those assigned with task of handling the audit. However, there are many ways in which an Organization can prepare for an audit which could lead to less time the auditor’s spend on site, decreased stress around deadlines, and an overall more efficient audit process.

  • PBC List – PBC stands for “Prepared By Client” and this is a schedule of initial audit requests provided by the auditor, which are to be prepared by Organization personnel. Because the auditor’s schedule is often tight, it is essential that the items on the PBC List are prepared and ready for the auditor prior to the start of fieldwork. Items that are not completed timely could cause significant delays in the audit process.
  • Prepare throughout the year – If the Organization has been audited before, personnel likely have an idea of key information or schedules that will be requested by the auditor. Rather than waiting until the PBC List is received, it may be helpful to update these schedules periodically throughout the year. Such items include investment, debt or fixed asset rollforwards which must be prepared from underlying data and records. As these schedules are updated, be sure to keep those supporting documents in a file or folder to provide the auditor at year-end with the audit package.
  • Organization – Keeping your audit files and underlying support organized will be key to aiding the audit efficiency. Items from the PBC List should be accumulated in folders and labeled according to the PBC List numbering, if possible. This will aid the auditor in identifying and processing the information quickly. Additionally, having supporting documentation such as invoices and deposits filed in an orderly manner will allow Organization personnel to quickly pull support requested by the audit throughout fieldwork. The less time it takes to provide the auditor requested documentation, the less time the auditor must spend on site.
  • Designated Personnel – While it is important to delegate preparation of audit schedules and accumulation of other requested support to financial personnel throughout the organization, it is important to designate an individual, such as a controller or CFO, as the audit contact. This individual will be responsible for communicating deadlines and any delays to the audit team. More importantly, this individual should review all schedules and support prepared by other personnel prior to providing that information to the audit team. Ensuring that provided information is complete and accurate will prevent duplication of effort and audit findings.
  • Information is Key – Know what has happened within the organization during the year. The auditor will ask about significant events, variances from prior year, and variances from budget, just to name a few. Providing clear, concise explanations for these variances will allow the auditor to document appropriately. Additionally, any information that can be provided to the auditor prior to the start of fieldwork will allow the auditor to develop expectations and may reduce the number of variance inquiries made throughout the audit.
  • Communication – Your chosen auditor should always be open to communication from their clients, whether during the actual engagement or throughout the year. Be sure to reach out with questions so that issues can be resolved prior to the start of the audit. Additionally, if you feel that you will not have the requested information prepared by the designated date, notify the auditor immediately so that scheduling and deadlines can be addressed as soon as possible.

It is equally important to the audit firm and the Organization for the audit to be as efficient and seamless as possible. The above suggestions should aid in creating a pleasant audit experience for all parties involved.

Langdon & Company LLP’s audit team is here to help. Contact us with questions regarding your audit engagement. Lee Byrd ([email protected]) is an Audit Manager at our Firm and has over 7 years of experience with a variety of clients.

How to Amend a 1040

by Susan Dean

Have you discovered an error after filing your personal income tax return? Did you forget to report income or claim deductions? Have you received a “corrected” tax reporting document such as a Corrected Form 1099? What should you do if you fall into one of these categories? Depending on the circumstances, you may need to amend your tax return.

To amend your Form 1040, U.S. Individual Incofrom Susanme Tax Return, you should file a Form 1040X, Amended U.S. Individual Income Tax Return. Form 1040X will become your new tax return, changing your original return to include any new information.

Page one of Form 1040X is a summary of your 1040 information, both as previously filed and what you are currently reporting.  Column A reports the “Original amount” as reported on a prior Form 1040 (or prior 1040X). This is the amount(s) you are updating or “amending.” Column C reports the “Corrected amount” or the amount that should have been reported on the original return, the amount you are updating. That leaves Column B. Column B shows the “Net change” between Column A and Column C. Column B reports the difference in what was reported (Column A) and what should have been reported (Column C). Form 1040X gives a visual comparison of your 1040, both before and after the change(s). The form shows the increase or decrease to your taxable income and/or tax liability.

When filing an amended tax return, you must explain the reason for the amendment. This explanation is reported on Part III, Explanation of changes. In this section you should communicate to the Internal Revenue Service (IRS) why you are filing Form 1040X. The reason can vary from receiving a late or corrected Form 1099; forgetting to claim a deductible charitable contribution or business expense; reporting additional taxable income; or changing the originally filed filing status. No matter the reason, the IRS wants to know why you are amending and what form(s) and line numbers have changed as well as any supporting schedules that have been affected by the change(s).

Once you have completed Form 1040X by reporting the corrected information, explained the reason for the change(s) and attached any necessary forms and/or schedules, you are ready to sign and file your amended return. Depending on the change in your overall taxable income and/or tax liability, you may owe additional tax to the IRS or you could be due a tax refund. The state you live in and the outcome of your tax liability determines where you file your amended return. Before mailing your amended return, please confirm the correct address in the current year Form 1040X instructions.

Please note if you are amending your federal income tax return, you also may need to amend your state income tax return. Refer to your state income tax return form instructions on when and how to amend your state income tax return or contact your personal certified public accountant.

For more information on amending your Form 1040, please refer to the IRS website and their section on Amended Tax Return Frequently Asked Questions. If you think you may need to amend your personal income tax return and would like further advice on amending or would like to request assistance in amending your personal tax return, please contact our office.

Susan ([email protected]) is a Tax Manager working primarily with closely-held family businesses and corporations.

NC Adult Care Home Update

by Rachel Owens

The NC Department of Health and Human Services sent out a memo dated July 15, 2015 with the latest information regarding General Statute 131D-4.2 – the Adult Care Home providers and their reporting requirements.  To comply with these requirements ALL facilities that receive State/County Special Assistance funds are required to file a cost report.  Those facilities that have 7 beds or more are additionally expected to have Agreed-Upon-Procedures performed.  dhhs

For facilities licensed under Chapter 122C (mental health supervised living facilities) the reporting period is July 1, 2014 – June 30, 2015.  All other facilities are required to use the year end September 30, 2015 regardless of their fiscal year end.  These cost reports are due December 31, 2015.

More information is forthcoming about AUP instructions, and software.  Please continue to check our website and blog for additional information.

Langdon & Company LLP has extensive history working with the long-term healthcare industry. We offer a high degree of expertise and experience with the needs of Adult Care Home providers and would be happy to assist you in the timely filing of the Cost Report.  If you have questions, we will be happy to help you.  Contact [email protected] or [email protected]!

When Should I Start Receiving My Social Security Benefits?

by Leonora Bowman

Like all financial questions, the answer to this question is, “it depends.” social security

You can start drawing social security benefits based on your own work history as early as 62 and as late as 70. Currently, those of us, who are baby boomers, born between 1943 and 1954, 66 is our full retirement age.  The full retirement age increases 2 months each year until it reached 67.

There are several factors, which will help to determine when you should start drawing social security, the most important being if you and your family can financially afford to delay drawing social security until a later date.  For each month, after you reach your full retirement age, you will earn 2/3 of 1% delayed retirement credits, or 8% per year. You can only earn delayed retirement credits based on your work history.  By suspending receipt of your social security between 66 and 70, your monthly benefit will increase by 32%.  Obviously, if you can afford to do so, this is your best option.  Spouses and widows do not earn delayed retirement credits.

If you are married and the family can financially afford to do so, there are some choices you can make to optimize your family’s social security monthly benefit.

The first choice that can be made, once full retirement age is reached, is for the higher earning partner to file and suspend collection of his/her benefit.  This will allow two things to happen.  1) the spouse filing and suspending collection will begin to earn delayed retirement credits and 2) the lower earning spouse can begin drawing a spouse benefit, which may be higher than the amount he/she may have received based on his/her own work history.

File and restrict your benefit is another option that married couples can do if they are both over 62 and one is already drawing benefits.  The partner not already receiving benefits can file and restrict the benefit he/she receives to 50% of the spousal benefit to which he/she is entitled and allow his/her own benefit to continue to earn delayed retirement credits until he/she reach 70.  The partner choosing to file and restrict must have reached his or her full retirement age to choose this option.

Those who are divorced and were married to their former spouse for at least 10 years, are at least 62 and have not remarried, can elect to receive the divorced spouse benefit provided it is greater than the amount he/she would have received based on their own work history.

The Social Security Administration is a great resource if you have specific questions.  To determine which social security benefit path is best for you and your family, please contact Langdon & Company LLP or your financial advisor.

Leonora “Lee” Bowman ([email protected]) is a Manager in our Accounting Services practice.  She has over 25 years of experience in taxation and also specializes in multi-dimensional corporate accounting across various states.

Planning for College? Benefits of a 529 Plan

by Kendall Tyson

Most parents and many grandparents often worry about the increasing college costs for their children and grandchildren.  According to a recent article in USA Today, college tuition and fees have increased 1,120% since 1978.  Edvisors reports 70% of students borrow to go to college and take on an average $33,000 in student loans.

One way to help plan for upcoming college costs is to open a 529 plan.  A 529 plan is a qualified tuition program operated by a state or educational institution designed to help set aside funds for future college costs.  Under IRC Section 529, a qualified tuition program is exempt from income tax.  The earnings grow tax-free, and as long as the contributions and earnings are used for qualified educational expenses then the beneficiary does not report or pay tax on any distributions.

Almost every state now offers a 529 plan and the plan’s fund can be used to meet costs of qualified colleges nationwide.  A North Carolina resident can invest in a Virginia plan for a beneficiary who attends a Tennessee college, as long as the college is an eligible institution.  (Eligible institutions have been assigned a federal school code by the Department of Education).

Anyone can contribute to a 529 plan; the plan just needs a beneficiary.  While the contributions are not deductible for federal tax, the contributor is not subject to AGI limitations and contributions are considered a completed gift, which is excluded from the contributor’s estates.  The IRS even allows for contributors can elect to take contributions larger than the annual gift exclusion into account ratably over five years.

All distributions from the 529 plan must be used for qualified higher education expenses.  Qualified higher education expenses include the following:

  • Tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution;
  • Expenses for special needs services incurred in connection with enrollment or attendance
  • Room and board included for students who are at least half-time
  • Internet access or related services used by the beneficiary while enrolled at an eligible educational institution

Distributions from the plan will be reported a Form 1099-Q, Payments from Qualified Education Programs, showing the earnings and basis related to the distribution.  Any distributions not used for qualified expenses are included in income and subject to a 10% penalty.  Many individuals confuse the idea of using 529 funds to repay student loans.  Unfortunately, the repayment of prior year student loans does not meet the IRS definition of “qualified education expenses”.  Any distributions used to repay student loans are included in income and subject to the 10% penalty.

529 plans can also be rolled into another qualified tuition program for the same beneficiary or transferred to another beneficiary within the same family with no adverse tax consequences.

With the proper planning, a 529 plan can help ease the burden of increasing college costs with relatively low maintenance for the contributor.  For more information or help in finding a 529 manager or financial adviser, please contact our office.

Kendall Tyson ([email protected]), a Tax Manager at Langdon & Company LLP.  She specializes in physician/dentist practices, multi-state and nonprofit returns.

How Will the IRS and the States Handle Virtual Currency?

by Cody Taylor

bitcoinOver the last decade the Internal Revenue Service (IRS) has been faced with a brand new subject courtesy of our interconnected world: virtual currency.  Bitcoin is the most well-known but there are over 150 virtual currencies worldwide with some of the other larger ones being Litecoin, Darkcoin and Peercoin.  As these currencies have popped up and have become more popular the IRS needed to decide how to handle transactions conducted in these new currencies.  Bitcoin for instance is accepted at mainstream retailers such as Overstock.com, Dish Network and Expedia, among others.

The IRS issued guidance in the form of answers to Frequently Asked Questions (FAQs).  This setup tries to provide an overview for how transactions in virtual currencies will be handled for federal tax purposes.  What follows is an excerpt of the FAQs from IRS Notice 2014-21:

Q-1: How is virtual currency treated for federal tax purposes?

A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.

Q-2: Is virtual currency treated as currency for purposes of determining whether a transaction results in foreign currency gain or loss under U.S. federal tax laws?

A-2: No. Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

Q-3: Must a taxpayer who receives virtual currency as payment for goods or services include in computing gross income the fair market value of the virtual currency?

A-3: Yes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, 3 measured in U.S. dollars, as of the date that the virtual currency was received. See Publication 525, Taxable and Nontaxable Income, for more information on miscellaneous income from exchanges involving property or services.

Q-4: What is the basis of virtual currency received as payment for goods or services in Q&A-3?

A-4: The basis of virtual currency that a taxpayer receives as payment for goods or services in Q&A-3 is the fair market value of the virtual currency in U.S. dollars as of the date of receipt. See Publication 551, Basis of Assets, for more information on the computation of basis when property is received for goods or services.

Q-5: How is the fair market value of virtual currency determined?

A-5: For U.S. tax purposes, transactions using virtual currency must be reported in U.S. dollars. Therefore, taxpayers will be required to determine the fair market value of virtual currency in U.S. dollars as of the date of payment or receipt. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.

Q-6: Does a taxpayer have gain or loss upon an exchange of virtual currency for other property?

A-6: Yes. If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency. See Publication 544, Sales and Other Dispositions of Assets, for information about the tax treatment of sales and exchanges, such as whether a loss is deductible.

The rest of IRS Notice 2014-21 and the remaining FAQs can be found at IRS Notice 2014-21 – Federal Taxation for Virtual Currencies.  At the state level the details of how virtual currency will be handled is still being worked out.  North Carolina currently has a bill in the state congress that addresses how the state wants to handle a number of issues associated with virtual currencies.  They even have a Virtual Currency Corner on the North Carolina Commissioner of Banks website dedicated to current virtual currency news and legislation.

If you have any dealings with virtual currency or might in the future, we would be happy to help answer any questions you may have.  Please contact our office for additional information.

Cody ([email protected]) is part of our tax staff at Langdon & Company LLP.  He focuses on high-net wealth individuals, and other various types of tax projects.

Opportunities for Tax Savings Using a Section 1031 Exchange

by Morgan Norris

What is a Section 1031 exchange? exchange-money

An exchange using Section 1031 of the Internal Revenue Code occurs when you sell an investment property and subsequently purchase another similar property within a certain amount of time.  This exchange is also known as a “like-kind” exchange, and can be used to postpone paying tax on the gain from the property sale if all the IRC requirements surrounding the exchange are met.  A Section 1031 exchange is reported on Form 8824, Like-Kind Exchanges.

Who qualifies?

Owners of investment and business property; including individuals, C corporations, S corporations, Partnerships, LLC’s and trusts can all qualify to take part in the Section 1031 exchange.

What are the requirements?

There must be an exchange of properties.  Examples of property exchanges include:  a simultaneous swap of one property for another or a deferred property exchange.  A deferred exchange allows you to dispose of a property, and then identify and purchase another property within a certain window of time.  Two time limits must be met in order to avoid a taxable event during a deferred exchange.  The first time limit requires you to identify potential replacement properties within 45 days from the date of the original property sale.  Your identification of the potential property must be in writing and must follow certain additional rules in order to be valid.  The second time limit requires that the replacement property be received and the exchange completed no later than 180 days subsequent to the sale of the original property or the extended due date of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.  The replacement property must be substantially the same as the property identified in the original paperwork issued.  There is no limit on how many times, or how frequently you can participate in a Section 1031 exchange.

Ways in which taxable gain may result

The exchange can include like-kind property exclusively, or a combination of like-kind property and cash, liabilities and/or non-like-kind property.  Exchanges consisting of cash, debt relief or non-like-kind property may trigger some taxable gain in the year of the exchange.  Taxable gain may also be generated from taking possession of cash from the sale of the relinquished property.  A Section 1031 exchange requires that a third party, such as a qualified intermediary, hold the proceeds from the original sale until the full exchange is complete.  Your real estate agent, broker, accountant or attorney may not act as your qualified intermediary.  Additional stipulations are also placed on the qualified intermediary.

Depreciation recapture may also be the result of certain exchanges.  This is taxed as ordinary income, and is usually the result of swapping items that are not necessarily of like-kind, such as improved land with a building for unimproved land without a building.

The fine print

A properly constructed Section 1031 exchange allows one to defer; but not forgive, taxable gain.  It is pertinent that the basis in each additional property purchased be tracked until the last replacement property is eventually sold.  Once this occurs, taxable gain will be calculated using the basis schedule.

Morgan ([email protected]) is a tax senior at Langdon & Company LLP.  She has experience with individual and corporate tax preparation.  Please contact our office if we can provide additional information.

Are YOU a Victim of Tax Identity Theft?

by Susan Dean

If you have received a 5071C letter from the Internal Revenue Service (IRS), you may indeed be a victim of tax identity theft. The purpose of the 5071C letter is to inform you that the IRS has received a tax return with your name and/or social security number and need to verify your identity. In an effort to protect the taxpayer, the letter provides two options to contact the IRS and confirm whether or not you filed your return. Taxpayers may use the idverify.irs.gov site or call a toll-free number on the letter. Due to the high-volume of calls, the IRS-sponsored website is the safest, fastest option for taxpayers with web access.

Below is a Taxpayer Guide to Identity Theft posted by the IRS.

ID theftWhat is tax-related identity theft?

Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.

Generally, an identity thief will use your SSN to file a false return early in the year. You may be unaware you are a victim until you try to file your taxes and learn one already has been filed using your SSN.

Know the warning signs

Be alert to possible identity theft if you receive an IRS notice or letter that states that:

  • More than one tax return was filed using your SSN;
  • You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return;
  • IRS records indicate you received wages from an employer unknown to you.

Steps to take if you become a victim

  • File a report with law enforcement.
  • Report identity theft at gov/complaint and learn how to respond to it at identitytheft.gov.
  • Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:
  • Contact your financial institutions, and close any accounts opened without your permission or tampered with.
  • Check your Social Security Administration earnings statement annually. You can create an account online at ssa.gov.

If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, take these additional steps:

  • Respond immediately to any IRS notice; call the number provided
  • Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS.gov, print, then mail or fax according to instructions.
  • Continue to pay your taxes and file your tax return, even if you must do so by paper.

If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 1-800-908-4490. We have teams available to assist.

How to reduce your risk

  • Don’t routinely carry your Social Security card or any document with your SSN on it.
  • Don’t give a business your SSN just because they ask – only when absolutely necessary.
  • Protect your personal financial information at home and on your computer.
  • Check your credit report annually.
  • Check your Social Security Administration earnings statement annually.
  • Protect your personal computers by using firewalls, anti-spam/virus software, update security patches and change passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking.

The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

Report suspicious online or emailed phishing scams to:[email protected]. For phishing scams by phone, fax or mail, call: 1-800-366-4484. Report IRS impersonation scams to the Treasury Inspector General for Tax Administration’s IRS Impersonation Scams Reporting.

This excerpt and additional Q&A information on Identity Theft can be found on the IRS website.

Financial Considerations Before Tying the Knot

by Dwayne Murphymarriage

There are a number of things to consider when getting married among them are various financial considerations. Below are just a few items to discuss with financial implications:

  • Discuss past financial issues and future goals such as:
    • Current income, debt and spending habits.
    • Career paths and goals – such as are there plans in going back to school, career changes or job relocations.
    • Children, how many, and if they will be in day care or if one parent will stay home and if they plan or want to go back to work at some point.
    • Whether you might have an older parent living with you in the future and all the financial costs that would be involved.
    • Retirement planning and goals – as in your current situation, what your end goal is and how you plan to get there. Then determine if you want to start a combined retirement account or keep your individual retirement accounts separate.
  • Discuss who will handle the finances:
    • While you may want to designate one of you to handle the finances, both of you should be aware of your goals, spending habits and investments. This will make both of you feel responsible for saving and want to help contribute.
  • Joint or separate accounts?
    • Joint Accounts
      • Trust is the key here as this is probably the most convenient as all the money goes in and comes out of one account. However, if one of you makes more money or has more debt than the other then it could seem unfair to share everything.
      • Another option is to share a common account as well as keep separate accounts. The common account would be for common bills and to save for common goals such as a house. The separate accounts would be for individual spending habits. The issue here is how much each of you will contribute to the joint accounts, especially if one of you makes considerably more than the other.
    • Separate Accounts
      • This could be the easiest solutions for people with large balances in accounts that would be a hassle to move and not having to worry about opening another credit card in both names. The issue here is who is responsible for what bills and for saving towards common goals.
    • Tax considerations
      • First, understand the tax brackets and how your new income will be affected. Then update your withholding form W-4 and applicable state form to adjust the amount of taxes withheld from your paycheck. This hopefully should keep you from getting a shock come tax time.

In conclusion there are a number of things to consider when getting married and lot of them have financial implications. Hopefully by discussing some of the items above it will help to achieve a healthy financial marriage.  Contact our office for additional tax advice.

Dwayne ([email protected]) is an Audit Senior with Langdon & Company LLP.  He mainly works with various types of non-profit associations.