Category Archives: Raleigh CPA Firm

New Tax Law Impacts Retirement Benefits

As you’re likely aware, Congress passed and the president signed into law a new tax bill in December. The technical name of the act is rather long and unwieldy, so it’s commonly referred to by an earlier and simpler title: the Tax Cuts and Jobs Act (TCJA). Naturally, most of the TCJA’s provisions have to do with income taxes. But it also impacts retirement benefits.

Loan balances

The new law gives a break to plan participants with outstanding loan balances when they leave their employers. Ordinarily, participants with outstanding loans who fail to make timely payments after separation from an employer are deemed to have received a distribution in the amount of that outstanding balance. Under pre-TCJA law, they could, however, roll that amount (assuming they have sufficient funds available) into an IRA without tax penalty if they do so within 60 days.

Under the TCJA, beginning in 2018, former employees in this situation will have until their tax return filing due date (including extensions) to move funds equal to the outstanding loan balance into an IRA or qualified retirement plan without penalty. They’re given the same opportunity if they’re unable to repay a loan because of the plan’s termination.

Roth conversions

The TCJA also restricts individuals’ ability to recharacterize conversion contributions to a Roth IRA as if they were still making contributions to a traditional IRA. In other words, beginning in 2018, individuals can no longer convert a traditional IRA to a Roth IRA and then later recharacterize that Roth IRA contribution back to a traditional IRA contribution to essentially undo the conversion. However, taxpayers can still recharacterize new Roth IRA contributions as traditional contributions as long as they do it by the applicable deadline and meet all other rules.

This provision may portend additional 401(k) restrictions in years to come. Roth 401(k)s are favored by revenue-seekers in Congress, because the after-tax nature of contributions to Roth plans — IRAs or 401(k)s — enables the federal government to collect more tax revenue in the present, pushing off into the future the drain on tax revenue because of the tax-free nature of Roth withdrawals.

Future possibilities

Indeed, the federal government will likely continue to look at changes to retirement plans as a means of generating revenue. One proposed, but eventually eliminated, provision would have required that all contributions to any defined contribution plan sponsored by the same employer (including mandatory employee contributions to a defined benefit plan) be aggregated when determining whether contributions to a participant’s account satisfy IRC Sec. 415(c) limits. This would have raised $1.7 billion over a 10-year period, the Committee’s staff estimated.

Similarly, Congress considered imposing a low ($2,400) cap on pre-tax 401(k) contributions, requiring the balance of the total $18,000 limit on contributions ($18,500 for 2018) to be made on an after-tax basis. Congress could someday revisit this concept and push employers to convert traditional 401(k) plans to Roth plans.

Far beyond

The TCJA goes far beyond tax rate reductions. Let our firm help your organization fully understand how both its tax liability and employee benefits are affected by the new law. Contact Landgon & Company today!

© 2018

Attachment

Now Available – 2018 Income Tax Withholding Tables

01_12_18_106439659_ftnp_560x292_1.jpgEmployers and employees: Withholding tables reflecting Tax Cuts and Jobs Act (TCJA) changes are now available, and employees could see paycheck changes by February. The IRS has issued new income tax withholding tables for 2018 and advised employers to begin using them as soon as possible, but no later than Feb. 15. Find the IRS’s information release at http://bit.ly/2D2ihJn and the percentage method tables themselves in IRS Notice 1036 at http://bit.ly/1Ne91he Answers to frequently asked questions about using the new tables can be found at http://bit.ly/2D5iWJm

Out tax department is happy to answer any questions you may have regarding the new tax laws. Please contact us at (919) 662-1001 or send us an email here.

How the New Tax Law Affects State Income Taxes

01_05_18_139882791_ftnp_560x292_1.jpgHow will the new tax law affect state income taxes? The Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017, is a major revamping of federal taxes but it also could have sweeping effects on your state taxes. To name a few, most states use the federal system to calculate state taxable income, so you may see your state income tax liability change. New limits on the federal state and local tax deduction may indirectly impact individuals at the state level, especially in high tax areas. States will have to decide whether to conform with new federal tax rules.

If you have additional questions, please contact our office.  We will be happy to help you!

Don’t let donor fatigue erode support for your nonprofit

After a flurry of year-end fundraising, you and your not-for-profit’s staff are probably ready for a little break. Your supporters may be tired, too. At some point, even the most philanthropic individuals experience donor fatigue and start saying “no” — even to their favorite charities.
Here’s how to remain engaged with donors and yet keep your fundraising efforts from eroding relationships.

Stagger your attention

When you do a mass mailing for donations, do you blanket your entire donor base each time? Doing so can lead to donor fatigue. To avoid this, stagger your solicitations. Solicit your most significant donors in person, for example, but contact the next tier of donors with a personal letter or email. Follow up both communications with a phone call. Solicit all other donors by mass mailing.

Also consider scaling back the number of donation requests you make. Donors may be annoyed by monthly appeals (especially in the form of mass mailings). But if they know you only ask once or twice a year — or in the event of emergencies — they’re more likely to be there when you need them.

Think of alternatives

Also consider forgoing soliciting your major donors for money every year. A corporate sponsor’s nonmonetary donation — such as use of a venue for an event — may be just as valuable. Or, instead of returning to the same event sponsor every year, seek new sponsors, but keep the established sponsor engaged by asking for support in another form. For example, request the donation of an auction item or gift basket.

The same holds true for individual donors. While you’d hate to miss out on a donation by simply not asking, consider requesting that significant donors contribute in ways besides writing a check. Chances are your biggest supporters are well established in the community and have friends and colleagues who are charitably inclined. Ask major donors to donate their time by chairing a committee, emceeing an event or hosting a fundraising function on your nonprofit’s behalf. As a result, they’ll likely introduce your organization to others.

Be sensitive

A dedicated donor base is critical to your nonprofit’s continuing operation. To avoid alienating your biggest fans, be sensitive to possible donor fatigue and know when to use a lighter touch.

Langdon & Company has over 25 years of expertise and experience working in the nonprofit industry. Contact us today for more info.

© 2018

Upcoming Deadline for Wage Statements and Independent Contractor Forms

01_04_18_810117502_ftnp_560x292_2.jpgBusinesses: Don’t forget the upcoming deadline for wage statements and independent contractor forms. Employers are required to file their copies of Form W-2 and Form W-3 with the Social Security Administration by Jan. 31. This deadline also applies to certain Forms 1099-MISC filed with the IRS to report nonemployee payments to independent contractors. An extension of time to file is no longer automatic, and the IRS will only grant extensions for very specific reasons. “Failure to file these forms correctly and timely may result in penalties,” the IRS stated.

If you have any questions on how to file these forms, contact Langdon & Company today!

2018 Tax Filing Deadlines

The 2018 tax filing season will begin on Jan. 29, the IRS announced. That’s the date the IRS will begin accepting electronic and paper returns (though many tax professionals and software companies will accept returns earlier). Processing returns will begin in mid-Feb. The earliest that refunds claiming the earned income credit or additional child tax credit will be available will be Feb. 27. The IRS expects over 90% of refunds to be issued within 21 days. The last date to file without an extension is April 17, 2018.

For additional information on this year’s tax deadlines, check out the official news release on the IRS website.

If you have questions or need assistance filing your taxes, contact us for more info.

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How the New Tax Law Affects State Income Taxes

01_05_18_139882791_ftnp_560x292_1.jpgHow will the new tax law affect state income taxes? The Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017, is a major revamping of federal taxes but it also could have sweeping effects on your state taxes. To name a few, most states use the federal system to calculate state taxable income, so you may see your state income tax liability change. New limits on the federal state and local tax deduction may indirectly impact individuals at the state level, especially in high tax areas. States will have to decide whether to conform with new federal tax rules.

If you have additional questions, please contact our office.  We will be happy to help you!

Valuing and reporting gifts in kind and donated services

Not-for-profit organizations don’t receive only cash donations. Your support also likely comes in the form of gifts in kind and donated services. But even when such gifts are welcome, it can be challenging to determine how to recognize and assign value to them for financial reporting purposes.

Recording gifts in kind

Gifts in kind generally are pieces of tangible property or property rights. They may take many forms, including:

• Free or discounted use of facilities,
• Free advertising,
• Collections, such as artwork to display, and
• Property, such as office furniture or supplies.

To record gifts in kind, determine whether the item can be used to carry out your mission or sold to fund operations. In other words, does it have a value to your nonprofit? If so, it should be recorded as a donation and a related receivable once it’s unconditionally pledged to your organization.

To value the gift, assess its fair value — or what your organization would pay to buy it from an unrelated third party. In many cases it’s easy to assign a fair value to property, but when the gift is a collection or something that doesn’t otherwise have a readily determinable market value, its fair value is more difficult to assign. For smaller gifts, you may need to rely on a good faith estimate from the donor. But if the value is more than $5,000, the donor must obtain an independent appraisal for tax purposes, which will give you documentation for your records.

Recognizing donated services

The fair value of a donated service should be recognized if it meets one of two criteria:

1. The service creates or enhances a nonfinancial asset. Such services are capitalized at fair value on the date of the donation. These types of services either create a nonfinancial asset (in other words, a tangible asset) or add value to an asset that already exists.

2. The service requires specialized skills, is provided by persons with those skills and would have been purchased if it hadn’t been donated. These services are accounted for by recording contribution income for the fair value of the service provided. You also must record it as a related expense, in the same amount, for the professional service provided.

Beyond the basics

These are only basic guidelines to recognizing and valuing gifts in kind and donated services. For more comprehensive information about handling these gifts, contact us.

Update: NC Adult Care Home Cost Reports

The NC Department of Health and Human Services released a memo dated May 15, 2017 detailing the official instructions for Adult Care Home reporting requirements as well as the release of Agreed-Upon-Procedures (AUP) instructions. As of November 21, 2016, the Cost Report for Adult Care Homes was reinstated with the significant change being reporting is only every two years, beginning this year.

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 more than 7 beds are additionally expected to have Agreed-Upon-Procedures performed.  The cost reports will be completed using the latest completed fiscal year end. These cost reports are due – September 30, 2017!

As an advocate for providers we are flexible in the midst of inconvenient legislation and would be happy to serve your Organization as well. If you have questions, please contact pwilliams@langdoncpa.com or rowens@langdoncpa.com!

https://www2.ncdhhs.gov/control/acf/2016-17/aup/adult-care-mental-health-faciliites.pdf

 

 

 

 

What Can We Do For You?

By Lee Byrd

Small business owners and nonprofit executives often wear many hats while managing their organization. Whether it’s day-to-day accounting or oversight of an internal accounting department, an accounting firm offers many services that will allow you to focus on the core strategies of your business. Here at Langdon & Company LLP, we offer a wide range of services from basic bookkeeping to acting in a CFO role to financial statement audits and tax return preparation. Often times you will find that the cost of hiring an accounting firm to perform these services is less than hiring an employee.

Bookkeeping Services

Many small organizations do not have the need or financial resources to hire a full-time employee to perform the day-to-day bookkeeping tasks. In such caserviceses, it may be helpful to seek the aid of an accounting firm that can provide services such as accounts payable and receivable, billing, payroll, bank reconciliations, general ledger entries and monthly financial reports. You will gain the knowledge of an experienced bookkeeper with access to CPAs within the firm at a cost effective rate.

CFO Services

Do you need the expertise of a Chief Financial Officer but can’t bear to add such a salary to your already tight budget? A CPA firm can offer the expertise of a CFO in tasks such as creating budgets, preparing financial statements, analysis of financial data, or review of your organization’s internal accounting personnel offering a greater segregation of duties. These services can be provided on a periodic basis, such as monthly or quarterly, or on a project by project basis, as needed throughout the year.

Audit and Attest Services

Whether it is at the request of a lender or required by the organization’s by-laws, many organizations feel the need for a higher level of review of the financial statements. CPA firms offer attest services that will provide the level of assurance needed. An Audit provides the highest level of assurance that the finaauditncial statements are free from material misstatement and includes the auditor obtaining an understanding of the client’s internal controls and assessing fraud risks. An audit is also the most costly level of attest service. While less costly, a Review is substantially narrower in scope than an audit and provides only limited assurance. A review consists mostly of inquiry and analytical procedures. If the audit or review services do not meet the needs of the organization, CPA firms also offer Agreed Upon Procedure (AUP) services. An AUP is an engagement in which an auditor is engaged to carry out procedures of an audit nature to which the auditor, the client, and any appropriate third party have agreed and to report on factual findings.

Tax and Consulting

In addition to day-to-day booking or more extensive oversight services, accounting firms also advise clients on financial strategies, such as lowering tax burdens, providing suggestions on a business plan, or suggestions on the most effective way to comply with third party regulations. CPAs can also assist with the preparation of state and federal tax returns.

Langdon & Company LLP is a full-service CPA firm committed to providing quality customer service in the highest professional manner. Contact us to see how we can help you!

Lee (lbyrd@langdoncpa.com) is an Audit Manager with Langdon & Company LLP. She works with many not-for-profit and healthcare organizations.