Category Archives: Uncategorized

3 keys to a successful accounting system upgrade

Technology is tricky. Much of today’s software is engineered so well that it will perform adequately for years. But new and better features are being created all the time. And if you’re not getting as much out of your financial data as your competitors are, you could be at a disadvantage.

For these reasons, it can be hard to decide when to upgrade your company’s accounting software. Here are three keys to consider:

1. Your users are ready. When making a major change to your accounting software, the sophistication of the system needs to align with the technological savvy of its primary users. Sometimes companies buy expensive software only to have many of its features gather virtual dust because the employees who use it are resistant to change.

But if your users are well trained and adaptable, they may be able to extract added value from a more sophisticated accounting system. For instance, they could track key performance indicators to generate more meaningful financial reports.

2. The price is right. You’ll of course need to consider the costs involved. As holds true for any technology purchase, project leaders must set a budget and focus the search on products and vendors offering only the functions your company needs.

But don’t stop there. Explore add-on services such as free trials, initial training and ongoing support. You want to get the most value from the software, which goes beyond the new and improved features themselves.

3. You need to integrate. This is the concept of networking your accounting system with your other mission-critical systems such as sales, inventory and production.

For most companies today, integration is essential to maximizing the return on investment in accounting software. So, if you haven’t yet implemented this functionality, an upgrade may be highly advisable. Just be aware that a successful companywide integration will call for buy-in from every nook and cranny of your business.

Typically, if a company doesn’t need any major accounting process changes, it probably doesn’t need a major accounting software change either. But if upgrading both will help grow your business, it’s absolutely a step worth considering. We can provide further guidance and info. Contact our team today!

When it comes to revenue, nonprofits need to think like auditors

Auditors examining a not-for-profit’s financial statements spend considerable time on the revenue figures. They look at the accounting methods used to record revenues and perform a detailed income analysis. You can use the same techniques to increase your understanding of your organization’s revenue profile.

In particular, consider:

Individual contributions. Compare the donation dollars raised to past 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.

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.

Fees for services. Fees from clients, joint venture partners or other third parties can be similar to fees 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.

Once you’ve gained a deeper understanding of your revenue picture, you can apply that knowledge to various aspects of managing your organization. This includes setting annual goals and preparing your budget. Contact us for help interpreting and applying revenue data.

© 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!

How long should you retain payroll records?

Employers must exert a certain amount of time and resources to properly retaining their income tax records. But these aren’t the only documents you need to maintain. Retention of your organization’s payroll records is also important.

Rule of thumb

Most employers must withhold federal income, Social Security and Medicare taxes from their employees’ paychecks. As such, you must keep records relating to these taxes for at least four years after the due date of an employee’s personal income tax return (generally, April 15) for the year in which the payment was made. This is often referred to as the “records-in-general rule.”

These records include your Employer Identification Number, as well as your employees’ names, addresses, occupations and Social Security numbers. You should also keep for four years the total amounts and dates of payments of compensation and amounts withheld for taxes or otherwise ― including reported tips and the fair market value of noncash payments.

It’s also important to track and retain the compensation amounts subject to withholding for federal income, Social Security and Medicare taxes, and the corresponding amounts withheld for each tax (and the date withheld if withholding occurred on a day different from the payment date). Where applicable, note the reason(s) why total compensation and taxable amount for each tax rate are different.

Other data and documents

A variety of other data and documents fall under the records-in-general rule. Examples include:

• The pay period covered by each payment of compensation,
• The employee’s Form W-4, “Employee’s Withholding Allowance Certificate,”
• Each employee’s beginning and ending dates of employment,
• Statements provided by employees reporting tips received,
• Fringe benefits provided to employees and any required substantiation,
• Adjustments or settlements of taxes, and
• Amounts and dates of tax deposits.

Follow the rule, too, for records relating to wage continuation payments made to employees by the employer or third party under an accident or health plan. Such records should include the beginning and ending dates of the period of absence, and the amount and weekly rate of each payment (including payments made by third parties). Also keep copies of each employee’s Form W-4S, “Request for Federal Income Tax Withholding From Sick Pay,” and, where applicable, copies of Form 8922, “Third-Party Sick Pay Recap.”

Simple rule, complex info

As you can see, the records-in-general rule is fairly simple, but the various forms and types of information involved are complex. Please contact our firm for assistance in managing the financial aspects of your role as an employer.

“Innocent Spouse Relief”

01_04_18_462235785_ftnp_560x292_1.jpgAn ex-wife gets no tax relief. In general, married taxpayers who file a joint tax return are “jointly and severally liable” for the tax due on the return. However, spouses may be eligible for “innocent spouse” relief if they can prove they didn’t know about an understatement of tax. In one case, a married couple filed a joint return and later divorced. The U.S. Tax Court ruled the ex-wife wasn’t entitled to innocent spouse relief with respect to two sources of income earned by the ex-husband because she was aware he had received 1099 forms. (TC Summ. Op. 2017-95)

When are education expenses deductible?

Education expenses may be deductible, but not if the education is needed as a minimum requirement of the taxpayer’s current job, or if it qualifies him or her for a new profession. In one case, a taxpayer was hired as a speech pathologist, but she didn’t have the required master’s degree. After obtaining that degree, she deducted the costs on her tax return, but the IRS disallowed the deductions. The U.S. Tax Court agreed, because the degree was needed to meet the minimum requirements of her job and also qualified her for a new profession. (TC Summary Op 2017-93)

Withholding guidance for Employers

Employers: Withholding guidance coming soon. With the new tax law now in place, Form W-4 will need to be substantially revised. On Dec. 26, the IRS announced it is working on withholding guidance and anticipates issuing it this month. Employers and payroll companies will be encouraged to implement the changes in Feb. The IRS stated the information will be designed to work with W-4 forms already filed. Use of the new withholding tables will allow employees to see changes in their paychecks as early as Feb. Until then, employers should continue using 2017 tables.

IRS REVISES FORM 990 EXTENSION PROCEDURES FOR TAX EXEMPT ORGANIZATIONS

by Tony Pandiscia

In guidance released in January, 2017, the Internal Revenue Service [“IRS”] announced a new extension procedure for organizations required to file Form 990, “Return of Organization Exempt from Income Tax”.  Tax Exempt Organizations seeking an extension will now file a “single” Form 8868 to request an automatic 6 month maximum extension of time to file the annual tax return.  Previously Tax Exempt Organizations intending to avail themselves of the full statutory extension period would be required to file 2 consecutive 3 month extensions, provide a valid reason for the extension request and sign the extension “under penalty of perjury”.  The new Form 8868 filing procedure will also apply to filers of other annual returns such as Form 990EZ [“Short Form Return of Organization Exempt from Income Tax”], Form 990PF [“Return of Private Foundation”], and Form 5227 [“Split Interest Trust Information Return” used by Charitable Trusts].  Note that Form 990-T [“Exempt Organization Business Income Tax Return”] that is required for Tax Exempt Organizations who generate Unrelated Business Income Tax [“UBIT”] has always been subject to a 6 month extension and will continue to do so under the new Form 8868 process.

The new extension form will apply commencing with the filing of “2016 tax returns” during calendar year 2017 [i.e. fiscal years with a “beginning date” in 2016] and must be filed prior to the due date for filing of the respective tax return.  As a reminder, a Form 990 is initially due 4 ½ months following the organization’s fiscal year end.  For “control or affiliate groups,” a separate extension form must be filed for each respective organization or affiliate that has an annual filing requirement.  Payments required (i.e. such as for “UBIT”) should accompany the extension form.  The Form 8868 may at the discretion of the filer be submitted via regular mail to the Ogden, UT IRS Service Center or electronically filed using any approved “EFILE” processing system.  Finally, note that this revised extension procedure applies to annual Federal Form 990 (and similar) filings for a Tax Exempt Organization and does not directly affect any State-mandated annual filing requirements.

We will be discussing with our respective clients the new extension procedures during the next few months, however anyone may contact Langdon & Company LLP should you have any questions.

Tony (tpandiscia@langdoncpa.com) is the Tax Partner with Langdon & Company LLP.  He is a CPA and also an attorney, advocating for clients on many levels-including with the State and the IRS.

NC Adult Care Cost Report Update

by Rachel Owens

Nursing-home

We have an official update from the NC Office of the Controller!

They have announced that NO Adult Care Cost Report will be due in 2016 after the General Assembly passed House Bill 1030, which changed the General Statute 131D-4.2 stating the ACH Cost Reporting requirements.  These reporting requirements changed to every OTHER year instead.

Therefore, the next cost report required will be for 2017.  The deadline has not been set, nor the year end for that cost report.  We will continue to be in communication with our contacts at the state to get information as it comes in, and pass it along to you.

Click here to see the official announcement.  If you have additional questions about cost reports or other ways Langdon & Company LLP can help your Organization, contact us!

Rachel (rowens@langdoncpa.com) is an Senior Accountant who works primarily with healthcare clients, providing all their Medicare and Medicaid reimbursement reporting needs.

It is time for your CFO or Controller to become a Coach?

by Dwayne Murphy

According to the book The Traits of Today’s CFO: A Handbook for excelling in an evolving Role, by Ron Rael, CPA, CGMA, coaching is a mix of technical and people skills combined in a unique fashion that produces great results, which helps the organization achieve its goals.dwaynes pic

Coaches try to foster personal relationships with each employee so that they can tell the truth when things are going well or going poorly. They are not managers or micromanagers because they are using knowledge and insight to help employees come into their own wisdom and trusting their employees and letting them successfully stumble so they quickly learn to succeed.

Coaching is not limited to employees; you can coach a boss or a colleague. The process of coaching is consistent and once it is mastered you will find many ways to use it to help others.  Coaching at the organization level requires the CFO or controller to be the conscience of the organization. You must be seen as the professional leader who does not have any biases or an agenda other than the organization’s success. Here are nine skills of a great organization coach:

  1. Teaching and Training: Leadership positions in finance are now being required to constantly train individuals. That is why a coach should be able to constantly teach others about finance, accounting and business management.
  2. Counseling: Coaches should be able to help guide other leaders and colleagues through difficult situations and tough decisions.
  3. Guiding: Coaches should step in to help shape other leaders’ behaviors and decisions so that they stay focused on solutions and plans that benefit the organization.
  4. Relating: Coaches should use analogies, examples and stories to help get your point across and speak at the same level as the person being coached to help foster trusting relationships.
  5. Learning: Coaches should be open to learning from other leadership team members as this will ensure future success at the organization.
  6. Questioning: Don’t be afraid to ask open-ended and probing questions. These often lead to new possibilities and help the organization reach its goals.
  7. Listening: Often managers will have hidden agendas or often deny anything is wrong, but by listening with your ears, eyes and intuition you will be able to bring forth those hidden things so they can be openly discussed.
  8. Using intuition: Coaches should be aware of what to say and what not to say by using your business intuition.
  9. Creativity: Coaches should be open minded to new tools, methods, or processes that the organization can use to remove obstacles and achieve goals.

Coaching can seem daunting but with the right attitude and plan it can benefit both the coach and the whole organization. The business world is challenging and always changing and coaching can help the organization stay on target and succeed.

Dwayne (dmurphy@langdoncpa.com) is an Audit Senior in our firm.  He works with many non-profit clients as well as those in healthcare.