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How the New Tax Law Affects State Income Taxes

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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!

Charitable Solicitation License Refresher

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By Rebecca Lunn

In the nonprofit arena, charitable solicitation licenses are a necessity for certain fundraising efforts. If you are an organization or individual that asks the public for contributions or donations to support a charitable purpose, a charitable solicitation license (“CSL”) is needed, unless specifically exempt by law. As many states have laws regulating the solicitation of funds for charitable purposes, it is important to check the requirements for each state your organization operates in to ensure compliance.

For organizations based in North Carolina whom are currently registered with the NC Secretary of State (SoS) Charities Bureau, keep in mind the following renewal requirements:

·       The NC SoS notifies by mail all organizations who already hold licenses 65 days prior to their annual renewal date of the renewal requirements.  Typically, each organization files its own CSL renewal directly with the NC SoS.

·       The NC SoS has published on its website that all organizations who have a current CSL should disclose its licensure status, such as including a statement with the following wording on all solicitations: “Financial information about this organization and a copy of its license are available from the State Solicitation Licensing Branch at 919-807-2214 or 888-830-4989 for NC Residents.”

·       Licenses are generally due 4 ½ months following the fiscal year-end date of the organization; however, all organizations in “current” standing with the NC SoS receive a 60-day extension without having to request it.  For example, a calendar year organization in current standing has a CSL renewal due date of July 15th in reliance on the automatic 60-day extension.  Absent current standing status, an organization will be subject to late filing penalties upon its eventual updating of its record with the NC SoS.

·       If more time is needed to file the CSL renewal, an additional 30-day extension is available to the organization by filing a copy of the Federal Form 8868 (extension for IRS Form 990) prior to the expiration of the automatic 60-day extension.  As a result, a calendar-year organization may, by timely-filed request, extend the period of time for CSL renewal to August 15th.

·       When the CSL renewal is actually prepared, organizations must comply with the annual financial disclosure requirements via submission of one of the following: (1) a copy of the duly executed Form 990, (2) copy of the Audited Financial Statements, or (3) completing a NC SoS “Annual Financial Report” signed by 3 members of the organization’s board of directors, finance committee or audit committee. 

If you are an organization who needs assistance or has additional questions on the Charitable Solicitation License requirements or renewal process, our accounting professionals at Langdon & Company would be glad to assist. Please contact us at 919-662-1001 for further information.

Also, for further information specific to the North Carolina filing requirements, please visit https://www.sosnc.gov/csl/ThePage.aspx. 

Rebecca [email protected] is an Audit Senior who works primarily with non-profit organizations.

Update: NC Adult Care Home Cost Reports

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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 [email protected] or [email protected]!

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

 

 

 

 

What Can We Do For You?

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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 ([email protected]) is an Audit Manager with Langdon & Company LLP. She works with many not-for-profit and healthcare organizations.

2017 Tax Season Update/Reminders

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by Tony Pandiscia

Updates to Important 2016 Income Tax Return Filing Deadlines:

  • Individuals                  Tuesday, April 18, 2017
  • C Corporations           Tuesday, April 18, 2017
  • Trust/Estates              Tuesday, April 18, 2017
  • Partnerships       Wednesday, March 15, 2017
  • S-Corporations   Wednesday, March 15, 2017

HIGHLIGHTS OF FEDERAL TAX CHANGES

  • The Standard Deduction amount for Married Filing Joint couples has increased by $100 for 2017 to $12,700; all other filing status standard deductions have increased by $50.
  • The maximum annual “profit sharing” contribution limit for certain retirement plans has increased to $54,000 for 2017.
  • The annual compensation limit for certain retirement plans has increased to $270,000 for 2017.
  • The Social Security maximum earnings base for application of FICA tax has increased to $127,200 for 2017.
  • The thresholds for each of the Individual Income Tax Brackets for 2017 have been increased slightly due to annual Cost of Living Adjustments.
  • The gross income levels for which a 2017 income tax return is required have been increased to $ $20,800 (Married Filing Joint filers) and $10,400 (Single filers).
  • Effective January 1, 2017, Business-related travel expense “standard mileage rate” has been revised to 53.5 cent per mile for business miles driven. The “standard mileage rates” for medical or moving expense purposes is now 17 cents per mile, but the rate for charitable activities remains unchanged at 14 cents per mile.
  • Tax Exempt Organizations can now receive an automatic six-month extension of time to file using Form 8868 prior to the initial due date for their 2016 tax returns.

HIGHLIGHTS OF NORTH CAROLINA TAX CHANGES

  • The standard deduction has been increased by $1,000 for married individuals who file jointly (or as “head of household”) and $500 for all other individuals.
  • Effective January 1, 2017, many service businesses will now be subject to Sales & Use Tax collection and reporting when providing “repair, maintenance, or installation” services that are not “Capital Improvements.” In addition, a new exemption form has been issued for service businesses to qualify for a “Capital Improvement” exemption.

HELPFUL REMINDERS

  • Charitable Contribution:
    • Tax deductible contributions can be made in the form of cash or noncash but not “service” to a qualified 501(c)(3) organization. Out-of-pocket costs and travel expenses incurred may be subject to deduction.
  • Any single donation larger than $250 to a “qualified organization” requires acknowledgement (or receipt). For noncash donations, fair market value assessment is the responsibility of the donor and if over $5,000, a certified appraisal is required.
  • Reporting of Foreign Bank and Financial Accounts (FBAR):
    • If you have a financial interest in or signature authority over a foreign financial account with overall value exceeding $10,000 at any time during the calendar year, you are required to file an FBAR. (As a protective measure, many of our clients file this report regardless of the threshold in order to run the statute of limitations for audit.)
    • The annual due date for filing has been revised to April 18, 2017. All taxpayers will be granted an automatic six-month extension to October 15.

This is a summary of 2017 tax changes.  If you have any questions regarding the details of the changes and how they may affect your specific situation, please feel free to contact us to discuss.

Tony ([email protected]) 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.

Nonprofits: Choosing or Changing the Fiscal Year-End

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by Lee Byrd

What is a fiscal year? A fiscal year is the period used for calculating annual (“yearly”) financial statements in businesses and other organizations. Many nonprofits have a fiscal year-end of June 30th. However, this is not a requirement and the organization’s fiscal year can end whenever the nonprofit should chose, as long as the end date is specified in the organizational documents.

So how should a nonprofit chose the best fiscal year-end for the organization? Some things to consider include:

  • Program year – the organization’s fiscal year should coincide with its program year so that one year’s program activities should not fall into two fiscal years. For example, if the majority of the nonprofit’s programs fall during the summer months, June 30th is most likely not the best option for that nonprofit’s fiscal year-end.
  • Grant cycles – Some organizations may find it helpful to align their fiscal year-end with the terms of the organization’s major grants and/or funders. This enables the organization to develop a clean cut-off for grant reporting and simplifies the grants process.
  • Audit evidence – Nonprofits who require an audit generally need time subsequent to year-end to close out the books and gather audit evidence in preparation for the audit. Having a year-end that falls during the organization’s busiest time of year may impact the availability and timeliness of sufficient audit evidence.
  • Debt covenants – For organizations with significant debt covenants, the cyclical nature of the organization’s operations and the impact on the calculation of those covenants should be considered when choosing a year-end.

Once the above factors have been considered and a year-end has been chosen, many nonprofits question the audit and reporting impact of a fiscal year-end change. A year-end change will affect how the nonprofit presents its audited financial statements in the year of change and in the subsequent fiscal year. An organization can chose to extend the period under audit in the year of change or undergo an audit for the short period, plus the original fiscal year. For this reason, it is often common for single year financial statements to be presented rather than comparative statements in the year of change. The need for a comparative financial statement presentation and the costs of an extended or additional audit period should be considered in the year of change.

Lastly, in order to change the organization’s year-end with the IRS, Form 1128 “Application to Adopt, Change, or Retain a Tax Year” will need to be filed along with Form 990 for the short period to bridge the gap between the original year-end and the new year-end. A copy of the nonprofit’s tax exempt ruling letter from the IRS will need to be submitted with along with Form 1128. If an extension is needed for the short-period Form 990, the extension must be filed prior to the initial due date of the new fiscal year. Additionally, the nonprofit will want to review and amend any organizational documents (such as bylaws) that refer to the fiscal year-end.

If you are considering a change to your nonprofit’s year-end, contact Landon & Company LLP for further guidance on your specific situation.

Lee ([email protected]) is an Audit Manager with Langdon & Company LLP.  She works with many healthcare nonprofit organizations.

Gift Tax Exemptions and Avoidance Strategies

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by Eric Murphy

Under current IRS regulations, when a donor makes a gift in excess of $14,000, they must file Form 709 to report the gift and pay tax on the excess above $14,000.  This exemption is applicable to each donee the donor makes a gift to in 2016, so they can make one gift for $11,000 to one person and another gift of $12,000 to a different person and they won’t be subject to the tax liability or filing requirement.  Under IRC Sec. 2513, this threshold is increased for married couples to $28,000 per donee, with the donor and spouse having the option of making “Split Gifts”, which essentially result in each of them making half of a gift to a particular donee.  An example of this is a donor giving his friend $26,000 in cash to buy a car.  Under the rule of “Split Gifts”, the donor and his spouse each made a gift of $13,000 to the taxpayer’s friend, therefore neither exceeds the exemption threshold.  However, a gift tax return would need to be filed indicating the gift split option was utilized, even though no tax would be due.

There are also some othgift moneyer ways a donor can make gifts in excess of the exemption without being subject to the filing requirement and liability on the excess, under IRS Publication 950.  Some of these include:

  • Paying the medical expenses for anyone, as long as the payments are made directly to a third party medical institution or physician. The gift can’t be given to the donee directly or else it’s subject to the exemption limit.
  • Paying the tuition expenses for anyone, as long as the payments are made directly to a third party educational institution. Similar to a gift for a donees’ medical expenses, the gift can’t be given to the donee directly or else it’s subject to the exemption limit.
  • Donors can make unlimited gifts to their spouses.
  • Donors can make gifts to qualified Political Organizations for their objectives. However, these gifts don’t qualify for a charitable contribution deduction on their personal Tax Return.  Gifts to qualified charitable organizations formed under IRC 501(c)(3) are allowed as deductible contributions on the donor’s return and are exempt from the limitation.

The preceding information is a summary of some basics of gift taxation.  If you are in the process of estate planning or want to help out someone in need, please contact Langdon & Company, LLP.  Our tax professionals can discuss your goals with you and develop a strategy that insures that you’ll have more to give to those you care for.

Eric ([email protected]) is a Tax Senior with Langdon & Company LLP.  He works primarily on medical practices, real estate holding companies, and multi-state corporations.

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

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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 ([email protected]) is an Audit Senior in our firm.  He works with many non-profit clients as well as those in healthcare.

 

 

New Overtime Rule – What you need to know

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by Meagan Bulloch

On May 18, 2016, the US Department of Labor (DOL) published the Final Rule on overtime, which amended the Fair Labor Standards Act (FLSA).  This change is expected to affect approximately 4 million workers across the United States.

Beginning December 1, 2016, the salary threshold for non-exempt workers increases from $455/weekly ($23,660 annually) to $913/weekly ($47,476 annually).  Under this new rule, any worker regardless of their role or title who earns less than that amount will have to track their hours and will be entitled to overtime pay which equates to time and a half for any hours over 40 in a week.

How does this compare to the old rule?  Check out this comparison table.

What are my Options?

  1. Raise salaries for non-exempt “white collar” employees above the $47,476 threshold so that they will be exempt from overtime
  2. Limit the hours worked by these employees to 40 or fewer per week
  3. Hire additional workers to perform the extra hours
  4. Pay non-exempt employees overtime for any hours worked beyond 40 per week

What else should I consider?

  • Determine whether your organization is entitled to minimum wage and overtime pay protections on an enterprise or individual basis.
  • Review personnel records, job descriptions and worker classifications to make sure their actual job duties (not titles) are used to determine exempt or non-exempt status.
  • Review employee workload to evaluate current staff capacity considering weekend or seasonal workload fluctuations.
  • Review terms of any grant agreements or contracts and identify staffing needs. Keeping in mind that the organization may be contractually obligated to maintain services at a predetermined level.
  • Consider “what if” scenarios and estimate budget and cash flow impacts.
  • Revisit organizational policies and procedures including timekeeping, compensation and overtime to make sure they are in line with the new rule requirements.

Is anyone excluded?

The DOL has a non-enforcement policy for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds.  From December 1, 2016 through March 17, 2019, the DOL will not enforce the updated salary threshold of $913 per week for the subset of employers covered by this non-enforcement policy.

Be sure to give Langdon & Company LLP a call if you have questions on how this affects your organization.

Meagan ([email protected]) is an Audit Partner at Langdon & Company LLP.  She works on various clients from associations to healthcare.

IT Controls: How to Keep Your Organization Safe

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by Rebecca Lunn

As organizations become more and more reliant on technology, the risks around technology also continue to grow. Recently, we have heard on the news of large hospitals being attacked with ransomware, which encrypts files. Hackers then refuse to give the key to unlock the files unless a ransom is paid, typically in the form of bitcoin, which is more difficult to trace. Although these particular hackers were after sensitive patient data, other types of organizations should also be aware of this risk. For example, non-profits who have large databases of member or donor data may also appeal to these types of hackers. In the face of increasing risk, it is vital that organizations re-evaluate their IT controls. Strong IT controls consist of the following:

  • The Organization has an IT strategic planning and risk management process in place to support financial reporting requirements.
  • The Organization maintains reliable systems that include appropriate data backup and recovery processes. This includes not only backing up data, but testing the backup restoration process on a periodic basis.
  • Physical security and access to programs and data are appropriately controlled to prevent unauthorized use, modifications, damage or loss of data.
  • Program and system changes are appropriately managed to ensure that the application software adequately supports financial reporting objectives.

If your organization would like additional information about implementing or improving IT controls, please contact Langdon & Company LLP.

Rebecca [email protected] is an Audit Senior who works primarily with non-profit organizations.