Tax Reform Changes - How will they affect you?

When you file your 2018 tax returns – about a year from now – your return will look very different.  Here are a few of the biggest changes that may affect you.

 

Individual Tax

• Individual tax rates will range from 10% to 37%.
• Standard deduction increases and personal and dependent exemptions eliminated
• The Child Tax Credit increased and a new Dependent Credit created.

Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:

• State income tax and property taxes above $10,000 per year in total;
• Moving expenses (with an exception for certain military);
• Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
• Mortgage interest beyond interest on $750,000 of acquisition debt (if you buy a new home); and
• Mortgage interest paid on equity debt (all homeowners).

Some new benefits for individuals include:

• Medical expense Adjusted Gross Income (AGI) threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
• Alternative Minimum Tax (AMT) threshold increased;
• A deduction for qualified business income for passthrough entity owners;
• Recharacterization to an IRA cannot be used to undo a Roth conversion;
• The estate tax exclusion has increased to $10 million (adjusted for inflation); and
• Annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.

Small Business Tax

• Corporate tax rate will be a flat 21% for 2018
• Up to 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are complex but there is a lot of planning that we can do to maximize this deduction for you.
• Corporate Alternative Minimum Tax (AMT) repealed;
  
• IRC §179 expensing and bonus depreciation increased;
• Deductible business interest reduced;
• The net operating loss (NOL) carryback repealed, NOL deduction amount limited;
• The domestic production activities deduction is repealed;
• IRC §1031 treatment is limited to certain real property; and
• Entertainment expenses are disallowed.

We are here if you would like to discuss how the changes apply to your unique situation >> Contact Us

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For nonprofits, it can be all too easy to overlook the importance of such filings, viewing it as a necessary evil – a dull and dry “must do” on the end of year checklist.

However, one form in particular – the 990 – should be considered a truly great opportunity (more on that later).

But first…

What is the 990?

For those of you unaware, the Form 990 was designed to allow both the IRS and the public to evaluate tax-exempt organizations and how they operate. It collects information about the nonprofit’s mission, programs, and of course finances.

And more recently, the 990 has been amended to gather even more information about nonprofits, including the compensation of board members and staff, the disclosure of any potential conflicts of interest, and financial accountability and the avoidance of fraud.

Who Needs to File a 990?

Large nonprofit organizations with gross receipts of $50,000 and over must file Form 990 or 990-EZ.

And smaller nonprofits with gross receipts of less than $50,000 must file Form 990-N so that they can retain their tax-exempt status.

Is Anyone Exempt?

Churches, religious schools, missions and missionary organizations are exempt from filing the Form 990.

Subsidiaries of nonprofits are also exempt if a group return is filed by the parent organization, as are some state institutions and Government corporations.

Remember, the 990 is Public Information

Now, remember earlier when we mentioned that filing the Form 990 is potentially a great opportunity for nonprofits? Well, here’s why.

It’s public information.

This means this “must-do” piece of paperwork can actually act as a platform from which you can shout about and celebrate your organization’s accomplishments and social impact.

What’s more, the form is available through a variety of internet platforms, such as Charity Navigator and Guidestar. You can therefore be certain that many donors and grantors alike will use the form’s information to vet charitable organizations.

So, when you reach the section of the form where you are required to describe your program accomplishments and activities, think of it as free advertising.

Grasp that opportunity with both hands; tell your story and frame your mission in such a way that it will resonate with readers.

Go Beyond Compliance

You will more than likely need to file the Form 990 every year. Nonprofits that go three years without filing the form can actually lose their tax-exempt status, with no appeal process.

You need to be compliant when completing your year-end paperwork, and we can help with that. But we can also help advise you as you go from being merely compliant to leveraging the opportunity for positive PR afforded by this form.

Contact us at Checkbox to find out more.

The post Form 990 – A Necessary Evil or a Great Opportunity? appeared first on Checkbox Accounting.

Identity theft is on the rise.  It is now the third most serious crime in our country according to the Federal Bureau of Investigation (FBI).  The federal government is putting pressure on Visa and MasterCard to protect vital cardholder data at the point of sale.  They are doing this by passing this responsibility on to their small business owner clients.  Unfortunately, businesses are not taking this issue seriously because they feel they are too small and “under the radar”.

However, just the opposite is the case as over 80% of all data breaches are from small “Mom and Pop” main street businesses.  These businesses do not have the money to hire the IT personnel needed, or purchase the sophisticated software to help protect themselves and their customers.

Cyber thieves have found a way to tap into credit card terminals and steal data as it is transmitting to the merchant service providers. In fact, even though the older terminals appear to work just fine, they have small hard drives that store cardholder data and when the owners are asleep the cyber thieves are working diligently to download that data.  This also happens with the older point of sales (POS) systems as well.  When that data is on the hard drive it can be taken as easily as receiving a Windows update.  The same “backdoor” that allows upgrades from providers such as Microsoft and other software companies is left open for the cyber thieves.

Due to the pressure from Congress, MasterCard and Visa will soon be seeking out and punishing all business owners that are not compliant placing their customer’s cardholder information at risk. The credit card companies point out that they have been warning business owners about the new regulations for the last 2 years.  Visa and MasterCard typically include a one line warning on merchant statements that refer to the issue and warn business owner’s that compliance with the law is their responsibility.

Businesses found not to be compliant face losing the ability to accept credit cards and may be subject to steep fines.  What many business owners do not know is that if you do not have a compliance certificate and compliance manual you are NOT compliant.

Many business owners operate under the false sense of security that paying “compliance fees” to their merchant card provider keeps them compliant.  Unfortunately this is NOT true.  These fees are really charged by the card provider to offset their own cost to be in compliance.

In addition to being compliant with the regulations is the cost to the business owner if there is a breach of security.  Often the cost to repair the damage done to the business and its customers is tremendous and can even force some out of business.  It would be wise to consider investigating the special insurance policies that cover cyber theft.

For additional information on how to get your business compliant with the current credit card regulations or how to insure your business against these risks please contact our office, we would be glad to assist you.

The post Small Business Identify Theft: Is Your Business in Danger? appeared first on Checkbox Accounting.

All conflicts of interest need to be addressed cautiously and quickly resolved even though they may not be illegal or unethical. Yet these are still unavoidable. Strategies need to be intact and followed by the board when dealing with such conflicts. It is also important to make certain that only independent board members vote when a conflict of interest occurs (more information on Principle 12).  On the opposite side, board members with material conflict of interest must recuse themselves from such board discussions as well as votes. It is crucial that a written conflict- of- interest policy and corresponding disclosure form as the guide for addressing conflict situations.

LEGAL AND COMPLIANCE ISSUES

-IRS Form 990 asks whether the organization
–has a written conflict-of-interest policy

–requires directors, officers, key employees, and others to annually disclose interests that could give rise to conflicts

–regularly monitors and enforces compliance with the policy

-IRS Form 990 also requires disclosure of certain transactions with current or former directors, officers and key employees

-Board members must meet certain standards of legal conduct, including the duty of loyalty—which means putting personal and professional interests aside for the good of the organization.

RESOURCES

–Independent Sector Conflict-of-Interest Policy

-Managing Conflicts of Interest:A Primer for Nonprofit Boards by Daniel Kurtz and Sarah E. Paul. BoardSource, 2006

-“Conflicts of Interest at Foundations: Avoiding the Bad and Managing the Good,”A BoardSourceWhite Paper

-The Nonprofit Policy Sampler by Barbara Lawrence and Outi Flynn. BoardSource, 2006

The post Principle 3: Conflicts of Interest appeared first on Checkbox Accounting.

The board must be familiar with the hierarchy of laws and the legal framework within which the organizations functions.  Making certain that the governing body of your organization is aware of new and updated laws is crucial.  Laws are often advanced or added annually; therefore those individuals need to be aware of all legalities pertaining to the organization.

LEGAL AND COMPLIANCE ISSUES

-Non-profits are covered under federal, state, and local laws and jurisdictions.

-An organization’s bylaws comprise a legal document describing the board’s structure and practices.

-IRS Form 990 inquires about existing policies and procedures relating to federal and state laws.

RESOURCES

• Access to nonprofit corporation state laws www.law.cornell.edu/states/listing.html

• “Life Cycle of an Exempt Organization” www.irs.gov/charities/article/0,,id=169727,00.html

• State and local bar associations www.hg.org/northam-bar.html

• National Association of State Charity Officials www.nasconet.org

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