December 26, 2018 § Leave a comment
I have a friend who posts to social media the quotes from her daily calendar. They are often inspirational and practical to everyday life. Earlier this week, she posted this quote:
“Stop talking about how busy you are. Focus on what you enjoy about what you do and the spaces in between the doing instead of feeling weighed down by it all. Decide that you live in an awesome, relaxed life full of interesting projects that you love doing and communicate that to the world and yourself. And then go out and merrily do it.”
For some reason, this quote really hit home for me. How many of us focus on how interesting each project we have is and how blessed we are to have it instead of adding it to what always seems like a never ending to do list?
I’ve learned that we all seem to have our own definition of busy. I have four children and a full-time job. People don’t usually deny that I’m busy and I’m probably going to say that I am too. But for me, I love everything I do. I love my job and the challenge that comes with each project. Yes, it adds to my busyness but I don’t know what I would do without it. Obviously, my kids and their activities keep me very busy but I enjoy seeing them learn new things and pursuing their passions.
No matter what your definition of busy is, what is key is the attitude you take towards it. We can choose whether we let the activities of our day fill us up or drain our energy at the end of the day. Ultimately, it determines how happy you are.
Here at MHCS, we are getting ready to head into what many in public accounting refer to as ‘busy season’. The description isn’t inaccurate. Everyone will be busy with tax returns and audits to meet deadlines and keep clients happy. It doesn’t come without challenge, much like many things in life. A few years ago, I was introduced into the concept of calling this time of year opportunity season. It’s a time of year where we get to meet with more of our clients and we are given an opportunity to use our skills to serve them. We are blessed for our clients to trust us with challenges that arise and the learning opportunities that can grow us all from those challenges. At MHCS, we have a lot of fun during busy season. We have an opportunity to bond with our coworkers and form a trust that is key to working together as a team. We love what we do and gain a happiness from the “opportunity busy” that comes with that time of year.
We all feel busy. It’s become so common for someone to respond to “How’s it going?” with “Busy”. The tone used in that response is what I’m urging you to think about. Do you let others know how appreciative you feel of the opportunity to be busy? Do you let the activities of your day leave you feeling fulfilled and energized? I hope the answer is yes and you take the glass half full approach to the opportunities in your life.
Jenny Smith, CPA, CFE, Director
December 20, 2018 § Leave a comment
There are changes in filing requirements for employers issuing 1099s and W2s to employees and independent contractors this year. Check out this video by Jonathan Porter, CAS Manager, as he discusses the differences between 1099s and W2s and what changes have been made since last years filings.
December 20, 2018 § Leave a comment
- If the entity has reserved employee parking spaces, the organization will have unrelated business income (UBI). The IRS is allowing a grace period to take down signage before March 31, 2019 to avoided the automatic application of the tax, retroactive to January 1, 2018.
- Remaining parking spaces of the organization will need to be categorized and be subject to a four-part calculation to determine what percentage is available for the general public to know if associated expenses will be UBI.
December 18, 2018 § Leave a comment
About a year and a half ago I wrote a blog about the significant reporting changes coming for not-for-profit organizations. At the time, it seemed almost silly to write about because the effective date was still quite a way out. But I blinked and now we are there! The statement and disclosure changes required by Accounting Standards Update 2016-14 Presentation of Financial Statements of Not-for-Profit Entities (ASU 2016-14) is effective for calendar years ending 12/31/18.
Hopefully you are fully prepared for the changes and aren’t sweating that the implementation is just around the corner. Or maybe you early implemented and all the work is done! For those of you that haven’t started the implementation process or haven’t heard about ASU 2016-14, here are some highlights to get you through the change. These highlights don’t cover all the changes required by ASU 2016-14, but will briefly touch on just a few of the more significant changes.
- Net asset classifications will change from 3 classifications (unrestricted, temporarily restricted and permanently restricted) to 2 classifications (net assets without donor restrictions and net assets with donor restrictions)
- There are likely no accounting changes necessary to comply with this change but rather just a combination of temporarily restricted and permanently restricted into 1-line item on your Statement of Financial Position
- Liquidity and Availability disclosures are now required
- These disclosures will explain how the organization manages its financial assets to meet cash needs and provide the amount of liquid financial assets available for general operating expenses for the next 12 months.
- Organizations will want to consider what their current operating, reserve and investment policies say regarding the availability of their funds as this information will now be included in the financial statement disclosures. If you don’t have a formal policy, now is the time to adopt one!
- Statement of Functional Expense is now required
- Must show expenses by both their function (program, management & general, fundraising) and their nature (salaries and benefits, office expense, depreciation, etc.)
- Can be shown with the Statement of Activities, as a separate Statement of Functional Expense or in the disclosures to the financial statements
- Must disclose the methods used to allocate expenses among program, management & general and fundraising. Examples of methods include: time and effort or square footage.
While these are just a few of the changes, I believe they are the changes that may have the most impact and time involved in implementing ASU 2016-14. We are happy to help with this implementation and can provide sample disclosures and statements at your request. Wishing you a Happy Holiday and ASU 2016-14 Implementation Season!
Kristin Clayton, CPA, Senior Manager
December 12, 2018 § Leave a comment
In this video, Wendy Moran, CPA, Assurance Partner, gives a brief overview of the new 5-step Revenue Recognition Guidance process for transportation companies. The new guidance is required for all non-public companies for years beginning after December 15, 2018.
December 10, 2018 § Leave a comment
The Tax Cuts & Jobs Act (“TCJA”) is the biggest change to the tax code since 1986 and has brought a myriad of changes that will affect every single taxpayer. One of the changes that may affect taxpayers is the new and expanded child tax credit. With the repeal of personal exemptions from 2018-2025, the child tax credit ($2,000 per qualifying child) is a huge reason why many taxpayers will see an overall decrease in taxes from 2017 to 2018.
First, a “qualifying child” must be defined. A qualifying child must meet various tests:
- The child must be 16 years old or younger as of December 31, 2018.
- The child must be your daughter, son, foster child, or adopted child. The child could also be your grandchild or descendant of one of your siblings.
- The child must have lived with you for more than half the year.
- The child must be claimed as a dependent on your federal tax return.
- The child must not have provided more than half of their own support.
- The child must be a U.S. citizen.
Next, who is eligible to claim the child tax credit? The credit is dependent on your adjusted gross income (“AGI”). For married taxpayers, the full $2,000 credit is available for taxpayers with less than $400,000 of AGI. You are eligible for a partial child tax credit if your AGI is between $400,000 and $440,000. Once it is over this amount, no child tax credit is available. For single, head of household, and married filing separately taxpayers, the full credit is available for taxpayers with less than $200,000 of AGI. It is also phased out over $40,000 so no benefit is received if you are over $240,000 of AGI.
For comparison, the pre-TCJA laws stated that the credit was only $1,000 per qualifying child, and the phaseouts started at $110,000 for married taxpayers and $75,000 for single taxpayers. This means that many more taxpayers will claim the child tax credit in 2018 which will reduce tax liabilities.
There is also a credit available for “other dependents” under the TCJA. This credit equals $500 and is available for two categories of dependents:
- Children over 16 years old that don’t qualify for the child tax credit above
- Qualifying relatives that you support such as dependent parents
The same limitations and phaseouts mentioned above also apply to this credit, so this is a great way to reduce your tax liability.
If you have any questions about the child tax credit or the other dependent tax credit, please reach out to your CPA who can walk you through the new rules.
Rob Poterucha, CPA, Supervisor
December 4, 2018 § Leave a comment
Any tax-exempt organization with a taxable year starting after January 1, 2018, will be subject to the new laws under the Tax Cuts and Jobs Act of 2017. One of the major changes is the new “silo” rules for unrelated business income (UBI). Any tax-exempt organization with more than one UBI stream may need to adjust their tax calculation methods used in previous years.
Before January 1, 2018, each unrelated business activity’s income or loss was calculated and subsequently netted together, regardless if they were similar activities. For example, XYZ Foundation had unrelated business activity “A” with unrelated business taxable income (UBTI) of $5,000 and another unrelated business activity “B” with the UBTI calculated as a net loss of $2,000. On the Form 990-T UBTI was a positive $3,000 and tax was computed on this number.
The new rules no longer allow aggregation of income and deductions from all sources. Going forward, each activity’s UBTI will be calculated separately, hence the term “silo”. Using the same details in the example above, the UBTI will be $5,000 for activity A and $0 for activity B for the year. Activity B would have their own net operating loss (NOL) that can be used for their specific activity in the future (cannot be used for activity A). Tax would be calculated using the full $5,000.
The first step in preparing for this change will be identifying revenue streams and categorizing them into trades or businesses. Revenue streams that fall into the same trade or business can continue to be netted together. For example, web advertising and association newsletter advertising may continue to be combined, and any expenses related to these two incomes can be used to reduce either revenue stream. However, an association that rents out a portion of their building and provides services at this space (i.e. catering) and also has a revenue stream from advertising in their quarterly newsletter will now have two separate lines of UBTI. Each line will compute their respective UBTI and pay tax on each.
Unfortunately, tax-exempt organizations have not been provided criteria for determining whether an exempt organization has more than one unrelated trade or business or how to identify separate unrelated trades or businesses for purposes of calculating UBI. Until that time comes, exempt organizations can use a reasonable and good-faith method considering all the facts and circumstances. One suggested method includes using the North American Industry Classification System (NAICS) code.
Katie New, CPA, Manager