What Documentation Do I Need for a Charitable Contribution Deduction?

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com

You have made your charitable contributions during the year, now it is time to gather them for your tax return preparation.  What documents do you need to retain?

The IRS requires the donor maintain either a bank record or a receipt from the donee with the donee’s name, contribution date and amount for a cash donation.

 

For a payroll donation, the donor should retain the pay stub or documentation for the amount withheld with payment to the charitable organization. 

For a noncash donation of less than $250, the donor should maintain a receipt from the donee with the name, date, and a description of the items donated.  The donee will not provide a value of the donated property.

For contributions of $250 or more, the donor should maintain the written acknowledgment from the donee.  The following items should be included in the acknowledgment:  amount of cash or property description and a value of the goods or services exchanged for the contribution.

For noncash contributions of more than $500, the donor must list on their tax return a written description of the donated property and any other information required by the IRS.  If the donation is a vehicle, there are additional reporting requirements.  If there is a noncash donation of $5,000 or more, a qualified appraisal must be attached to the return.

When in doubt of what is required, contact your tax preparer with any questions. 

Need a Gift Idea?

 

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com



How about starting or contributing to a 529 College Savings Plan account?

You can set up a Plan operated by a state or state agency and name anyone as a beneficiary.  The contributions cannot exceed the amount necessary to provide for the qualified education expenses.  Remember, any gifts in excess of $14,000 will be taxable.  Since you will be the purchaser, you will control the funds until they are withdrawn for educational expenses.

The earnings from a 529 Plan are not subject to Federal taxes and may not be subject to state tax if the money is used for educational expenses for college.  For the state of Ohio, $2,000 per beneficiary can be deducted on the individual income tax return and any excess can be carried forward to deduct in future years.

So again, I ask, need a gift idea? Getting started on affording a college education is something you or your beneficiary will not forget.

FASB Makes Changes to Not-for-Profit Accounting Standards Update

 

 

Daniel Kaminski, CPA

Senior Manager

kaminski@hwco.com

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Proposed Accounting Standards Update (ASU) No. 2015-230, Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements of Not-for-Profit Entities.  One of the most controversial items in the ASU was the requirement that not-for-profit organizations would be required to present their statement of cash flows using the direct method.

The FASB received comments that requiring the use of the direct method would cause significant challenges.  Not-for-profit organizations felt that it would be difficult for readers of their financial statements to make comparisons with for-profit companies who would not be required to use the direct method.  The second common complaint came from smaller not-for-profits who felt that using the direct method would cause them to incur significant costs, either internally or by increased costs from their outside accountants.

 

As a result, on December 11, 2015, the FASB made the decision it would not require not-for-profit organizations to use the direct method, but would give them the option to use the direct method or the indirect method.  However, this was not the FASB’s only change.  Currently, U.S. generally accepted accounting principles (GAAP) allows for a choice between using the direct method or the indirect method.  However, if the direct method is chosen, the indirect method must also be presented.  However, the FASB has decided it would no longer require the presentation of the indirect method if an organization chooses to present their statement of cash flows under the direct method.

Even though the direct method can be more useful to financial statement users, since the indirect was required to be presented, very few organizations chose to do the additional work or presenting under the direct method as well.  The FASB’s hope is that by eliminating the requirement to also present the indirect method; more organizations will choose to use the direct method.

 

The FASB also clarified a few other items in the ASU.  The FASB had previously decided to reduce the number classifications of net assets from three to two.  They officially decided the two new classifications will be called “net assets with donor restrictions” and “net assets without donor restrictions.”  In addition, the FASB will require the purpose of board-designated net assets to be disclosed either on the face of the financial statement or in the notes.  The FASB also is requiring the aggregate amount that endowment funds are underwater be included in net assets with donor restrictions and is requiring enhanced disclosures about the underwater endowment funds.

Opposition to the Department of Labor proposed overtime rules

 

 

Anthony S. LaNasa, CPA

Managing Principal - Columbus

lanasa@hwco.com

 

On June 30, 2015 the Department of Labor (DOL) released a proposal to update the Fair Labor Standards Act’s (FLSA) overtime rules.  These proposed changes would increase the number of workers who qualify for overtime pay by modifying the FLSA’s overtime exemptions and increasing the minimum salary for those that are exempt.  The DOL is expected to finalize the rule in mid-to-late 2016.

This week the Partnership to Protect Workplace Opportunity, a coalition of employer groups that includes a diverse collection of associations, businesses, and other stakeholders representing employer across the country and in almost every industry, sent a letter of opposition to Congress.  The letter was signed by many national and state associations, including the Ohio Society of CPAs and 16 other state CPA societies.

The letter reads, “The magnitude of DOL’s proposal, coupled with the annualized automatic increases with no feedback from employers, and the changes to the duties test that DOL is considering, threaten businesses, employees, non-profits, state and local governments, and the economy as a whole.  According to the Department’s own estimate, as a result of the minimum salary increase more than four million employees will need to be reclassified from exempt/salaried to non-exempt/hourly and the rule will affect over ten million workers; that is more than the populations of Maine, New Hampshire, Rhode Island, Montana, South Dakota, Alaska, North Dakota, Vermont, Washington and Wyoming combined.”

The letter goes further to say, “The millions of employees converted from exempt to nonexempt status would lose the flexibility that they currently enjoy and have fewer opportunities for career advancement.  Hourly employees are not guaranteed any fixed weekly pay—like salaried employees—or guaranteed any specific hours.”

The letter concludes for congress representatives to contact the DOL, Office of Management and Budget’s Office of Information and Regulatory Affairs, and other officials within the Administration and urge them to reconsider this rule.

Tax Extenders Still Have Not Passed So What Should I Still Be Doing?

 

 

 

Cathy Robinson, CPA

Senior Manager

robinson@hwco.com

 

 

Okay, it is December and Congress has not yet taken any action on provisions which have expired at the end of 2014.  There are still some things you should consider doing before year end:

 

1.       Review your withholding and estimated tax payments for 2015. 

2.       Consider if you are liable for the alternative minimum tax in 2015. 

3.        Consider realizing losses on stock to offset gains.

4.       Postpone any additional income until 2016.

5.       Accelerate any deductions in 2015.  Consider using your credit card to pay for the deductible expenses.

6.       Bunching of any expenses.  For example, pay three real estate bills in a year.

7.       Ask your employer to defer your 2015 bonus until 2016. 

 

These are just some suggestions in order to help eliminate an unpleasant surprise in April next year.  As with any tax advice you read or hear, you need to ensure the advice provided agrees with your tax situation.

Change in De minimis safe harbor

 

 

 

Edward C. Lowe, MAFIS, CPA

Principal

lowe@hwco.com

The IRS has increased the de minimis safe harbor from $500 to $2,500 for taxpayers that don’t maintain an applicable financial statement. (IRS notice 2015-82)

The de minimis safe harbor was intended as an administrative convenience to allow taxpayers to deduct small dollar expenditures for the acquisition or production of new property or for the improvement of existing property, which otherwise must be capitalized under Code Section 263(a).  The increase is effective for costs incurred after 1-1-2016, however use of the new threshold won’t be challenged in tax years prior to 2016.

U.S. Department of Labor’s Tips for Selecting and Monitoring a Plan Auditor

 

 

 

Russell E. Majkrzak , CPA

Senior Manager

majkrzakr@hwco.com

 

In mid-November, 2015, the Chief Accountant of the U.S. Department of Labor (DOL) sent out an email to plan administrators related to selecting a qualified CPA firm to audit your plan’s financial statements. This email referenced a recent study completed by the DOL (which can be found on the DOL’s website) which concluded that due to the unique audit and reporting requirements related to employee benefit plan audits, plan administrators should take care when selecting their CPA firm to ascertain that the CPA firm is qualified to perform the plan audit. HW&Co is qualified and, in fact, currently audits many employee benefit plans, and as a member of the AICPA Employee Benefit Plan Audit Quality Center, HW&Co must meet additional professional standards including having our audit staff obtaining a specific number of training hours over a three-year period and the additional internal monitoring and peer review requirements.  HW&Co, since its inception, has received the best Peer Review results possible with our most recent Peer Review receiving a rating of “pass with no deficiencies”. Additionally, the DOL has performed a DOL desk audit for one of our plan audits with no findings identified. If HW&Co does not currently perform your plan audit, please consider having HW&Co become your plan auditors. If you have any questions or concerns, please contact your HW&Co Executive or Joe Sbrocco, CPA, CGMA at 877-FOR-HWCO.



Calling the IRS Requires Patience

 

 

 

 

Cathy A. Robinson, CPA

Senior Manager

robinson@hwco.com

 

 

You may have read one of our most recent blogs in regards to identity theft. To reiterate, we advised those who are victims of fraud and identity theft to contact the IRS. What you should expect, however, is there’s a strong possibility you will be experience a wait time.

 

According to an article in Accounting Today, due to budget cuts the IRS customer service has suffered greatly. The article reports the IRS answered only 32 percent of taxpayer calls routed to a customer service representative. Hold time, for taxpayers able to get through, averaged 23 minutes.

 

Meanwhile, the Practitioner Priority Service Line was answered 45 percent of the time, with a hold time averaging 45 minutes.

 

You may also experience what the IRS calls a “courtesy disconnect.” This occurs when the IRS switchboard is overloaded and it cannot handle anymore calls. In 2014, this happened to 544,000 callers. This number skyrocketed in 2015 to an alarming 8.8 million people.

 

If you end up on the phone with an IRS agent remember you aren’t the only experiencing a wait time. Please be patient, and remember they’re there to help.

Good News For Ohio Nonprofits

Tony LaNasa
Managing Principal-Columbus Office
lanasa@hwco.com
 

As an HW Nonprofit Advisor I recognize the importance of our clients being informed of the latest changes occurring in the industry.

Ohio nonprofit organizations received great news on September 29th when the Ohio Revised Code Sec. 4123.01 was amended in HB 52 to not consider unpaid corporate officers or volunteers as employees for the purpose of workers’ compensation.  This great news is less costs to nonprofits in premiums, and more dollars for the nonprofits mission and purpose.

To read more on this subject visit the OSCPA's website or click here.

Our 7 Need to Know Tax Strategies for End of Year Tax Planning

 

 

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

 

Last week, we shared some tax planning ideas for small businesses.  We recognize that it's just as important for individuals to have a tax strategy in place as well. This week, we share some ideas for individuals, though not all items are ideas individuals will be able to implement. 

1.       Review your filing status to ensure the change will not impact income. 

2.        Postpone income until 2016 and accelerate deductions into 2015, you believe you will be in a lower bracket next year.

a.        Accelerating deductions could be accomplished by bunching deductions together.  For example, you could pay three real estate taxes in one year versus two. 

b.      You could use your credit card to pay deductible expenses before the end of the year.

c.       You may consider if it is advantageous to defer your bonus to 2016.

 

3.        Consider realizing losses on stock or consider selling appreciated assets to offset pre-existing losses.  Of course, for either of these transactions you will need to consult with your investment advisor.

 

4.       Review your required minimum distributions from your IRA or 401(K).   You could delay first required distribution, but it might mean that you double up your distribution in the next year and push you into a higher tax bracket.

 

5.       Pay your fourth quarter state or local estimated payment before the end of the year.

 

6.       If you paid a balance with your state and/or local income tax returns in 2014, remember to include the amounts paid with your 2015 returns.

 

7.       If applicable, remember to consider the effect of any of your year-tax planning on AMT (alternative minimum tax).  A deduction may not save taxes if you are subject to AMT.

 

As always, contact your tax professional in order to begin the planning process so you do not have any surprises in April.

7 End of Year Tax Planning Tips for Small Business Owners





Cathy A. Robinson
Senior Manager
robinson@hwco.com



We are now in the fourth quarter of 2015, and it’s time to think about tax planning.

 



 

However, Congress hasn’t passed the tax extenders, which are a part of our tax planning and strategies.  Several expired extenders include:  50% bonus depreciation, increase in expensing to $500,000 of Section 179 property, work opportunity credit, and research and experimentation credit.  

In the meantime, small businesses owners should still begin preparing for the end of the year. Tax strategies small business owners should consider include below:

·         If you buy a heavy SUV, pickup, or van for your business, you have the ability to write off up to $25,000 of the cost of a new or used heavy SUV that is placed in service before the end of your business tax year that began in 2015.

·         Determine if you can take advantage of the “de minimis safe harbor election”.

·         Juggle income and deductible expenditures through year-end if you are in a higher tax bracket this year.

·         If you’re eligible, utilize the cash method accounting. It gives you the flexibility to manage 2015 and 2016 income to minimize taxes over the two-year period.

·         Have a cost segregation study prepared.

·         Implement a cash balance pension plan.

·         Set up an IC-DISC, if you qualify.

 

Stay tuned as more develops in regards to business extenders.   As tax professionals,  we would like to know if these tax planning strategies will be extended early enough to make an impact in developing a tax plan for our clients.  However, review where your business income is now and begin your roadmap to implementation of your tax strategies.  If you have questions concerning tax planning for your business, contact your accounting professional.

How to Protect Yourself From Identity Theft

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com

 

 

Did you know an estimated 17.6 million people were victims of one or more incidents of identity theft in 2014? According to a report from the U.S. Department of Justice, seven percent of all residents age 16 or older were victims, with three percent of people experiencing the misuse of a credit card.  Over the last two weeks, we have discussed ways to recover from identity theft and social security fraud. So what can you do to protect yourself from the threat of identity theft?

 

If you’ve received a phone call from someone impersonating an IRS agent demanding you pay immediately, chances are it is a scam. Should you receive this type of phone call, report it. The IRS asks these phone calls and other IRS impersonation crimes be reported to the Treasury Inspector General for Tax Administration at 1-800-366-4484 or online at IRS Impersonation Scam Reporting.  

 

If you receive an email from the IRS, even if the logo from the IRS looks real, it is a scam. The IRS does not make initial contact via the phone or email. 

 

Steps to Protect Yourself: 

·         Keep your social security card and any documentation in a safe place. Do not carry your social security card. 

·         Be mindful about sharing your social security number, even when someone asks for it. Share it ONLY WHEN ABSOLTUELY NECESSARY.

·         Protect your financial information on your computer. In a world where everything is digital, you need to make sure to protect your computer. This means using firewalls, anti-spam and virus software, and routinely changing your password to protect yourself and your information.

·         Check your credit report annually.

·         The IRS recommends checking your social security administration earning statement annually.

·         Finally, protect any of your identifiable information by only providing the information when YOU initiate contact or know who is asking for it.

 

Recovering from identity theft is hard, but you can take the precautions to prevent it from happening with these few simple steps. 

Supplemental information for this article came from the below: 

IRS.gov

Bureau of Statistics

IDENTITY THEFT: What to do when your Social Security number is compromised

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

When you are a victim of identity theft, the issues can seem endless. Last week, we discussed the steps to take to recover from identity theft. This week, we discuss the issues that come with having your Social Security number compromised.  

If there is a breach and your Social Security number was obtained and used, there are several factors of which you should be aware of:

 

1.)    The Social Security Administration cannot help you with a resolution

2.)    You need to report the incident to the Federal Trade Commission.

3.)    Victims should contact the IRS.

4.)    File an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov.

a.       If you haven’t heard of this agency or know what they do, that’s okay. We’re here to help. The IC3 is a partnership between the FBI and the National White Collar Crime Center. The mission of this agency is to deal with cybercrime.

5.)    Accept free credit monitoring if it is offered by the company responsible for leaking your information.

6.)    Victims should consider placing a credit freeze.

7.)    Monitor your credit report if you do not freeze your accounts.

8.)    In the end, you may have to apply for a new Social Security number.  If you do, you will need to prove your identity, age, and citizenship status. There is no guarantee, however, that a new number will work.  

Being a victim of identity theft can be messy, and having your Social Security number compromised in the process can be challenging. Be sure you know who you need to contact and what steps to take to prevent any further damage. 

This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

Identity Theft: Know the Steps if You are a Victim

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com

 

Are you prepared to receive a notification informing you that the IRS has already received a tax return from you? With another individual tax filing deadline approaching knowing the risks of identity theft is important. It is also just as important to begin taking the steps to protect your identity.

But what happens when you find you’re a victim just before the deadline? 

 

          If you are a victim, there are several steps you will need to take. They are:

 

1.      File a police report.

2.      File a Federal Trade Commission complaint at www.identitytheft.gov.

3.      Contact one of the three credit bureaus:  Equifax, Experian, or TransUnion.

4.      Check to see if any accounts were opened with your financial institutions.

5.      Close any accounts that have been opened.

6.      Respond to any IRS notice immediately.  However, the IRS will not contact you by phone or email. 

7.    Complete the IRS Form 14039, Identity Theft Affidavit. 

8.     File your return by paper and pay the related taxes due.

9.    Contact the IRS Identity Protection Specialized Unit at 800-908-4490.

 

The IRS issues the Identity Protection Pin (IP Pin), which is a 6 digit number assigned to eligible taxpayers.  This number must be used to confirm your identity.

You will receive a new IP Pin each December via regular mail. 

 

Having your identity stolen can be a scary and frustrating ordeal. As with any tax issue, it’s important to remember you can contact your accounting professional with questions and concerns about the risks to your finances.





This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.
 

What You Really Need to Worry About When it Comes to Vacation Rentals



Cathy R. Robinson, CPA
Senior Manager
robinson@hwco.com

Owning a vacation property can be a great idea. You get the perks of vacationing somewhere else for as long as you like, while also being able to rent out the property when it’s not in use. It seems like the perfect scenario. However, there are also some drawbacks to owning a vacation property that you may not be aware of.

So what can you do as a vacation property owner to help make sure you’re compliant?   Begin with good recordkeeping.  Documentation is needed for the rental income and expenses.  The amount of rent that is charged should be the fair market value even if renting to relatives.   If your rental property has a loss for the year and you did not charge fair market value, the loss will be disallowed.  The IRS will need to review all records if you are audited. 

Many business owners also make an error when they assume that just because they have simply paid the federal income tax on their revenue they have nothing else to worry about when it comes to the world of taxes. Sadly, they are wrong.  

First, you need to determine the license requirements as well as the tax.  This can be confusing as these items can be highly localized with different names and requirements. The next step is to register with any state and local tax agencies.  Also, remember to renew your business license each year.  

As always, it is important to consult your accounting professional. They can help you to navigate the tricky waters of the various taxes involved and assist with developing a plan for your recordkeeping.

 

Renting your property can be an easy way to help offset the cost of ownership of the vacation home. It’s important to understand each aspect of ownership so you can avoid any surprises at the end of the year.  

 

 

What is a W-4?

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

So you are starting a new job.  You will have many forms to fill out the first day including a W-4.  Do you know why you complete a W-4? Not to worry, we are here to help.

What exactly is a W-4?

Simply, it is used by your employer to withhold the proper amount of Federal income tax from your pay.

Why fill out a W-4?

Completing a W-4 accurately can help save you money in two ways. The first way is it helps to prevent you from overpaying your taxes.  Doing this can mean putting more money in your pocket throughout the year. The second way is to ensure you do not owe anything at tax time.

 How do you fill one out?

If you are single, the W-4 is straight forward and easy to complete. For those who are married or have more than one job, the process becomes more complex.  The W-4 includes a series of worksheets to help guide you through this process.  There are also worksheets included for those who have a spouse working as well or for those who have additional employment. 

It is important to keep in mind as well the higher the exemption number claimed, the higher the amount of your net pay. The tradeoff, however,  there will be less withholding deducted from your pay, and you could owe on April 15^th.

 

Remember, ask your tax professional should you have any questions in regards to filling out the W-4 or the tax worksheets attached to it.

 

 

 

 

 

Tips, Tricks and Essentials of Estate Planning (PART 2)

Cathy R. Robinson, CPA
Senior Manager
robinson@hwco.com
 

In Part 1 of Tips, Tricks and Essentials of Estate Planning the four essential documents the CPAs and advisors at HW&Co. most recommend were covered. To recap the list, the essentials were having a will, having durable power of attorney, medical power of attorney, and finally, a directive to physicians or a living will.

So what else can you do to better prepare yourself for planning your estate?  There are additional highly recommended items you should look into. They are: 

A  Trust

You should create a trust while you are alive. Finding a reliable, trustworthy trustee is the second step. This person will manage the property according to legal duties and your instructions. They distribute the assets to the beneficiaries according to your instructions.  So why invest in a trust? The first reason is so that it can help you to provide for and protect a beneficiary. Secondly, the flexibility of asset distribution can help to spread benefits over time. Your instructions will govern who receives the assets of the trust and the amount they receive, while also setting standards and conditions. Finally, a trust can help to protect against your own incompetence. Should something happen with your mental state the trust will already be in place with clear concise orders to help take care of your loved ones.  

It’s important to also be aware that while trusts can be very helpful, they are not always worth the cost, expense and hassle that come with them. You should also look out for the trust “seminars” sponsored by companies claiming to prepare trusts. These people are often not licensed attorneys. Avoid the scam and seek out a professional.  

Self-Designation of Guardian

With this document, you can name the person whom you would want appointed to be in charge of your minor child(ren.) A guardian is the person who will be legally responsible for the personal affairs, health, and well-being of a minor. In some states, you can also disqualify people you do not want appointed.  

Organ Donation

If you are someone who would like to donate your organs, you should have clear documentation and instructions. This can be as easy as going to the DMV to have it placed on your driver’s license. If you do not make this decision for yourself, your family will reserve the right to make the decision for you.  

There never seems to be an ideal time to plan your estate, but it is important to have a plan. These useful documents can help to make things easier on your loved ones, while ensuring your wishes are being carried out accordingly. It is also recommended to seek professional advice as to meet your goals.    

September Intern Recruiting...Coming to a School Near You!

Kirsten Thompson, CPA
Director of HR

Katie Primeau
HR Assistant

 

HW&Co. | CPAs & Advisors will be meeting with students and recent grads from Ohio colleges during the month of September at Accounting Career Fairs!  Check the career services calendar at your university and stop by the HW&Co. booth to introduce yourself.

 

HW&Co. already looking for Accounting Interns to work through busy season January through April 15, 2016. 

September Recruiting at Ohio Colleges for Interns:

College	Date
The Ohio State University	9/08/15
Bowling Green State University	9/09/15
Ashland University	9/10/15
Case Western Reserve University	9/10/15
University of Akron	9/15/15
Cleveland State University	9/16/15
Baldwin Wallace University	9/17/15
University of Dayton	9/17/15
Kent State University	9/17/15
John Carroll University	9/21/15