When it comes to income tax returns, April 15 (actually April 17 this year, because of a weekend and a Washington, D.C., holiday) isn’t the only deadline taxpayers need to think about. The federal income tax filing deadline for calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes is March 15. While this has been the S corporation deadline for a long time, it’s only the second year the partnership deadline has been in March rather than in April.

Why the deadline change?

One of the primary reasons for moving up the partnership filing deadline was to make it easier for owners to file their personal returns by the April filing deadline. After all, partnership (and S corporation) income passes through to the owners. The earlier date allows owners to use the information contained in the pass-through entity forms to file their personal returns.

What about fiscal-year entities?

For partnerships with fiscal year ends, tax returns are now due the 15th day of the third month after the close of the tax year. The same deadline applies to fiscal-year S corporations. Under prior law, returns for fiscal-year partnerships were due the 15th day of the fourth month after the close of the fiscal tax year.

What about extensions?

If you haven’t filed your calendar-year partnership or S corporation return yet, you may be thinking about an extension. Under the current law, the maximum extension for calendar-year partnerships is six months (until September 17, 2018, for 2017 returns). This is up from five months under prior law. So the extension deadline is the same — only the length of the extension has changed. The extension deadline for calendar-year S corporations also is September 17, 2018, for 2017 returns.

Whether you’ll be filing a partnership or an S corporation return, you must file for the extension by March 15 if it’s a calendar-year entity.

When does an extension make sense?

Filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now.

But keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by the unextended deadline. There may not be any tax liability from the partnership or S corporation return. If, however, filing for an extension for the entity return causes you to also have to file an extension for your personal return, you need to keep this in mind related to the individual tax return April 17 deadline.

Have more questions about the filing deadlines that apply to you or avoiding interest and penalties? Contact us.

© 2018

Cloud computing promises lower technology costs and greater efficiency and productivity. Yet many nonprofits have yet to move to the cloud, possibly because their staffs are smaller and their IT expertise is limited. Fortunately, cloud computing is a simple concept that’s easy to adopt.

Remote control

Cloud computing, also known as “software as a service,” uses a network of remote third-party servers made available online. Rather than relying on your organization’s own computers or server, you remotely share software and storage to process, manage and share information.

For many nonprofits, the greatest advantage of using cloud services is lower costs. The technology generally eliminates pricey contracts and per-user licensing fees. Instead, cloud customers pay a monthly subscription fee or are billed based on actual usage. What’s more, service providers update their offerings and provide security patches on an ongoing basis.

Another benefit is the scalability of cloud services. You can scale up when you need more storage or data capacity and scale back when you need less. Also, because cloud services aren’t limited to a physical location and can be accessed from anywhere, they make it easy for colleagues, board members and volunteers to collaborate on projects. Finally, cloud services can make it easier to track and report funds over multiple time periods and to analyze budgets, expenses and cash flows. They can also produce specialized data reports.

Rest assured

Most reputable services boast stronger security, including firewalls, authorization restrictions and data encryption, than your own nonprofit could afford to put in place on its own. And cloud services typically offer continuous data backup and disaster recovery capabilities.

That said, your nonprofit can’t possibly have as much control over a cloud system as it would of its own infrastructure. So if control is a priority, you need to weigh it against the benefits of cloud computing.

Vendor options

You’ll want to look for a service that:

Cost is another major consideration when selecting a vendor. But your nonprofit may qualify for discounts or even gratis services.

Get satisfaction

Before leaping into the cloud, be sure to research your options and get recommendations from other nonprofits and from IT experts. Contact us for help finding a cost-effective cloud provider.

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Many businesses hired in 2017, and more are planning to hire in 2018. If you’re among them and your hires include members of a “target group,” you may be eligible for the Work Opportunity tax credit (WOTC). If you made qualifying hires in 2017 and obtained proper certification, you can claim the WOTC on your 2017 tax return.

Whether or not you’re eligible for 2017, keep the WOTC in mind in your 2018 hiring plans. Despite its proposed elimination under the House’s version of the Tax Cuts and Jobs Act, the credit survived the final version that was signed into law in December, so it’s also available for 2018.

“Target groups,” defined

Target groups include:

• Qualified individuals who have been unemployed for 27 weeks or more,
• Designated community residents who live in Empowerment Zones or rural renewal counties,
• Long-term family assistance recipients,
• Qualified ex-felons,
• Qualified recipients of Temporary Assistance for Needy Families (TANF),
• Qualified veterans,
• Summer youth employees,
• Supplemental Nutrition Assistance Program (SNAP) recipients,
• Supplemental Security Income benefits recipients, and
• Vocational rehabilitation referrals for individuals who suffer from an employment handicap resulting from a physical or mental handicap.

Before you can claim the WOTC, you must obtain certification from a “designated local agency” (DLA) that the hired individual is indeed a target group member. You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to the DLA no later than the 28th day after the individual begins work for you. Unfortunately, this means that, if you hired someone from a target group in 2017 but didn’t obtain the certification, you can’t claim the WOTC on your 2017 return.

A potentially valuable credit

Qualifying employers can claim the WOTC as a general business credit against their income tax. The amount of the credit depends on the:

• Target group of the individual hired,
• Wages paid to that individual, and
• Number of hours that individual worked during the first year of employment.

The maximum credit that can be earned for each member of a target group is generally $2,400 per employee. The credit can be as high as $9,600 for certain veterans.

Employers aren’t subject to a limit on the number of eligible individuals they can hire. In other words, if you hired 10 individuals from target groups that qualify for the $2,400 credit, your total credit would be $24,000.

Remember, credits reduce your tax bill dollar-for-dollar; they don’t just reduce the amount of income subject to tax like deductions do. So that’s $24,000 of actual tax savings.

Offset hiring costs

The WOTC can provide substantial tax savings when you hire qualified new employees, offsetting some of the cost. Contact us for more information.

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The key role of a not-for-profit’s internal auditors was once limited largely to testing financial and compliance controls and reporting their findings to the organization’s leadership. But today, with their cross-departmental perspective, internal audit staff (whether employees or outside consultants) can help anticipate and mitigate a variety of risks, improve processes — and even help evaluate your nonprofit’s strategies.

Core job

On its most basic level, the internal audit function provides independent assurance of compliance with a nonprofit’s internal controls and their effectiveness in mitigating financial and operational risk. Potential risks include fraud, insufficient funds to support programming and reputational damage.

Internal auditors start by identifying a nonprofit’s vulnerabilities and prioritizing them from high to low. Through testing and other methods, they then assess the effectiveness of internal controls. Auditors document their results in reports that include recommended improvements.

Internal auditors further evaluate compliance with laws, regulations and contracts. They follow up on management’s remediation actions to eliminate identified risks and assist external auditors, when applicable.

The effectiveness of the internal audit function hinges on auditor independence. Auditors should be independent from management and all areas they review to avoid bias or a conflict of interest. Auditors should report directly to the board of directors or its audit committee.

Expanded function

Although the internal audit function is often viewed mainly through the prism of compliance and internal controls, it has a lot to offer beyond risk assessments and audit plans. Savvy nonprofits have begun to tap internal audit for strategic purposes.

Auditors may serve as internal consultants, providing insights gathered while performing compliance and assessment work. For example, while reviewing invoices, internal auditors may discover a way to streamline invoice processing.

The internal audit function’s familiarity with the organization’s inner workings also affords it an unusual perspective for evaluating strategic opportunities. Does your nonprofit have a financial weakness that could undermine plans for continuing current programs or launching new ones? Your internal auditor probably knows the answer.

Ask for more

Increased public scrutiny of how nonprofits are governed and held accountable makes an effective internal audit function a must. But internal auditors can offer your nonprofit more than financial and compliance oversight. To ensure you’re making the most of this function, contact us.

© 2018

Tax credits reduce tax liability dollar-for-dollar, potentially making them more valuable than deductions, which reduce only the amount of income subject to tax. Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. Two still-available tax credits are especially for small businesses that provide certain employee benefits.

1. Credit for paying health care coverage premiums

The Affordable Care Act (ACA) offers a credit to certain small employers that provide employees with health coverage. Despite various congressional attempts to repeal the ACA in 2017, nearly all of its provisions remain intact, including this potentially valuable tax credit.

The maximum credit is 50% of group health coverage premiums paid by the employer, if it contributes at least 50% of the total premium or of a benchmark premium. For 2017, the full credit is available for employers with 10 or fewer full-time equivalent employees (FTEs) and average annual wages of $26,200 or less per employee. Partial credits are available on a sliding scale to businesses with fewer than 25 FTEs and average annual wages of less than $52,400.

The credit can be claimed for only two years, and they must be consecutive. (Credits claimed before 2014 don’t count, however.) If you meet the eligibility requirements but have been waiting to claim the credit until a future year when you think it might provide more savings, claiming the credit for 2017 may be a good idea. Why? It’s possible the credit will go away in the future if lawmakers in Washington continue to try to repeal or replace the ACA.

At this point, most likely any ACA repeal or replacement wouldn’t go into effect until 2019 (or possibly later). So if you claim the credit for 2017, you may also be able to claim it on your 2018 return next year (provided you again meet the eligibility requirements). That way, you could take full advantage of the credit while it’s available.

2. Credit for starting a retirement plan

Small employers (generally those with 100 or fewer employees) that create a retirement plan may be eligible for a $500 credit per year for three years. The credit is limited to 50% of qualified start-up costs.

Of course, you generally can deduct contributions you make to your employees’ accounts under the plan. And your employees enjoy the benefit of tax-advantaged retirement saving.

If you didn’t create a retirement plan in 2017, you might still have time to do so. Simplified Employee Pensions (SEPs) can be set up as late as the due date of your tax return, including extensions. If you’d like to set up a different type of plan, consider doing so for 2018 so you can potentially take advantage of the retirement plan credit (and other tax benefits) when you file your 2018 return next year.

Determining eligibility

Keep in mind that additional rules and limits apply to these tax credits. We’d be happy to help you determine whether you’re eligible for these or other credits on your 2017 return and also plan for credits you might be able to claim on your 2018 return if you take appropriate actions this year.

© 2018