Industries Archives - Page 9 of 47

5 Ways Nonprofits can Prepare for an Audit

Non-Profits|August 24, 2021

No not-for-profit looks forward to annual audits. But regular maintenance and preparation specific to an impending audit can make the process less disruptive. We recommend taking the following steps.

1. Reconcile routinely

You shouldn’t wait until audit time to reconcile accounts — for example, cash, receivables, pledges, payables, accruals and revenues. Reconcile general ledger account balances to supporting schedules (bank reconciliation, receivables and payable aging) monthly or at least quarterly. And don’t forget to reconcile database information provided and maintained by nonaccounting departments, such as contributions, events revenue, registration revenue and sponsorships.

2. Prepare supporting documentation

Collect all supporting documentation before your audit and, if anything is missing, alert auditors immediately. It might be necessary to request duplicate invoices from vendors or ask donors for copies of letters describing restrictions on contributions.

3. Assemble the PBC list items

As part of their planning process, auditors typically compile a Provided by Client (PBC) list of materials they expect you to produce. The list includes a timeline indicating when the auditors need each type of material. Submit everything on the list according to the timeline. If you don’t, you could push back the audit itself and miss your board deadline for completion. Also, to ensure accuracy, perform a self-review of all information before you send it.

4. Be ready to explain variances

Before the auditors arrive, identify major fluctuations in your account balances compared to the previous year. Your auditors will inquire into significant variances in revenues and expenses. Make sure you’re ready to explain them — as well as budget variances — promptly and clearly.

5. Review earlier audits

Audits from previous years provide useful guidance. Check prior years’ audit entries and confirm that you didn’t make the same errors this year. Also confirm that you posted all of the audit entries from the last audit. If you didn’t, your financial statements might be distorted.

Year Long Relationship

Don’t think of audits as a once-a-year obligation. Keep in touch with auditors throughout the year. For example, if you land a new grant or contract and aren’t certain how to properly record it, don’t hesitate to ask your auditors.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

DEI Programs are Good for Business

Services|August 17, 2021

Many businesses are spending more time and resources on supporting the well-being of their employees. This includes recognizing and addressing issues related to diversity, equity and inclusion (DEI).

A thoughtfully designed DEI program can do more than just head off potential conflicts and disruptions among coworkers. It can help you attract good job candidates, retain your best employees and create a more engaged, productive workforce.

Strategic Objectives

Essentially, DEI programs are formal efforts to help employees better understand, accept and appreciate differences among everyone on staff. Differences addressed typically include race, ethnicity, gender identification, age, religion, disabilities and sexual orientation. They may also include education, personality types, skill sets and life experiences. A program can comprise training courses, seminars, guest speakers, group discussions and social events.

Strategic objectives may vary depending on the business. Some companies wish to improve collaboration and productivity within or among teams, departments or business units. Others are looking to attract more diverse job candidates. And still others want to connect with growing multicultural markets that don’t necessarily respond to “traditional” messaging.

Think of implementing a DEI program as an investment. It should include specific goals and achievable, measurable returns.

Key Components

Many DEI programs fail because of lack of consensus regarding their value or faulty design. Begin with executive buy-in. Successful programs start with the support of ownership and senior leadership. If they’re not committed to the program, it probably won’t last long (if it gets off the ground at all). Typically, a champion will need to build the case of why a DEI program is needed and explain how it will positively impact the organization.

You’ll also need to assemble the right team. Form a DEI committee to identify objectives and give the program its initial size and shape. If you happen to employ someone who has been involved in launching a DEI program in the past, learn all you can from that employee’s experience. Otherwise, encourage your team to research successful and unsuccessful programs. You might even engage a consultant who specializes in the field.

For clarity and consistency, put your DEI program in writing. The committee needs to develop clear language spelling out each goal. The objectives can then be reviewed, discussed and revised. Ensure the objectives support your strategic plan and that you can accurately measure progress toward each. Don’t launch the program until you’re confident it will improve your organization, while not distracting it.

How Work is Done

Events of the last year or so have led most businesses to reconsider the size, composition and operational approach of their workforces. In many industries, DEI awareness and training is playing an important role in this reckoning.

As always, please do not hesitate to call our offices and we would be happy to help you assess the costs and feasibility of a program for your business.

Can a Broken Trust be Fixed?

Industries, Services |August 12, 2021

An irrevocable trust has long been a key component of many estate plans. But what if it no longer serves your purposes? Is it too late to change it? Depending on applicable state law, you may have several options for fixing a “broken” trust.

How a Trust Breaks

There are several reasons a trust can break, including:

Changing family circumstances. A trust that works just fine when it’s established may no longer achieve its original goals if your family circumstances change. Some examples are a divorce, second marriage or the birth of a child.

New tax laws. Many trusts were created when gift, estate and generation-skipping transfer (GST) tax exemption amounts were relatively low. However, for 2021, the exemptions have risen to $11.7 million, so trusts designed to minimize gift, estate and GST taxes may no longer be necessary. And with transfer taxes out of the picture, the higher income taxes often associated with these trusts — previously overshadowed by transfer tax concerns — become a more important factor.

Mistakes. Potential errors include naming the wrong beneficiary, omitting a critical clause from the trust document, including a clause that’s inconsistent with your intent, and failing to allocate your GST tax exemption properly.

These are just a few examples of the many ways you might end up with a trust that fails to achieve your estate planning objectives.

How to fix them

If you have one or more trusts in need of repair, you may have several remedies at your disposal, depending on applicable law in the state where you live and, if different, in the state where the trust is located. Potential remedies include:

Reformation. The Uniform Trust Code (UTC), adopted in more than half the states, provides several remedies for broken trusts. Non-UTC states may provide similar remedies. Reformation allows you to ask a court to rewrite a trust’s terms to conform with the grantor’s intent. This remedy is available if the trust’s original terms were based on a legal or factual mistake.

Modification. This remedy may be available, also through court proceedings, if unanticipated circumstances require changes in order to achieve the trust’s purposes. Some states permit modification — even if it’s inconsistent with the trust’s purposes — with the consent of the grantor and the beneficiaries.

Decanting. Many states have decanting laws, which allow a trustee, according to his or her distribution powers, to “pour” funds from one trust into another with different terms and even in a different location. Depending on your circumstances and applicable state law, decanting may allow a trustee to correct errors, take advantage of new tax laws or another state’s asset protection laws, add or eliminate beneficiaries, and make other changes, often without court approval.

Seek professional guidance

The rules regarding modification of irrevocable trusts are complex and vary dramatically from state to state. There are risks associated with revising or moving a trust. This includes uncertainty over how the IRS will view the changes.

Before you make any changes, talk to us about the potential benefits and risks.

Nonprofit Fundraising: From Ad Hoc to Ongoing

Non-Profits|August 11, 2021

When not-for-profits first start up, fundraising can be an ad hoc process, with intense campaigns followed by fallow periods. As organizations grow and acquire staff and support, they generally decide that fundraising needs to be ongoing. But it can be hard to maintain focus and momentum without a strategic plan. Here’s how to create one.

Building on past experience

The first step to a solid fundraising plan is to form a committee. This should consist of board members, your executive director and other key staffers. You may also want to include major donors and active community members.

Committee members need to start by reviewing past sources of funding and past fundraising approaches and weighing the advantages and disadvantages of each. Even if your overall efforts have been less than successful, some sources and approaches may still be worth keeping. Next, brainstorm new donation sources and methods and select those with the greatest fundraising potential.

As part of your plan, outline the roles you expect board members to play in fundraising efforts. For example, in addition to making their own donations, they can be crucial links to corporate and individual supporters.

Developing an action plan

Once the committee has developed a plan for where to seek funds and how to ask for them, it’s time to create a fundraising budget that includes operating expenses, staff costs and volunteer projections. After the plan and budget have board approval, develop an action plan for achieving each objective and assign tasks to specific individuals.

Most important, once you’ve set your plan in motion, don’t let it sit on the shelf. Regularly evaluate the plan and be ready to adapt it to organizational changes and unexpected situations. Although you want to give new fundraising initiatives time to succeed, don’t be afraid to cut your losses if it’s obvious an approach isn’t working.

Maintaining strong cash flow

Don’t wait until your nonprofit’s coffers are nearly dry before firing up a fundraising campaign. Fundraising should be ongoing and constantly evolving.

As always, please reach out to WCS for advice on maintaining strong cash flow.

IRS Extends Administrative Relief for 401(k) Plans

Industries|August 5, 2021

As mitigation measures related to COVID-19 ease, it will be interesting to see which practices and regulatory changes taken in response to the pandemic remain in place long-term. One of them might be relief from a sometimes-inconvenient requirement related to the administration of 401(k) plans.

A virtual solution

In IRS Notice 2021-40, the IRS recently announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a 401(k) plan representative or notary public.

The original relief, which appeared in IRS Notice 2020-42, was provided primarily to facilitate plan loans and distributions under the CARES Act. However, the relief could be used during 2020 for any signature that, under regulations, had to be witnessed in the physical presence of a plan representative or notary public. This included required spousal consents. The relief was subsequently extended through June 30, 2021, under IRS Notice 2021-03.

Under the notices, signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established under the original relief:

Live presentation of a photo ID,
Direct interaction,
Same-day transmission, and
Return with the representative’s acknowledgment.

Signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state-law requirements for a notary public.

Comments requested

As mentioned, IRS Notice 2021-40 further extends the relief — subject to the same conditions — through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding:

The costs and other effects of the physical presence requirement and its temporary waiver,
Whether the relief has resulted in fraud, coercion or other abuses,
How the witnessing requirements are expected to be fulfilled as the pandemic abates,
What procedural safeguards should be instituted if the physical presence requirement is permanently modified, and
Whether permanent relief should use different procedures for witnessing by plan representatives or notary publics.

Comments should be submitted by September 30, 2021.

More information

Going forward, the need for a signature may often relate to spousal consents. If your business recently established a 401(k), the plan may be designed to limit or even eliminate the need for spousal consents.

However, plans that offer annuity forms of distribution are still subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a nonspouse as primary beneficiary.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

10 Fact: Pass-Through Deduction for Qualified Business Income

Tax Prep, Planning & Strategy|August 4, 2021

Are you eligible to take the deduction for qualified business income (QBI)? Here are 10 facts about this valuable tax break, referred to as the pass-through deduction, QBI deduction or Section 199A deduction.

It’s available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships and S corporations. It may also be claimed by trusts and estates.
The deduction is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
It’s taken “below the line.” That means it reduces your taxable income but not your adjusted gross income. But it’s available regardless of whether you itemize deductions or take the standard deduction.
The deduction has two components: 20% of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate; and 20% of the taxpayer’s combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.
QBI is the net amount of a taxpayer’s qualified items of income, gain, deduction and loss relating to any qualified trade or business. Items of income, gain, deduction and loss are qualified to the extent they’re effectively connected with the conduct of a trade or business in the U.S. and included in computing taxable income.
QBI doesn’t necessarily equal the net profit or loss from a business, even if it’s a qualified trade or business. In addition to the profit or loss from Schedule C, QBI must be adjusted by certain other gain or deduction items related to the business.
A qualified trade or business is any trade or business other than a specified service trade or business (SSTB). But an SSTB is treated as a qualified trade or business for taxpayers whose taxable income is under a threshold amount.
SSTBs include health, law, accounting, actuarial science, certain performing arts, consulting, athletics, financial services, brokerage services, investment, trading, dealing securities and any trade or business where the principal asset is the reputation or skill of its employees or owners.
There are limits based on W-2 wages. Inflation-adjusted threshold amounts also apply for purposes of applying the SSTB rules. For tax years beginning in 2021, the threshold amounts are $164,900 for singles and heads of household; $164,925 for married filing separately; and $329,800 for married filing jointly. The limits phase in over a $50,000 range ($100,000 for a joint return). This means that the deduction reduces ratably, so that by the time you reach the top of the range ($214,900 for singles and heads of household; $214,925 for married filing separately; and $429,800 for married filing jointly) the deduction is zero for income from an SSTB.
For businesses conducted as a partnership or S corporation, the pass-through deduction is calculated at the partner or shareholder level.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

PPP Loan Repayments May Begin Soon

NEWS|July 29, 2021

The Paycheck Protection Program has issued over $798 billion in loans since its inception in April 2020. Presently, only about half of that amount has been forgiven by the SBA. Borrowers can apply for forgiveness any time up to the maturity date of the loan. However, if borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making payments to their PPP lender.

What Does this Mean?

Many borrowers applied and received a PPP loan in Spring 2020, which means a significant number of PPP loans will require payments to start this July or August if an application for forgiveness has not been submitted. There are three different loan forgiveness applications that are available for borrowers: SBA Form 3508, SBA Form 3508EZ, and SBA Form 3508S. Borrowers who meet specific requirements are allowed to use the shortened versions of the application. In addition to these applications, the SBA recently announced that it will launch a new application portal allowing borrowers with loans of $150,000 or less to apply for forgiveness directly with the agency instead of having to go through their lender.

Questions?

If you need assistance, WCS is here to provide guidance and support as you navigate through the PPP loan forgiveness process. Please contact Brianne Baccaro Norris to arrange a time to discuss assistance with completion of these forms.

Members of the Sandwich Generation are in a Unique Situation

Estate & Wealth Transfer Planning|July 29, 2021

The “sandwich generation” is a large segment of the population. These are people who find themselves caring for both their children and their parents at the same time. As a result, estate planning — which traditionally focuses on providing for one’s children — has expanded in many cases to include one’s aging parents as well.

Steps to Ease Complex Issues

Including your parents as beneficiaries of your estate may raise a number of complex issues. As you discuss these issues with your advisor, consider these five planning tips:

Plan for long-term care (LTC) costs. The annual cost of LTC — which may include assisted living facilities, nursing homes or home health care — can reach well into six figures. These expenses aren’t covered by traditional health insurance policies or Social Security, and Medicare provides little, if any, assistance. To prevent LTC expenses from devouring your parents’ resources, work with them to develop a plan for funding their health care needs through LTC insurance, investments or other strategies.
Make gifts. One of the simplest ways to help your parents financially is to make cash gifts to them. If gift and estate taxes are a concern, you can take advantage of the annual gift tax exclusion, which currently allows you to give each parent up to $15,000 per year without triggering gift taxes.
Pay medical expenses. You can pay an unlimited amount of medical expenses on your parents’ behalf, without tax consequences. This is true as long as you make the payments directly to medical providers.
Set up trusts. There are many trust-based strategies you can use to assist your parents. For example, in the event you predecease your parents, your estate plan might establish a trust for their benefit, with any remaining assets passing to your children after your parents die. Another option is to set up trusts during your lifetime that leverage your $11.7 million exemption. Properly designed, these trusts can remove assets — together with all future appreciation in their value — from your taxable estate. They can provide income to your parents during their lives, eventually passing to your children free of gift and estate taxes.
Buy your parents’ home. If your parents have built up significant equity in their home, consider buying it and leasing it back to them. This arrangement allows your parents to tap their home’s equity without moving out. It also provides you with valuable tax deductions for mortgage interest, depreciation, maintenance and other expenses. To avoid negative tax consequences, be sure to pay a fair price for the home (supported by a qualified appraisal) and charge your parents fair-market rent.

Find the Right Balance

As you review these and other options for assisting your aging parents, be cautious of pitfalls. For example, if you give your parents too much, these assets could end up back in your estate and potentially be exposed to gift or estate taxes. Contact us for help in addressing both your children and parents in your estate plan.

Fiduciary Duties: What Nonprofit Board Members Need to Know

Non-Profits|July 28, 2021

It takes more than dedication and enthusiasm for your cause and programs to make a good nonprofit board member. The most critical duty for all board members is being a fiduciary. This means, among other things, that they can be trusted to always act in their nonprofit’s best interests, avoid unnecessary risk, make decisions thoughtfully and execute them efficiently.

Core duties

Not all board members are aware of their duties — and it’s up to your organization to ensure they understand them. In general, a fiduciary has three primary duties:

Care. Board members must exercise reasonable care in overseeing the organization’s financial and operational activities. Although disengaged from day-to-day affairs, they should understand the nonprofit’s mission, programs and structure, make informed decisions, and consult others — including outside experts — when appropriate.
Loyalty. Board members must act solely in the best interests of the organization and its constituents, and not for personal gain.
Obedience. Board members must act in accordance with the organization’s mission, charter and bylaws, and any applicable state or federal laws.

If your board members violate these duties, they may be held personally liable for any financial harm your organization suffers as a result.

Improper Transactions

One of the most challenging — but critical — components of fiduciary duty is the obligation to avoid conflicts of interest. In general, a conflict of interest exists when a nonprofit organization does business with:

A board member,
An entity in which a board member has a financial interest, or
Another company or organization for which a board member serves as a director or trustee.

To avoid even the appearance of impropriety, your nonprofit should also treat a transaction as a conflict of interest if it involves a board member’s spouse or other family member, or an entity in which a spouse or family member has a financial interest.

The key to dealing with conflicts of interest, whether real or perceived, is disclosure. The board member involved should disclose the relevant facts to the board and abstain from any discussion or vote on the issue — unless the board determines that he or she may participate.

Educating your Board

To help your board carry out its duties, provide new members with an orientation that educates them in the basics of nonprofit finance and accounting. Also regularly provide an updated list of responsibilities that covers financial documents, compliance requirements and risk management.

Contact us. We can help inform your board and ensure it meets its fiduciary duties.

Pondering the Possibility of a Company Retreat

Industries|July 27, 2021

As vaccination levels rise and major U.S. population centers fully reopen, business owners may find themselves pondering an intriguing thought: Should we have a company retreat this year?

Although there are still health risks to consider, your employees may love the idea of attending an in-person event after so many months of video calls, emails and instant messages. The challenge to you is to plan a retreat that’s safe, productive and enjoyable — and that doesn’t unreasonably disrupt company operations.

Mixing Business with Fun

First, nail down your primary objectives well in advance. Determine and prioritize a list of the important issues you want to address but include only the top two or three on the final agenda. Otherwise, you risk rushing through some items without adequate time for discussion and formalized action plans.

If one of the objectives is to include time for socializing or recreational activities, great. Mixing business with fun keeps people energized. However, if staff see the retreat as merely time away from the office to party and golf, don’t expect to complete many work-related agenda items. One way to find the right mix is to consider scheduling work sessions for the morning and more fun, team-building exercises later in the day.

Craft a Flexible Budget

Next, work on the budget. Determining available resources early in the planning process will help you set limits for variable costs such as location, accommodations, food, transportation, speakers and entertainment.

Instead of insisting on certain days for the retreat, select a range of possible dates. Doing so widens site selection and makes it easier to negotiate favorable hotel and travel rates. Keep your budget as flexible as possible, building in a 5% to 10% safety cushion. Always expect unforeseen, last-minute expenses.

The good news is that the hospitality industry is generally trying to rebound from the very difficult downturn it suffered because of the pandemic. So, you may be able to find some special deals offered to “draw out” companies that haven’t held a retreat in a while.

Also, if you wish to truly minimize the health risks, you might want to focus on venues with outdoor facilities, such as farms or golf resorts. You could hold sessions mostly outdoors (weather permitting, of course) where it’s very safe.

Reunite and Reenergize

Holding a company retreat this year may be a great way to reunite and reenergize your workforce. As convenient and practical as video meeting technology may be, there’s nothing quite like seeing each other in person. We can help you assess the costs and establish a reasonable budget that supports an enjoyable, productive and cost-effective retreat. Contact us today!

1. Reconcile routinely

2. Prepare supporting documentation

3. Assemble the PBC list items

4. Be ready to explain variances

5. Review earlier audits

Year Long Relationship

Strategic Objectives

Key Components

How Work is Done

How a Trust Breaks

How to fix them

Seek professional guidance

Building on past experience

Developing an action plan

Maintaining strong cash flow

A virtual solution

Comments requested

More information

What Does this Mean?

Questions?

Steps to Ease Complex Issues

Find the Right Balance

Core duties

Improper Transactions

Educating your Board

Mixing Business with Fun

Craft a Flexible Budget

Reunite and Reenergize

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Our Industry Expertise

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