The Infrastructure Investment and Jobs Act (IIJA) was signed into law on November 15, 2021. It includes new information reporting requirements that will generally apply to digital asset transactions starting in 2023. Cryptocurrency exchanges will be required to perform intermediary Form 1099 reporting for cryptocurrency transactions. Existing reporting rules If you have a stock brokerage account, whenever you sell stock or other securities, you receive a Form 1099-B after the end of the year. Your broker uses the form to report transaction details such as sale proceeds, relevant dates, your tax basis and the character of gains or losses. In addition, if you transfer stock from one broker to another broker, the old broker must furnish a statement with relevant information, such as tax basis, to the new broker. Digital asset broker reporting The IIJA expands the definition of brokers who must furnish Forms 1099-B to include businesses that...[ Read More ]

The Ins and Outs of IRAs

Posted June 9, 2022

Traditional IRAs and Roth IRAs have been around for decades and the rules surrounding them have changed many times. What hasn’t changed is that they can help you save for retirement on a tax-favored basis. Here’s an overview. Traditional IRAs You can make an annual deductible contribution to a traditional IRA if: You (and your spouse) aren’t active participants in employer-sponsored retirement plans, or You (or your spouse) are active participants in an employer plan, and your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary annually by filing status. For example, in 2022, if you’re a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI ($68,000 to $78,000 for singles). Deductible IRA contributions reduce your current tax bill, and earnings are tax-deferred. However, withdrawals are taxed in full (and subject to a 10% penalty if taken before age...[ Read More ]
The use of a company vehicle is a valuable fringe benefit for owners and employees of small businesses. This perk results in tax deductions for the employer as well as tax breaks for the owners and employees using the cars. (And of course, they get the nontax benefit of getting a company car.) Plus, current tax law and IRS rules make the benefit even better than it was in the past. The rules in action Let’s say you’re the owner-employee of a corporation that’s going to provide you with a company car. You need the car to visit customers, meet with vendors and check on suppliers. You expect to drive the car 8,500 miles a year for business. You also expect to use the car for about 7,000 miles of personal driving, including commuting, running errands and weekend trips. Therefore, your usage of the vehicle will be approximately 55% for...[ Read More ]
Most not-for-profits encourage donors to make unrestricted contributions that will give the organization flexibility to use the money where it’s needed most. But there will always be some donors who place restrictions on their gifts — and these require a higher level of responsibility. If your nonprofit fails to use a restricted donation as intended, it’s possible the donor will request its return, potentially resorting to legal means. Even worse, other donors may hear about the situation and decide your organization doesn’t deserve their support. So you need to handle restricted gifts with kid gloves. Accountability is key Proper tracking of restricted donations is a vital part of the accountability and transparency your supporters expect. There’s no one-size-fits-all approach for tracking restricted contributions. You need to develop and consistently apply well-defined procedures that suit your circumstances. However, in general, nonprofits should train employees to properly identify and label incoming restricted...[ Read More ]

Preparations vs. Compilations

Posted May 19, 2022

Your business needs financial statements so management can monitor performance, attract investment capital and borrow money from a bank or other lender. But not all financial statements are created equal. Audited statements are considered the “gold standard” in financial reporting. While public companies are required to issue audited statements, smaller, privately held organizations have options. CPAs provide three other types of financial statements, which, in order of descending level of diligence, are: reviews, compilations and preparations. Here’s some insight into the newest and most basic financial reporting service available to private businesses — preparations — and how these engagements differ from compilations. Preparations Financial statement preparations are often created as part of bookkeeping or tax-related work. While some lenders may accept preparations in support of small lending arrangements, preparations are generally reserved for internal purposes to provide information on the business’s current financial condition and as a basis of comparison against future...[ Read More ]
When a nonprofit is new, it may struggle to find an adequate number of board members. But as it grows, its board is also likely to grow — sometimes, to an unwieldy size. The question is: How many directors does your organization need to effectively pursue its mission? Perks and drawbacks Both small and large boards come with perks and drawbacks. For example, smaller boards allow for easier communication and greater cohesiveness among the members. Scheduling is less complicated, and meetings tend to be shorter and more focused. Several studies have indicated that group decision making is most effective when the group contains five to eight people. But boards on the small side of this range may lack the experience or diversity necessary to facilitate healthy deliberation and debate. What’s more, members may feel overworked and burn out easily. Burnout is less likely with a large board where each member...[ Read More ]
When a nonprofit is new, it may struggle to find an adequate number of board members. But as it grows, its board is also likely to grow — sometimes, to an unwieldy size. The question is: How many directors does your organization need to effectively pursue its mission? Perks and drawbacks Both small and large boards come with perks and drawbacks. For example, smaller boards allow for easier communication and greater cohesiveness among the members. Scheduling is less complicated, and meetings tend to be shorter and more focused. Several studies have indicated that group decision making is most effective when the group contains five to eight people. But boards on the small side of this range may lack the experience or diversity necessary to facilitate healthy deliberation and debate. What’s more, members may feel overworked and burn out easily. Burnout is less likely with a large board where each member...[ Read More ]
Emily was a dedicated board member of her community’s most prominent social-services charity. But her commitment to the cause and the nonprofit’s programs didn’t prevent her from inadvertently violating the rule against excess benefit transactions. This happened when the organization wanted to build a new facility and bought land from her even though similar, and potentially cheaper, property was available from nonaffiliated sellers. Emily made only a minimal profit, but the IRS took notice and began investigating the deal. You may know that your not-for-profit needs to avoid excess benefit transactions, but are you sure you know what they are? A full understanding can help your nonprofit avoid Emily’s and her charity’s mistake. Don’t let insiders profit First, it’s important to understand the concept of private inurement. A private benefit is any payment or transfer of assets made, directly or indirectly, by your nonprofit that’s 1) beyond reasonable compensation for...[ Read More ]
Footnotes appear at the end of a company’s audited financial statements. These disclosures provide insight into account balances, accounting practices and potential risk factors — knowledge that’s vital to making well-informed lending and investing decisions. Here are examples of key risk factors that you might unearth by reading between the lines in a company’s footnotes. Contingent (or unreported) liabilities A company’s balance sheet might not reflect all future obligations. Auditors may find out the details about potential obligations by examining original source documents, such as bank statements, sales contracts and warranty documents. They also send letters to the company’s attorney(s), requesting information about pending lawsuits and other contingent claims. Detailed footnotes may reveal, for example, an IRS inquiry, a wrongful termination lawsuit or an environmental claim. Footnotes may also spell out the details of loan terms, warranties, contingent liabilities and leases. Liabilities may be downplayed to avoid violating loan agreements...[ Read More ]

The Ins and Outs of IRAs

Posted April 13, 2022

Traditional IRAs and Roth IRAs have been around for decades and the rules surrounding them have changed many times. What hasn’t changed is that they can help you save for retirement on a tax-favored basis. Here’s an overview. Traditional IRAs You can make an annual deductible contribution to a traditional IRA if: You (and your spouse) aren’t active participants in employer-sponsored retirement plans, or You (or your spouse) are active participants in an employer plan, and your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary annually by filing status. For example, in 2022, if you’re a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI ($68,000 to $78,000 for singles). Deductible IRA contributions reduce your current tax bill, and earnings are tax-deferred. However, withdrawals are taxed in full (and subject to a 10% penalty if taken before age...[ Read More ]