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Please Note: Our office will be closed Wednesday, April 16th.
SKR+Co Alert: Are you keeping the right tax records?
August 21, 2012
Records Retention: How long do we need to keep them?
Organizing, filing, and retaining old records is a burden for many businesses, not to mention individuals. As we move into a more "paperless" society, how do we determine what warrants taking up valuable office and storage space and what does not?
Records should be preserved only as long as they serve a useful purpose or until all legal requirements are met. To keep files manageable, it is a good idea to develop a schedule so that at the end of a specified retention period, certain records are destroyed.
At Stockman Kast Ryan + Co., we have developed a Records Retention Schedule we think you will find helpful. Although it doesn't cover every possible record, it does cover the most common ones. As always, please feel free to ask us should you have specific questions or concerns.
Is your receipt for your charitable gift satisfactory to the IRS?
So you thought you had proper substantiation for your charitable gift? Think again. A recent court case made it very clear that the IRS will not bend on certain requirements.
For any contribution of $250 or more, § 170(f)(8) provides that no deduction is allowed unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization. The contemporaneous written acknowledgment must contain the following information:
the amount of cash and a description of any property other than cash contributed;
a statement whether the donee organization provided any goods or services in consideration for the contribution; and
a description and good faith estimate of the value of any goods or services provided in consideration for the contribution, or, if the goods or services consist solely of intangible religious benefits, a statement to that effect.
Based on this information, we suggest that you check to make sure that the statements you receive from your charities contain the proper verbiage above. If you serve on a board for a charity, make sure the statements you provide meet the IRS' criteria.
We are a proud member of DFK International/USA, a worldwide association of independent CPA firms with locations in over 30 major markets throughout the United States and representation in 70 countries. Learn more HERE.
If you have questions about the issues raised in this article or would like to contact us, call us at (719) 630-1186 or email us through our Secure Email.
SKR+Co Alert: Estate Planning Changes & Strategies You Should Know
August 9, 2012
Unique Estate Planning Opportunities
As you are probably aware, there are some unique opportunities available during 2012 related to estate planning.
The tax act signed by President Obama on December 17, 2010 increased the estate, lifetime gifting and Generation Skipping Tax exemptions to $5 million and $5.12 million for 2011 and 2012, respectively. However, these changes expire December 31, 2012 and on January 1, 2013 the exemptions return to $1 million.
Many planners are recommending that high net worth families take advantage of this unprecedented lifetime gifting environment and transfer wealth to their children.
It is unknown if changes will be made to the law before the end of the year, but most feel that is doubtful. And even if changes are made by December 31, or next year and made retroactive, it is possible that the estate exemption will be $3.5 million, not $5 million. And, more importantly in many cases, many planners think the lifetime gifting exemption could remain at $1 million.
Please call us if you would like to discuss planning options that may be right for you.
Need more information?
If you need additional information, please see our online Web Tax Guide. The following link will take you to the Estate Planning section with information on estate tax, gift tax, GST tax, tax-smart giving, trusts, life insurance and more! You can also access this guide through our website atwww.skrco.com.
Estate planning is a complicated and confusing topic. We're here to help! If you or a loved one have questions, please call us at (719) 630-1186 or use ourSecure Email to contact any of our accounting professionals.
SKR+Co Alert: Colorado's New Revenue Online Service & More!
July 26, 2012
Introducing… Revenue Online!
The Colorado Department of Revenue has a new service: Revenue Online. Both individuals and businesses can now access a host of information quickly and easily all in one place. Some of the information requires a login, so make sure you have your Colorado Account Number to access your business information or one of the following to access your individual information:
Most recent tax return
Estimated tax payment
Recent Letter ID number from the CO. Dept. of Revenue
Here are some examples of what you can do through Revenue Online:
View, print, and amend tax returns
File Sales and Use Tax Returns
Make or view payments
Set up or change Electronic Funds Transfer (EFT) payments
Donating to an Enterprize Zone but don't want to use your Social Security Number?
Beginning January 1, 2012, Enterpize Zone administrators are required to report to the state of Colorado the taxpayer identification number of each entity certified for an EZ tax credit. Consequently, these entities are requesting taxpayer identification numbers from each donor.
If you are a donor and would prefer not to provide your social security number, you can provide your Colorado Account Number instead. All Colorado taxpayers have a Colorado Account Number and can request it by visiting www.colorado.gov/revenueonline. Then follow the steps beginning on Page 2 of this memorandum from the governor's office: EZ Credit Instructions
Another great online tool: Our Client Portal!
Stockman Kast Ryan + CO has an easy and secure way for you to access your tax and accounting documents – our Client Portal. This is a much safer way to send us your confidential information, rather than email, and you can access the information in your personal portal at any time through the internet, using your secure login.
Examples of how you might use your client portal:
Send us your individual or business tax documents
Send us your QuickBooks files for bookkeeping and payroll services
Access your tax returns when refinancing your home or applying for a loan
Client portals are set up at your request, so if you have not already taken advantage of this service, talk with your SKRCO tax professional today!
If you have any questions or need more information, please contact us at (719) 630-1186 or use our Secure Email to contact any of our accounting professionals.
SKR+Co Alert: The Supreme Court's ruling's effect on businesses & update on Waldo Canyon Fire recovery
July 13, 2012
Supreme Court upholds health care law: What do businesses need to do now?
June 28’s U.S. Supreme Court ruling has drawn attention to the far-reaching provisions of the Patient Protection and Affordable Care Act of 2010. Since 2010, various provisions have trickled into effect. But the waters of change are gaining speed, with several particularly significant provisions scheduled to take effect over the next 18 months, barring congressional action. And many of the health care act's provisions will require businesses to take action this year and next.
This alert provides an overview of what businesses need to do to prepare. To read the full article explaining what steps you might want to take, Click Here.
Tax deductions available for fire
mitigation
In the wake of the many wildfires here in Colorado, particularly the Waldo Canyon Fire, many of us are thinking more seriously about fire mitigation.
If you follow a previously approved fire mitigation plan for your area (follow the link below to the plan for your specific county and area) you can receive a Colorado tax deduction up to $2500 for 50% of the costs incurred for fire mitigation on your property(applies to individuals, estates and trusts.) Contact us for more information on how this might apply in your unique situation.
The Waldo Canyon Fire: Working together toward recovery
The leadership team for Colorado Springs Together, the non-profit organization incorporated on July 3 to be a central clearing house for Waldo Canyon Fire recovery information, services and resources, is announcing additional details on relief efforts.
This is a community-driven volunteer effort led by Mayor Steve Bach and his wife Suzi, with 100% of donations going directly to restoring the Mountain Shadows community. The team members will determine a quick and effective rebuilding process for the neighborhoods devastated by the fire. For more information, Click Here.
Please contact us at (719) 630-1186 or through our Secure Email if you have any questions.
SKR+Co Alert: Individual tax planning in the aftermath of the Supreme Court's health care law ruling
July 11, 2012
Since the U.S. Supreme Court issued its health care law ruling on June 28, most of the attention has focused on its mandates, expansion of coverage and state insurance exchanges. But the Patient Protection and Affordable Care Act of 2010 includes some significant tax-related provisions affecting individuals that are scheduled to take effect in 2013 and 2014, unless Congress repeals them or takes other action.
Now is the time to start planning so you can minimize any negative tax consequences to the extent possible.
To read the full article explaining what steps you might want to take, Click Here.
What does it all mean for you?
We would be happy to take a look at your individual tax situation and how this ruling may affect you.
Please contact us at (719) 630-1186 or through our Secure Email if you have any questions.
SKR+Co Alert: Waldo Canyon Fire – Financial Resource Guidance
June 29, 2012
Our hearts go out to all of you suffering from the effects of the Waldo Canyon Fire. This disaster affects our entire community to one degree or another, and we are heartened to see so many reach out to provide help and support to neighbors and strangers.
We realize that one area of concern for many may be how to rebuild their financial records that may have been damaged or destroyed. Another concern may be filing the right paperwork with the right agencies at the right time. This e-blast touches on several areas of possible concern with links to some of the best resources to help you and your family, friends, or business.
As always, please contact us with any specific questions and we'll do our best to help you find the answers. Our thoughts and prayers are with you all.
Putting the financial pieces back together
This booklet is written to help you regain a sense of financial balance following a disaster by offering suggestions on steps to take immediately, what to do in the initial weeks and months, and how to begin planning again for the future.
As of yesterday, June 28th, Colorado’s request for an expedited major disaster declaration has been received, reviewed and accepted by the White House. That means that taxpayers affected by the Waldo Canyon Fire have certain relief provisions. See the specific website links below for details.
We also want to remind you that Stockman Kast Ryan + CO maintains electronic copies of our clients' tax records and would be happy to provide them to you should the need arise.
Internal Revenue Service
Disaster Assistance and Emergency Relief for Individuals and Businesses
Casualty Losses
Another issue you may be wondering about is how your losses are treated for tax purposes: whether they are deductible, how much, and what is the process. According to the IRS, "If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year."
The IRS provides helpful information regarding casualty losses due to disaster on their website. But we realize that you may need help sifting through the information, so please contact us if you have questions or need assistance.
Internal Revenue Service
Casualty, Disaster, and Theft Losses – Including Federally Declared Disaster Areas
Again, we realize this is a very difficult time for so many in our community. If we can be of service to you in any way, please contact us at (719) 630-1186 or through our Secure Email.
SKR+Co Alert: The creation of"Little GAAP" has been approved for private companies!
June 8, 2012
After considering numerous public comments, the Financial Accounting Board (FAF) — the parent organization to the Financial Accounting Standards Board (FASB) — has approved the creation of the Private Company Council (PCC). The PCC will identify and vote on exceptions and modifications to U.S. GAAP that respond to the needs of private companies and their financial statement users. This article details PCC’s role and discusses the AICPA’s plan to develop “little GAAP.”
If you own a private company, it’s a good idea to monitor the activities of the PCC and the AICPA, which will likely have a big effect on how you prepare your financial statements. For more information on the PCC, please give us a call. We’d be happy to answer your questions.
Contact us with any questions or concerns at (719) 630-1186 or through our Secure Email.
SKR+Co Nonprofit Newsletter Spring 2012
A Window to your world: Making sure your board echoes your community's diversity
Board members are a nonprofit’s ambassadors to the constituencies it serves. But a lack of diversity — whether physical, societal or economic — can signal an underlying problem: a disconnect from the community. A nonprofit can improve its funding and program effectiveness when it reflects the population it serves, as well as the community (or communities) in which it operates. This article offers suggestions for improving diversity, while a sidebar shows there are ways to mix it up beyond just the board of directors.
“Quid pro quo” describes an arrangement in which a contributor gives money in exchange for something else. Whether it’s a supporter buying a ticket for a charity ball or an attendee at a charity auction successfully bidding on a hotel stay, such situations create an obligation for a nonprofit. This article describes the rules that determine whether a contribution is quid pro quo; how to value goods, services and auctioned items; and instances when quid pro quo reporting isn’t necessary.
The word “benchmark” may strike some as organizational lingo, but the practice of benchmarking often proves valuable for nonprofits. Nonprofits that incorporate financial benchmarks into their operations are better at anticipating negative financial trends and may even see revenues climb, expenses drop and efficiencies improve. This article explains the specific benefits of benchmarking and discusses metrics that many nonprofits can use in the process.
Independent Sector, a coalition of nonprofits, foundations and corporate giving programs, has recently decided to redirect the bulk of its efforts. The organization had focused largely on opposing proposals to limit the charitable tax deduction for high-income taxpayers.
This past winter, however, Independent Sector adopted new "Guiding Principles on Deficit Reduction and Tax Reform." The principles build on the premise that — as a matter of justice, fairness and effectiveness — steps taken to address the nation's fiscal challenges should favor policies that won't exacerbate income inequality or increase poverty. The principles will guide the organization's analysis and commentary on budget, deficit reduction and tax proposals.
We have several nonprofit resources available to you on our website. You can see prior newsletters, disclosure requirements, as well as Form 990 and its instructions. Click Here to go to the Not-for Profit Services web page.
For more information about any of the articles here or our nonprofit services, please contact us at (719) 630-1186 or through our Secure Email:
Make your mark by benchmarking
The word “benchmark” may strike some as organizational lingo, but the practice of benchmarking often proves valuable for nonprofits. Nonprofits that incorporate financial benchmarks into their operations are better at anticipating negative financial trends and may even see revenues climb, expenses drop and efficiencies improve.
What is benchmarking?
Benchmarking is an ongoing process of measuring an organization against expectations, past experience or industry norms for productivity and profitability and then making adjustments to improve performance in relation to those metrics. Ideally, your nonprofit will consider both:
Internal benchmarks — to monitor and detect trends, based on your organization’s historical results and statistics, as well as expectations, and
External benchmarks — to ascertain where it’s thriving and where it lags behind, based on data from peers.
Benchmarking provides essential information for effectively developing and implementing strategic plans. It helps an organization keep a watchful eye on its financial health and determine where costs can be cut and revenues increased. Nonprofits can use benchmarks to demonstrate their efficiency to stakeholders such as donors and grantors.
Benchmarks for nonprofits
The first step is to define what your nonprofit needs to measure. Focus on the metrics that are most critical to the success of your mission and the key indicators of the organization’s financial health and operational effectiveness. For many nonprofits, those metrics will include:
Program efficiency (program service expenses / total expenses). This ratio identifies the amount you spend on your primary mission, as opposed to administrative and fundraising costs. This ratio is of utmost importance to stakeholders.
Fundraising efficiency (unrestricted contributions / unrestricted fundraising expenses). How many dollars do you collect for every dollar you spend on fundraising? The higher this ratio, the more efficient your fundraising. What qualifies as a good ratio depends on the organization’s size, its types of fundraising activities, and so on.
Operating reliance (program service revenue / total expenses). This ratio indicates whether your nonprofit could pay all of its expenses solely from program revenues.
Organizational liquidity (expendable net assets / total expenses). How much of the year’s total expenses is considered expendable equity or reserves? The higher the ratio, the better the liquidity.
Also consider benchmarks such as average donor contributions, expenses per member and other ratios that measure trends for liquidity, operating yield, revenue, borrowing, assets and similar metrics. No matter which benchmarks you choose, though, you’ll need reliable processes for collecting and reporting the data.
For comparison’s sake
Comparing the nonprofit’s performance to benchmarks allows you to zero in on areas with the greatest potential for improvement. Armed with this information, you may be able to improve performance without making significant changes in your operations. Further, when comparing against external benchmarks, you might improve performance by simply adopting best practices used by your peers.
You can obtain information on other nonprofits’ metrics from websites such as GuideStar and Charity Navigator or from commercial software. Information also may be available from state government databases and trade associations. Take steps, though, to ensure you’re comparing apples to apples — that the two organizations you are stacking up against each other are truly comparable.
Make it a team effort
Some organizations have found it worthwhile to include staff in the benchmarking process. Their involvement in setting aggressive but attainable benchmarks — and measuring progress — can achieve buy-in and help foster teamwork as your nonprofit moves toward and surpasses its goals. Also include your financial advisor, who can help you select the most appropriate benchmarks for your organization and provide advice on how to improve your financial and operational performance.
When contributors receive something in return
Does your charity understand how to treat quid pro quo arrangements? “Quid pro quo” describes an arrangement in which a contributor gives money in exchange for something else. Whether it’s a supporter buying a ticket for your charity ball or an attendee at your charity auction successfully bidding on a hotel stay, such situations create an obligation for your nonprofit.
Understanding the requirements
According to IRS rules, you may ignore contributions of less than $75, but if your not-for-profit receives more than $75 and provides a benefit to the donor, you must advise the donor that it’s a quid pro quo contribution. With such contributions, donors can deduct only the amount they pay in excess of the value of the goods or services.
Additionally, the charity must put in writing the amount donated, the goods or services provided in return, and a good-faith estimate of their value. You must also provide written acknowledgment when the donation is solicited or when it’s received.
If you’re holding a musical performance for which tickets are sold, for example, each ticket should disclose the tax-deductible portion of the ticket price (in this case, the market value of a similar event in your area). You must make the disclosure in a readily visible format. You can find examples in IRS Publication 1771, Charitable Contributions — Substantiation and Disclosure Requirements.
Your organization could be penalized for failing to furnish the proper acknowledgment and disclosure. Fines are $10 per contribution, up to $5,000 for the fundraising event. If the contribution is $250 or more, failure to provide and describe a good-faith value of the benefit may cost the donor their contribution deduction.
Valuing the goods and services
A key task for the charity is to value the goods or services. An example: Your organization takes a group of supporters to a sporting event and pays for their tickets. The supporters then make large donations. Determining quid pro quo is fairly simple in such cases: The amount your organization paid for the tickets would be considered the fair market value, and only the amount of the contributions in excess of this valuewould be a tax-deductible contribution for the donor.
It’s not as easy when some of the items given away have been donated to your organization. Let’s say, for instance, that your charity put on a one-day chocolate lovers’ event with live chamber music. The hosting hotel charged you a reduced amount for the candy and desserts as its contribution, and the chamber quartet performed at no cost. To establish the value to be reported to the donor, you must determine what it would cost someone to attend a similar event. In this case, you might be able to find a comparable activity in a nearby community.
Placing value on auctioned items
All items auctioned at a charity auction (silent or regular) must have a value placed on them. The charity should ask the donor to put a value on the item unless it’s readily apparent, such as with a $50 gift certificate. The value should be the amount that a willing buyer would pay for the item in an “arm’s length” transaction — that is, in the marketplace.
The charity can then publish the item’s value on bid cards or in a catalog of auction items. This serves as the acknowledgment, and the buyers will be entitled to a deduction for the amount paid in excess of that value.
Understanding exceptions to the rule
There are a few instances when quid pro quo reporting isn’t necessary:
Membership exception. This exception happens when membership benefits (free admission or free parking, for example) are provided, but the annual membership fee is $75 or less.
Token exception. This exception takes place when a contribution is for $49.50 or more and the goods cost less than $9.90, or the value of the benefit to the donor doesn’t exceed 2% of the donation or $99, whichever is less.
Intangible religious exception. This exception pertains to religious benefits, such as religious services or classes that are provided by an organization operated exclusively for religious purposes (excluding travel, education and consumer goods).
In other situations, it’s safer to report quid pro quo than not.
Subjective decisions
Making decisions on the value of items you give to contributors in exchange for contributions often involves a degree of subjectivity — value is sometimes in the eye of the owner. If you have any disclosure or reporting questions concerning contributions to your nonprofit and quid pro quo arrangements, contact your CPA.
