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Red Alert – Test Alert A – July 12 expiration
Red Alert – Test Alert A – July 12 expiration
Employ analytical analysis to get a better view of your organization’s revenue picture. Techniques such as pinpointing year-to-year trends and benchmarking to other nonprofits can be useful in planning your short- and long-term future.
To some degree, most nonprofits rely on contributions from supporters to balance their budgets. Compare the dollars raised to past years and see if you can pinpoint any trends. For example, have individual contributions reached a plateau in recent years? What fundraising campaigns have you launched during that period?
Go beyond the totals and determine, for instance, if the number of major donors — say, those who give $1,000 or more a year — has been rising. You get more bang for your fundraising buck when you’re able to add major donors to your roster of supporters.
Also estimate what portion of contributions is restricted by donors as to how or when the money can be used. If your organization has a large percentage of donations tied up in restricted funds, you might want to re-evaluate your gift acceptance policy. You also might want to review your fundraising materials to make sure you’re pursuing contributions that give your organization the most flexibility.
Grants include funding from corporate, foundation and government sources. They can vary dramatically in size and purpose, from grants that cover operational costs, to monies for launching a program, to payment for providing services to clients. For example, a state agency may pay you $500 for each low-income, unemployed individual who receives your job training.
Pay attention to trends here, too. For instance, did a particular funder supply 50% of total revenue in 2014, 75% in 2015, and 80% last year? A growing reliance on a single funding source — an example of a “concentration” that will increase your risk — is a red flag to auditors and it should be to you, too. In this case, if funding stopped, your organization might be forced to find a new funding source, curtail a program or even close its doors.
Fees from clients or other third parties can be similar to fees for-profit organizations earn. Fees are generally viewed as exchange transactions, because the client receives something of value in exchange for its payment. Some not-for-profits charge fees on a sliding scale based on income or ability to pay. In other cases, fees (such as rent paid by low-income individuals) are subject to legal limitations set by government funding agencies.
On an ongoing basis, your nonprofit will need to assess if providing certain services pays for itself. For instance, fees set four years ago for a medical procedure may no longer be sufficient to cover costs. A decision to raise fees or discontinue the services will probably need to be made.
If your nonprofit is a membership organization, you likely charge membership dues. Has membership grown or declined in recent years, and how do your dues compare with similar groups?
Make informed predictions about the future of membership dues, especially if you rely on them substantially for revenue. If you suspect that dues income will continue to decline, your organization might consider dropping dues altogether and restructuring. If so, examine other income sources for growth potential.
Once you’ve gained a deeper understanding of your revenue picture, apply that knowledge to various aspects of managing your organization. This will likely involve educating your management team and setting or revising goals.
Colorado Secretary of State Wayne Williams recently urged Coloradans to be mindful when making a donation to Hurricane Harvey relief efforts.
“It is important for Coloradans to research the charities they support and trust that their donations are being used prudently,” he said.
Williams shared 10 tips to avoid charity scams.
If you have tax questions about donating to the hurricane relief efforts, please call your tax professional.
It’s a fact of life that physicians and dental professionals operate under an increased level of scrutiny. Increasingly, compliance checks are digging in to more than charts and coding. The IRS is paying particular attention to these hot-button compliance areas:
Is your practice classifying hired physicians as independent contractors? The IRS may come knocking for a look at your payroll records. Violations can result in practice owners and officers being held individually liable for back payroll taxes (including withholding taxes) plus penalties and interest.
Generally, for professionals, the IRS looks at three important factors to make the legal distinction between the employee vs. contractor status of a physician/dentist:
Experts in employment law say that, against this backdrop, most hired physicians/dentists legally fall under the category of employee. Obvious exceptions include physicians and dentists who do locum tenens or who have their own professional medical entities and bring their own ancillary personnel to the job.
Action: To avoid sending up an audit red flag, don’t convert an existing physician employee to contractor status unless he or she has a significant change in job duties. And if you have workers doing the same job, don’t classify some as employees and others as contractors. Consult your attorney regarding appropriate classification and contracts.
Physicians who own their medical building are facing increased IRS scrutiny. In particular, auditors are looking for the cozy transactions that can occur when the medical practice is both the tenant and the landlord.
Action: Experts say the best approach is to treat it as if you were renting office space from someone you didn't know. Have a formal lease in place and make payments by physically writing a check or transferring money from your practice account into a separate medical building account.
Most states impose a “use tax” on certain personal property that was purchased from a seller outside of the state for use in that state. Essentially, it taxes the use of goods on which no sales tax has been paid. Unlike sales taxes, which are charged and collected by the vendor, the use tax is self-reported by the purchaser.
Action: If you purchase supplies or equipment from out-of-state vendors, determine whether state and local sales tax applies to these items. Then report any taxable sales on your monthly or quarterly sales tax report. Ask your CPA for guidance in this critical area.
Managing the typical 401(k) plan can be incredibly challenging, and the IRS (and Department of Labor) cuts offenders no slack. Penalties for noncompliance — even unintentional errors — may be severe, and can even result in the loss of a plan’s tax-deferred status.
One of the most common compliance errors involves failing to follow the terms of your original plan document — either taking actions that aren’t covered or allowed, or making changes to the plan document and then not following them in day-to-day practice. For example, maybe you’ve begun allowing participants to take out loans and hardship distributions, even though these weren’t included in your original written plan.
Action: Make sure you understand how to detect — and correct — errors in plan administration. Start by downloading the IRS’ comprehensive 401(k) Fix-It Guide at http://www.irs.gov/pub/irs-tege/401k_mistakes.pdf.
Head off an audit before it occurs by taking steps now to identify potential compliance problem areas. Contact our office for guidance in ensuring that your practice remains compliant in all areas of operation.