Nonprofit Tax Returns? But I’m Tax Exempt!

Meet Mary. Mary does a lot of good for the community. In fact, Mary started a nonprofit organization recently helping single moms build marketable career skills, navigate parenthood and balance the demands of work and family life. Mary dutifully filed for her nonprofit tax-exempt (501(c)(3)) status two years ago and has been pouring all her energy into her charity since then. 
But what Mary doesn’t realize is that her nonprofit status is now in danger because she hasn’t filed an annual tax return for the organization in the past two years. But Mary thought that no taxes meant no tax returns. Unfortunately, that’s not the case! 
Most nonprofit organizations, though tax-exempt, are still required to file annual nonprofit tax returns. Not filing, or filing late, can result in penalties for your organization. Failing to file for more than three years in a row can result in the organization’s nonprofit status being revoked.
While these nonprofit tax returns don’t require any taxes to be administered, it is necessary that the organization’s financial affairs be visible to the public.

990 Nonprofit Tax Returns

Nonprofit tax returns, known as the 990, are public documents, and as such, care should be taken to prepare them timely and accurately. Nonprofit taxes can be fairly simple, or quite complex, depending on the size of the organization, nature of the business it conducts, and how much revenue it receives.
The 990 forms serve to allow the IRS and the general public to evaluate the entire mission and operations of the organization; it includes information on the programs, mission, and finances of the organization. Donors, particularly foundations and other grantmaking organizations, use the 990 to help make decisions on whether they should contribute funding to an organization based on the information in the nonprofit’s tax returns.

Does my organization have to file a 990? 

If you’re new to the nonprofit world, or your organization hasn’t filed before, nonprofit tax returns can be daunting. Tax professionals who are experienced with nonprofit organizations can help you figure out if and how you need to file. 
While the type of 990 forms may differ from one organization to another, these types of organizations must file:

• Private foundations
• Most tax-exempt organizations with gross receipts over $200,000 or with assets over $500,000
• Organizations with gross receipts over $50,000 may file a 990 or 990 EZ
• Organizations with gross receipts that are less than $50,000 MUST file a 990-N
• Tax-exempt organizations that fall under 501©, 527, or 4947 (a)(1), or that are not exempt from filing

Tax-exempt organizations that do not have to file nonprofit tax returns:

• Churches and most faith-based organizations (religious schools, missionary organizations)
• Subsidiaries of other nonprofits, if there is a group return filed
• State institutions
• Government corporations

If you are unsure if your nonprofit needs to file, or if you are unsure of how to file a 990 or 990EZ, you should consult a professional tax preparer for help. 

Accountants for Nonprofits

Hiring a firm with a team of experienced tax experts can also help a nonprofit organization with other tax challenges:

• Filing for tax-exempt status
• Unrelated Business Income Tax
• Multi-entity planning
• State and local tax filing
• Reviewing internet fundraising activities
• Maintaining state charitable fundraising status
• Reviews of sponsorship, affinity, and royalty contracts
• IRS private ruling requests
• Donations of property
• Donations of vehicles
• Donations of intellectual property
• Donations of stock

If your nonprofit organization needs assistance with filing nonprofit tax returns or any other tax challenges, give us a call today at 740.373.0056.

Should I Hire a Professional for Tax Services?

Leaves are turning; your favorite football team is on; Halloween decor is out; fall is finally making itself known. Which means tax services are probably the farthest thing from your mind. But this is exactly the time to start planning. 
Why should you think about taxes now? After all, you won’t see your W-2’s for months. But if you wait until January, (or later!) it may cause you delays that you can’t afford. Starting the planning process now will ensure a smoother ride as you enter a bustling tax preparation season. Finding the right tax professional now can lessen the possibility of any surprises down the road. 
Do you need help making decisions about end of year finances? Have a new business that needs a payroll system put into place? Or do you simply need experienced tax preparers to help maximize your returns? Even if you’re unsure about what information you need, turning to a firm with experience in a wide variety of tax services will help you understand your needs.
You should ask plenty of questions to ensure that your tax professional has the proper experience, doesn’t charge unexpected fees, and can navigate through any applicable tax laws and regulations. Professional tax preparers are well versed at keeping up with the ever-changing tax code. 

6 Questions to Ask Before Hiring a Tax Services Professional

Here are some questions you can ask to make sure you’re finding the right tax professional for you:
 

• Make sure they have a PTIN (IRS Preparer Tax Identification Number). This is required by the IRS to file taxes that they have prepared. However, this does not prove that they are certified, or experienced. 

• Ask about their credentials and experience. Credentials may vary depending on your state, but ideally, a reputable agent will be certified and/or licensed. You might also be interested in knowing whether they are involved in continuing education or belong to professional organizations. 

• Ask about fees and the return process upfront. You should avoid agents who tie your costs to your total refund because there is a lack of transparency about the cost until after you’ve already filed. Along the same lines, make sure your return will come to your bank account and not the preparer. 

• Understand how they’re going to file your taxes. While they’ll be doing the legwork, you should be familiar with the process so that you can spot anything out of the ordinary. They should e-file your returns; this is the most efficient process and those who file 10 or more returns are required to do so. They should also ask for w-2’s and other documentation; it’s a red flag if they file only using your last pay stub. They should not ask you to sign a blank tax form, fail to sign it themselves or only use their PTIN, or refuse to give you a copy.

• Inquire if they provide audit assistance. If not, you may have to pay extra to hire a professional to accompany you to an auditor to speak to the IRS on your behalf.

• Make sure you can contact them after you file, including after the filing deadline.

 
 
If you’re looking for professional tax services in the Mid-Ohio Valley or Northern West Virginia, we’ll be happy to answer these questions for you! We can serve you in several locations in West Virginia and Southeast Ohio. 
 

Call us today at (740) 373-0056.

How is Virtual Currency Taxed?

 
For some years, a good bit of ambiguity has surrounded the world of virtual currency. Bitcoin, the most common type of this currency, was used by many in the beginning stages to avoid tax obligations. And even rule-abiding citizens have long wondered if the virtual currency is considered reportable.
Whether you like it or not…yes, indeed it is. The IRS has now issued guidance on the tax treatment of transactions using virtual currencies. It is considered convertible virtual currency, meaning it has an equivalent value in real currency. This, by default, places certain tax implications on any transaction with bitcoin or other virtual currency. 
However, to be clear, the IRS considers bitcoin property not currency for tax purposes. This allows the IRS to decide whether and when individuals owe taxes on the possession, mining, usage or sale of bitcoin. Tax consequences are incurred when there is a “realization event” according to the IRS. This generally falls into two actions – mining bitcoin or transferring (using or disposing of) bitcoin. 

Understanding Virtual Currency

Let’s look at a few tangible examples to help us understand.
Tax liabilities for mining bitcoin – By mining, we mean “acquiring” through the complex computer programs as they solve computational math problems. The concept is very similar to actual mining. When a bitcoin miner “strikes gold” – or solves a math computation resulting in a bitcoin – an asset is created. That asset (just as gold would be an asset) must be taxed appropriately. Acquiring a bitcoin through mining makes that value taxable immediately.
Tax liabilities for transferring bitcoin – Here, we’re actually referring to either the use or disposal of bitcoin, whether by exchanging it or paying for goods or services. If the actual value of the bitcoin at the time of use is greater than the value of the bitcoin when you first acquired it, you will owe taxes on the gain you experienced – in other words, capital gains tax. 
Since virtual currency is considered “property” you can think of it in terms of actual property. If you were to buy a house and sell it later for more than you purchased it (aside from the Section 121 exclusion), you would owe taxes on the capital gains you incurred from the sale. 
 

Other Important Facts about Taxes on Virtual Currency:

• You can deduct capital losses on bitcoin just as you would deduct losses on stocks or bonds. 
• Impeccable records are a must when dealing in cryptocurrency. Make sure you carefully track every transaction with your virtual currency, including the value when mined or bought and the value when sold or used.
• If you’ve received bitcoin from your employer for wages, that currency is taxed as income and subject to all normal withholding taxes.
• Remember that mining a bitcoin must be included in gross earnings for tax purposes.

 
As always, if you need help reviewing your current tax situation, including your virtual currency holdings, reach out to our experienced accountants. We look forward to helping you navigate the complex tax issues that virtual currency delivers while looking to decrease your tax liability as much as legally possible. 
 

Call us today to set up your free consultation – 740.373.0056.

How to Know if You Need a Forensic Audit

 
No company wants to believe they could be the victim of financial fraud, especially from an inside source. But it happens all too often. 
Ignoring the possibility won’t make it go away. However, preparing for prevention and detection of fraud will move you much closer to eliminating the problem or at least catching it in the early stages. If you suspect that your company may be dealing with internal or external fraud, now may be the time to seek a forensic audit of your company’s financial affairs.
But how do you know if you actually need a forensic audit? Below are a few of the signs that may indicate you need forensic accounting services.
 

7 Signs You Need Forensic Accounting Services

1. Internal Control Issues – By this, we don’t just mean someone that is a micro-manager (albeit, that’s not healthy either). These control issues manifest primarily around financial decisions and issues, but come out in an uncommon concern, control or manipulation of the company’s finances. Often, it may be communicated that the motivation is deep concern for the company’s well-being. But in many cases, a further examination can reveal ulterior motives. 
2. Odd Work Habits – While those that work long and hard hours may be respected in many corporate cultures, it’s important to understand that workaholics can often have other reasons for keeping late working hours. If you have an employee that refuses to take a vacation, works long into the evening or comes in on the weekend when the office is empty, give extra scrutiny to that individual’s actions and accounts. 
3. Personal Financial Stress – Unfortunately, difficult life situations can push people to desperate measures. Internal fraud can often be triggered by a personal financial loss such as divorce, bankruptcy or medical bills. 
4. No Accountability – If the person that reconciles your bank statements is also the individual signing checks, you may want to get a forensic audit simply to ensure complete transparency. 
5. Multiple Bank Accounts – Some businesses require various bank accounts for different business functions; however, multiple accounts make fraudulent movements of cash harder to detect. Use as few accounts as possible, and make sure each account has a specific purpose and use. 
6. Unexplained Transactions – You should be giving more than just a cursory review of your financial statements every month. If there are transactions or accounts that you don’t understand, ask about them. If the response is vague and downplayed, you need to investigate further. Often the initial response to these questions can indicate if there may be foul play afoot.
7. Generic Financial Reports – It’s true that your financial reports are a summary, but they shouldn’t be so generic that you’re unsure what is going in and out of each account. Make sure you have established a budget beforehand, which can act as a guide for actual reporting. Then, require that financial reports account for details, not just generalities.

Prevent Internal Fraud

Unfortunately, internal fraud can happen to any business. But you can take steps today to help prevent and detect fraud. Some of the following steps can help you mitigate the risk of internal fraud:

• Assign main financial duties to different people (account reconciling, check cutting/signing, etc.)
• Establish an anonymous fraud-tip hotline (make this available to both internal and external individuals and ensure the “whistle-blower’s” anonymity)
• Clearly segregate duties and controls (make sure the financial responsibilities are clearly defined among employees)
• Always perform a pre-employment screening of new hires
• Consider having an outside company handle your financial affairs or at least review them

 
When in doubt, get a forensic audit. The upfront cost will be worth the potentially massive loss you could sustain by falling victim to financial fraud. And while a forensic audit is searching primarily for an illegal activity for the purpose of presenting in court, there may be benefits in the process. Forensic audits can be beneficial in uncovering waste and inefficiencies that often would have gone unnoticed by the company. 

Forensic Accounting Services Near You

If you are in need of forensic accounting services, or simply feel you need to ask a few questions before determining if you need a forensic audit, call us today to speak to one of our certified forensic accountants. 

740.373.0056

List of Tax Deductions You Won’t Want to Miss!

 
Tax Season…most of us have a love/hate relationship with this time of year. And while it’s tempting to ignore it until the new year, your taxes and time may benefit from keeping it top-of-mind all year long. Receipts, expenses, purchases, and assets are all prime records that you should be keeping year-round to get ready for the big day. Besides, we think you’ll agree that it’s never too early to plan for deductions.
Deductions take a vast chunk of your time when filling out your tax return, and – we all hope – save you a vast amount of money. Charitable donations, medical expenses, home equity lines of credit, work-related expenses – all of these top the list of tax deductions that are commonly used. But there are many unfamiliar deductions that you may be missing. Here are just a few.
 

Don’t Miss This Uncommon List of Tax Deductions

1. Student Loan Interest

You’re diligently chipping away at your student loans? Great job! You get a deduction. A portion of the interest you pay on the student loans is tax-deductible. The benefit caps out at $2,500, and you will not receive the deduction if you make more than $75,000 per year as an individual or $155,000 per year if married. But if you meet those requirements, you’ll benefit from a great deal of tax savings.
 

2. Child Care Costs

Do you feel like your disposable income is eaten up by childcare costs? Paying for childcare is a hefty expense for many families. Thankfully, you’re able to recover some of that money through the Child and Dependent Care Credit. Tax credits can be worth between 20 and 35 percent of your total childcare costs. Having someone that you trust to watch your littles is priceless, and we know you’d gladly pay any amount for their safety. But a little kickback certainly doesn’t hurt.
 

3. Mortgage Points

Refinancing your mortgage? Pay attention here. You’re probably well aware that the interest you pay on your home loan is tax-deductible. But did you know that if you buy “points” to lower your interest rate, that money is tax-deductible as well? The IRS allows you to deduct the full amount of the points over the life of the loan. For instance, if you bought down your interest rate, paying $3,000 in points on a 15-year mortgage, you can deduct $200 per year. 
 

4. Jury Duty Fees

Did you recently serve Jury Duty and have pass-through income from the jury fee? That may be tax-deductible. Many employers still pay your full-time salary for the time you spend in Jury Duty. However, since you also receive payment from the government for the time you served on the jury, some employers require that money be given back to them. Yet, at the same time, the IRS requires that you pay taxes on the jury money earned. If you simply “passed-through” the jury fee to your employer, you can deduct that income from your total taxable income. 
 

5. State Income or Sales Tax

Did you know you can deduct taxes that you have already paid? While you are only permitted to deduct one or the other, you can choose which one according to what will provide the most benefit for you. For most people, deducting the tax that was paid on state income proves most profitable; however, if you made a large purchase that incurred considerable sales tax, such as a boat or new vehicle, it may be the year to choose the sales tax deduction.
 
This is just a small list of tax deductions that you may be missing without someone to help you navigate the complex and always-changing tax laws! 
Here at Perry & Associates, we would love to help you determine what deductions you can take and how best to track that right now. Our tax professionals are ready to take on even the most uncommon tax deductions. Call us today and get a head-start on tax season!
 
740.373.0056
 

Help! I’m Looking for Good “Accountants Near Me”

 
“Alexa, what are some good accountants near me?” Maybe not the most exciting question you’ve ever asked your virtual assistant, but certainly an important one. However, once you have your list of possibilities, the work really begins. 
How do you know which accountant to choose? Without a plan, it may be hard to distinguish one accountant from another. 
So, how about we reword that question a bit – “Alexa, what are some good questions to ask  potential accountants near me?”

When you’re armed with some key questions to ask your potential financial partner, you’ll know exactly what you’re walking into, which will give you confidence in the decision you make in the end.
Rarely would you hire a new employee to work for your business without conducting an interview. So why would you hire an accountant without doing the same? And most experienced accountants will actually welcome the questions. It shows that you are serious about your finances and your business. That’s the type of client all accountants hope for.

We’ve compiled a short list of eight questions we suggest you ask when looking for the right accounting firm to handle your business finances. 
 

8 Questions to Ask Your Accountant

 
 
1. What are your fees?
Managing expectations is always one of the most important parts of any relationship. It’s no different with your accountant. Make sure you know exactly how they charge and how they bill. Do they charge hourly? Project-based? Do they prefer a monthly retainer fee? How will billing be handled? This isn’t usually a make-or-break deal. It simply aligns your expectations from the beginning so money surprises (and consequent frustrations) don’t occur down the road.
2. Do you represent in the case of an audit?
Did you know that not all accountants are qualified to represent clients in an IRS audit? However, all CPAs are. If you think there’s a chance you may be audited at some point (which you should always plan that there is), having an accountant on your financial team that can knowledgeably and seamlessly represent your case will be invaluable.
3. How many times have you gone through an audit with a client?
On that same note, if you have a particularly complex business structure and tax filing status, you will want the security of knowing that your accountant has been through this before and can handle whatever challenges may arise.
4. Do you have experience in my industry?
This is important. Not all industries are taxed the same. Some industries have extremely complex tax laws, which, if not followed, can make or break a business. On the other hand, some industries have unique (and completely legal) tax breaks that could save your business thousands of dollars. Ask yourself, “Does this accountant near me actually have the experience necessary to navigate my field of business?”
5. What is your tax philosophy?
There exists a wide range of attitudes and actions among accountants when it comes to taking tax deductions. You’ll want to know if your accountant is cautious, forward or aggressive with tax deductions. And more importantly, you’ll want to make sure that aligns with your own goals and philosophy.We feel it necessary to note here, that regardless of the immensity of the deductions, it’s important to make sure your accountant is always legal. Beware of constant statements such as “We can get around that”, “We can hide that here”, etc.
6. What software do you have experience with?
If your small business bookkeeping uses a unique software program, ask if your accountant is familiar with it. That will make the transition for both of you much smoother. At the very least, make sure he or she is comfortable navigating digital platforms if that is what you will be using within your own business.
7. Are you willing to work directly with my other financial partners?
Most accountants are. However, if you find one that appears hesitant about collaboration, you’ll want to steer clear. You need a complete team of financial partners, including an attorney and wealth advisors, to deliver the best plan and outcome for your finances.
8. How often do you meet with your clients?
If the potential candidate says he simply likes to meet once a year right before taxes are due, this should be a red flag. As a business with various expenses and cash flow to track, you’ll want to know where the money is going on a regular basis. Not to mention the quarterly taxes that should be prepared and paid in order to avoid a large tax sum at the end of the year or even penalties from non-payment.
 
If you’re currently looking for an accountant in southeast Ohio and northern West Virginia, we would be happy to answer the questions above for you! Find out more about each of our accounting firm locations near you. 
 
Or call us today at (740) 373-0056.