Hunkered Down, day 6

Financial triage.

Texas got a liquidity lifeline last night. Abbott announced that all Texas counties have been included in the Economic Injury Disaster Declaration, which grants access to the Economic Injury Disaster Loan (EIDL) program. The program provides long-term, low-interest loans to small businesses (3.75%) and nonprofits (2.75%) with repayment terms up to 30 years. That’s great news for our local mom-and-pops and employers who are sinking fast.

The turnaround time for the Express loan is reported to be 36 hours. I’m a little skeptical, but I’ll let you know. We are prioritizing these applications and working as quickly as we can to help all of our clients. Bear with us, the 4506-T is already down this morning, and I started at 4am. I’ll keep trying throughout the day and let you know if I get one to go through. Click here to complete the online application at the SBA website.

Proposed: The Main Street Emergency Grant Program would offer grants to small, and possibly mid-sized businesses, and nonprofits to cover payroll and fixed costs, such as rent. The grants would be made avialable “quickly” to provide liquidity and avoid layoffs. This proposal has not been finalized.

Recommendation: Defer the Texas Franchise Tax payment and filing deadline until August 15th, 2020. The delay would defer preparation fees and tax payments for taxpayers, while allowing more time for tax return preparers to help clients navigate the current crisis. Please contact Glenn Hegar at the Texas Comptroller of Public Accounts and encourage him to support this recommendation.

See also:

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

Businesses and Nonprofits Have Six Months to Extend Overtime Pay

The DOL estimates that the new rule will extend the right to overtime pay to an estimated 4.2 million workers.~Mitzi E. Sullivan, CPA

Working

The final rule on overtime pay protection was signed by president Obama and published on May 18, 2016.  The rule takes effect December 1, 2016.  The DOL estimates that the new rule will extend the right to overtime pay to an estimated 4.2 million workers.

Which businesses are affected?

Generally, businesses and nonprofit organizations with gross annual sales of $500,000 or more must extend overtime pay to qualified employees.  For nonprofits, only UBIT sales are considered toward the $500,000.

In addition, all hospitals, businesses providing medical or nursing care for residents, schools (whether operated for profit or not for profit) and public agencies must comply with the new rule.

Businesses must also extend protection to employees whose work regularly involves them in commerce between States (“interstate commerce”), even if the business is not covered on an enterprise-wide basis.

Which employees are affected?

Generally, overtime pay protection is extended to full-time salaried workers with earnings up to $47,476 annually or $913 per week.  Bona fide executive, administrative, and professional (“EAP”) employees are exempt.  In addition, the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test is increased to $134,004.  Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10 percent of the new standard salary level.

Future automatic updates to salary thresholds will occur every three years, beginning on January 1, 2020.

What is overtime pay?

Employees covered by the Fair Labor Standards Act must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rates of pay.

Check the DOL’s FAQs for more information.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

Commonly Overlooked Deductions for Charitable Contributions

“Deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry.”~Mitzi E. Sullivan, CPA

20160404-Joplin 2013-2

For taxpayers who itemize, deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry.  Don’t limit your deductions to cash contributions.  Keep a record of charitable miles and non-cash contributions made throughout the year.  You may be surprised at how much you can save in taxes.

In General

Deductions for charitable contributions must be:

  1. contributed to a qualified organization or an agent acting on behalf of a qualified organization.
  2. unreimbursed,
  3. directly connected with the services you give,
  4. incurred only because of the services you give,
  5. not personal, living or family expenses, and
  6. not given to a specific individual.

You can verify whether a charity qualifies at CharityCheck101.org.  Churches and governmental units (such as public schools and universities) automatically qualify and will not be listed in the database.

Note that expenses must be incurred for services you give.  This does not include expenses incurred for services that your child gives.

Charitable mileage deduction

You can deduct 14 cents per mile, or actual incremental costs, for miles driven for qualified charitable purposes, plus tolls and parking.

Examples may include:

  • round trip mileage to volunteer at a charitable event, gala, fundraiser, etc.
  • round trip mileage to volunteer for disaster relief
  • round trip mileage incurred on a mission trip
  • round trip mileage to volunteer at a federal park
  • round trip mileage to choir practice
  • round trip mileage as a volunteer chaperon
  • round trip mileage to donate clothing and household items

You have the option to deduct actual incremental out-of-pocket costs (such as gas and oil) in lieu of the 14 cents per mile.  When gas costs are high, or you are driving a large vehicle, this method will give you a better deduction.

Travel and lodging deduction

You may be able to deduct travel and lodging costs, including meals, directly connected, and incurred only because of, the service you provided to a qualified charitable organization that required you to be away from home overnight.  The IRS specifies that there should be “no significant element of personal pleasure, recreation, or vacation in the travel” and makes important distinctions based on the level of involvement.  It’s okay to enjoy the work, just make sure you are working.  And make sure you meet all of the requirements in the “In General” section above.

Unreimbursed out-of-pocket expenses

As long as expenses meet the criteria listed in the “In General” section above, you may be able to deduct expenses that you paid on behalf of a qualified charity.

Examples may include:

  • Food and paper goods purchased to provide meals at a qualified charitable activity (youth group, support raiser for a missions agency, etc.)
  • small tools and equipment (contributed to the organization, or with no residual value)
  • printing supplies
  • postage

Gently used clothing and household items

Remember to get a receipt for your donated items and note on the receipt the fair market value of donated items.

Documentation Requirements

According to the IRS, “Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.

To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.”

Check with your CPA

The expenses discussed in this article are examples of expenses that may be deductible, depending on your unique circumstances.  Discuss them with your CPA to help you decide whether or not to claim a deduction.  The information contained in this article is for discussion purposes only and is not to be considered tax advice.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

5 Essentials for Every Nonprofit

“I always advise implementation of these 5 essential practices.”~Mitzi E. Sullivan, CPA

6045OLHDPYAs a nonprofit auditor, I frequently meet with boards of directors that are struggling to properly govern while remaining ministry focused.  I always advise implementation of these 5 essential practices.

  1. Make sure you have the basics covered.  Every nonprofit, regardless of size, should have these basic written policies.  All of these policies should be reviewed and updated annually and effectively communicated to board members and employees.  Click on the links below for some of my favorite resources, samples and templates.
    1. Conflicts of interest
    2. Code of ethics
    3. Document retention
    4. Gift acceptance
    5. Whistleblower protection
  2. Retain a schedule of required board meetings and maintain minutes for each meeting.  Every ministry is required to have at least one board meeting annually.
  3. Annually approve executive compensation and benefits and make sure they meet the criteria for reasonable compensation set forth by the IRS?
  4. Review your 990 in detail with your board of directors.  Your 990 is available for all to see and provides a unique opportunity to show your donors how you are meeting your stewardship responsibility.
  5. Have your financial statements prepared, compiled, reviewed or audited by a CPA, either in-house or by a third party.  With the new SSARS 21, CPAs have more flexibility in providing “prepared” financial statements at a reduced cost.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.