Did you know that when you make a trip to visit a client or vendor, or have lunch with a prospective contact, some of the cost is tax deductible? Keeping track of certain things such as mileage and entertainment expenses can be a big help when filling out your tax return.

Driving Expenses

When determining a business deduction for the use of your car, no personal use, such as commuting to and from work, can be included. Deductible car expenses include traveling from one office to another if your company has two locations, making a business trip to visit customers to attending a meeting not at your regular workplace, or travel to and from a temporary workplace. Keep complete records to substantiate items reported on your tax return. For car or truck expenses, you can claim the standard mileage rate or actual expenses.

Standard mileage rate for the use of a car (including vans, pickups, or trucks) can be found by going on IRS.gov and searching standard mileage rates. To claim standard mileage, appropriate records such as the documentation that identifies the vehicle and provides ownership or lease, and shows the miles traveled destination, and business purposes.

For actual expenses, add together your annual car operating expenses, including gas, oil, tired, repairs, licenses fees, lease payments, and registration fees. Multiply the car operating expenses by the percentage of business use for your car to get the allowable deductible amount. Things that relate directly to the business use of the car, such as business related parking or road tolls, are fully deductible and do not have to be included in the business percentage.

Travel Expenses

“Ordinary and necessary” expenses incurred while away from home for the purpose of business can be tax deductible. Keep all receipts and relevant documentation, and if you combine business and personal travel, be prepared to show how much of the expense was related to business. Travel expenses can include lodging, transportation (airplane, train or bus, travel agency, etc.), and meals.

For lodging, your receipts should show the location and duration of your stay and the cost of your stay. Keep records for extra costs, such as phone charges, tips, and laundry. Similarly detailed receipts are necessary for meal expenses. Make sure the receipts you keep contain the name and location of the restaurant, the number of people served, and the date and amount of the meal. A general rule to follow is to keep a log of meal expenses and receipts for amounts of $75 or more. Either track the actual costs of all your meals, or use the standard meal allowance amount if you qualify.

Entertainment Expense

For entertainment activities during business trips, you must have records to prove the business purpose and the amount of each expense, the date and place of the entertainment, and the business relationship of the people who were entertained. Entertainment expenses are usually subject to a 50 percent limit.

Due to the current budget situation, including the sequester, all Internal Revenue Service operations will be closed May 24, June 14, July 5, July 22, and Aug. 30, 2013. This includes all IRS offices, toll-free hotlines, the Taxpayer Advocate Service, and the agency’s nearly 400 taxpayer assistance centers nationwide. IRS employees will be furloughed without pay, no tax returns will be processed, and no compliance-related activities will take place on those days.

Taxpayers should continue to file their returns and pay any taxes due as usual on these days, but should take the days into consideration should they need to contact the IRS. Because none of the days are considered federal holidays, the shutdown will have no impact on any tax-filing deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.

Additionally, no tax-payment deadlines are affected. The IRS will, however, give taxpayers extra time to comply with a request to provide documents. When the last day for responding to an IRS request falls on one of the above days, the taxpayer will have until the next business day to reply. If the last day to respond is Friday, May 24, for example, the taxpayer will have until Tuesday, May 28 to comply (Monday, May 27 is Memorial Day). Further details on the impact of the shutdown on IRS procedures will be available on IRS.gov.

The IRS released structured data last month culled from the tax returns of nearly 616,000 tax-exempt organizations. This database of information can be used to find organizations and see details about their business, such as executive compensation, revenue, and expenses. You can also download their tax filings from as far back as 2001. Click here for details:

http://projects.propublica.org/nonprofits/

Make sure what you have is covered.

Beginning Jan. 1, 2013, all bank accounts are now limited as to their deposit insurance coverage. After the Dodd-Frank Wall Street Reform, interest-bearing accounts were limited in FDIC coverage to $250,000 per depositor per separately chartered depository institution. However, through Dec. 31, 2012, noninterest-bearing accounts provided unlimited deposit insurance coverage.

Now that the unlimited coverage has expired, noninterest-bearing accounts are grouped with all other accounts at an institution and insured up to $250,000 per depositor. This means that if you have a savings account with a balance of $150,000 in a federally insured depository institution and a noninterest-bearing checking account for $200,000 in that same institution, only a total of $250,000 is insured. The remaining $100,000 is uninsured.

We advise you to monitor your bank accounts closely to avoid the risk of future loss.

Have you ever walked into a store and the employees offer top-notch service? They are friendly, excited, and eager to assist the customers. Do you wonder if the employees at that particular store are paid better than those working down the street? Bonuses, paid holidays, and other monetary benefits may motivate employees, but all of those perks do not guarantee performance. Studies have shown “soft” and non-monetary benefits can, and do, lead to better job satisfaction, as well as increased efficiency, productivity, and moral among staff.

One of the first things business owners can do to engage workers it to listen to their criticisms and ideas. When meeting with an employee to discuss concerns, engage them on ways to address the issue. Employees know what is working, and normally have ideas and opinions on how to make effective changes. Keep an open mind during these discussions. A good piece of advice is to never use the word “but.” Instead of finding ways ideas won’t work, encourage the employee to find a way around any issues. For example, if someone has an idea regarding scheduling, but as an employer you are concerned about there being enough coverage to adequately service your customers, instead of responding “I like the idea but…” try saying “I like the idea and how could it work?” The response allows your employee to see all points of view and how, if at all possible, the idea can be implemented.

Other soft benefits include success recognition programs. Basic public recognition reinforces company values and provides examples of the company’s mission. Businesses do not have to attach a monetary value to performance rewards for the reward to be effective. A reward system will make employees happy only if it is designed to value everyone’s efforts equally or it is specifically tailored to measure successes to the various jobs performed. Effectively engaged employees are self-motivated. They take ownership of their tasks and feel pride in completing them to the best of their abilities.

Other ideas to engage employees:

• Set clear goals. While managers should grant their staff a degree of independence over their assigned duties, they should also set clear-cut goals for each employee to infuse them with a sense of purpose. Happier workers consider their job meaningful.
• Offer career growth opportunities. Engaged employees won’t want to toil away at the same tasks day in and day out. To maintain and encourage high levels of engagement, offer career growth opportunities in the form of advanced training, seminars, or an internal mentorship program. However the opportunities are facilitated, career growth enriches employees’ skill sets, which will further enrich the business.
• Provide consistent feedback. Providing consistent feedback opens communication between employees and managers – and the resulting benefits go both ways. Employees gain a better understanding of how they are succeeding and what require more attention, while managers glean insight into the store dynamics.

Engaging employees should lead to fewer turnovers and a happier, more productive staff, which in turn results in happier, more satisfied customers. Listen to your employees and find what “currency” will inspire them, and your business will reap the rewards of a motivated and engaged staff.

SS&G’s Dan Wander, Director, is featured in the May issue of Smart Business – Akron/Canton, discussing how single audit cahnges could impact some nonprofits.  Click here to read the article:  Wander_Single Audit Proposal 0513

Intermediate sanction rules allow the IRS to assess penalties against nonprofit executives who receive excess compensation – and the board members who approve it.

Internal Revenue Code Section 4958 prohibits most 501(c)(3) and 501(c)(4) organizations from engaging in an “excess benefit transaction” with a “disqualified person.” Disqualified persons generally include officers, directors, or anyone who has substantial influence over the organizations affairs in any five-year period preceding the transaction.

An excess benefit transaction occurs when a disqualified person receives a benefit that exceeds the value of the service, property, or payment the nonprofit receives in exchange. An example is if a director being paid a salary that far exceeds the salaries of executives of similar organizations. (Keep in mind, in this case a similar job title doesn’t necessarily mean a similar job. When looking at comparability data, the person must have similar duties, not just a similar title.)

Federal tax regulations provide “rebuttable presumption of reasonableness” for compensation arrangements that have three requirements. First, compensation must be set in advance by a group made up of members of the board of directors who do not have a conflict of interest regarding the arrangement. The authorized body must also rely on appropriate comparability data prior to making the compensation determination. If the organization’s average gross receipts are less than $1 million, information on only three similar positions in similar communities are needed. Regulations don’t specify the number of comparable needed for larger organizations. Finally the authorized body must document the basis for its compensation decision. This must include the terms of the arrangement, the date it was approved, the members who were present during the debate on the arrangement, who voted on it, the comparability data that was relied on, and any actions by a member of the authorized body who had a conflict of interest. The documentation must be prepared before the later of the next meeting of the authorized body or 60 days after the body’s final action.

It is important to remember that the IRS requires nonprofits to consider the total compensation an executive receives. This includes regular salary and bonuses, as well as retirement plan contributions, insurance, housing allowances, and payment of nonbusiness expenses. Contact your CPA if you have questions about reasonable or excess compensation.

Unexplained differences. Unsatisfactory explanation. Noncompliant. If you are a nonprofit leader gearing up for your next audit by an outside CPA firm, you probably dread hearing these words. Independent audits are often equated with criticisms, demands, and time taken away from more meaningful work.

This kind of anxiety can be unwarranted. If you understand what to expect during an independent audit, the event can run smoothly and provide you with a genuine assessment of your organization’s financial condition. Here are four things you can do to prepare for an independent audit:

1. Set the schedule – Line up the audit engagement far enough in advance to give you time to prepare. Make sure that key personnel will be in the office and available to answer questions during the auditors’ visit. Then, set a timeline with the audit firm that outlines who has what responsibilities and when the key due dates are.
2. Get your records in order – Have ready an analysis of each major balance sheet, revenue, and expense account. You also should be ready to provide detailed documentation about your organization’s operations in areas such as bank correspondence, inventory, payroll, grants and contributions, and financial or accounting policies and procedures. The documentation should include board meeting minutes, the current year’s budget, and interim financial statements. Many records can be easily gathered or prepared during the close of the financial year, and it is important to make sure everything is in order before the first day of fieldwork by the audit firm to make sure everything runs smoothly.
3. Be ready for a focus on internal controls – The audit will be less stressful if you review your nonprofit’s internal controls beforehand and make any necessary improvements. If significant adjustments need to be made as a result of the audit, the auditors may conclude that your internal controls over financial reporting are deficient. The pre-audit meeting is a good place to address questions regarding proper internal controls. Remember, the more time you spend resolving issues before the audit, the less time the auditors will need to spend addressing problems and the less likely they will be to issue a report on control deficiencies.
4. Keep your auditors on speed-dial – Contact your auditors with any questions in the weeks leading up to the audit, but don’t let that be the only time you give the CPA firm a call. Stay in touch year round.

Join us for our complimentary seminar in SS&G’s 2013 Nonprofit Seminar Series – PCI Standards and Current Trends for Information Technology – on Thurs., April 25.
 
Regardless of size, nonprofits are increasingly relying more on technology, from gathering donations online to promoting their missions through social media. Learn how to protect your organization in this electronic environment.
 
Presenters:

• Jerry M. Justice, MCSE, MCSA, SS&G - Best practices for IT security
• Brian Dean, CIPP, PMP, QSA, SecureState – PCI standards and what they mean for your organization

Please join us at 8 a.m. for registration, networking, and a continental breakfast. The seminar runs from 8:30 a.m. until 10 a.m.

RSVP for this event by April 18.

Saying “Thank you” is the easiest way to show your appreciation for a donor’s gift to your organization, but don’t take for granted the power of those two small words. While an initial thank you note or phone call should ideally be sent out within 48 hours of receiving the gift, it is equally important to continue to show your gratitude as time goes on.

Experts suggest finding a way for your organization to thank donors seven times over several weeks or months. This not only shows appreciation to your donor, it keeps your name fresh in their mind.

The levels of acknowledgement can vary depending on the size of the gift, but below are some ideas on different ways to thank donors:

• A personalized or hand-written note from the person who solicited the gift.
• A note signed by as many staff members as possible with a one-line thank you message.
• A call or note from the executive director or CEO on behalf of the organization.
• A call or note from a board member.
• A call or note from a staff member or client who directly benefited from the gift.
• Acknowledgement in a company publication or on the website.
• An update or report on how the donor’s gift is being used and what has been accomplished with their contribution.

Phone calls or notes shouldn’t be extensive, and scripts can be drafted for executive level personnel to follow so the process doesn’t become a burden on their schedules.  Have a timeline with when notes or calls should go out so you don’t overwhelm the donor either.

 Remember – taking the time to say thank you can be the difference between receiving or not receiving another donation in the future.