Hawkins Ash CPAs https://hawkinsashcpas.com Part of your business. Part of your life. Thu, 18 Oct 2018 15:12:44 +0000 en-US hourly 1 Payroll and Year-End Reporting Webinar https://hawkinsashcpas.com/payroll-and-year-end-reporting-webinar/ Thu, 18 Oct 2018 14:31:35 +0000 https://hawkinsashcpas.com/?p=6655 As an employer, you know year-end payroll processing and reporting is a complex undertaking that adds to the stress of closing the books for the year. To ensure a smooth, error-free year and to get the latest information, please join us for our Payroll and Other Year-End Reporting Webinar. This webinar is offered to bookkeepers, […]

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As an employer, you know year-end payroll processing and reporting is a complex undertaking that adds to the stress of closing the books for the year. To ensure a smooth, error-free year and to get the latest information, please join us for our Payroll and Other Year-End Reporting Webinar. This webinar is offered to bookkeepers, business owners and payroll professionals free of charge.

Debbie Denny, Tax Manager, will address compliance issues of year-end payroll processing and reporting and bring you up to date on the latest changes that affect the close of 2018 and beginning of 2019.  Topics covered in the hour and a half webinar will include:

  • Fringe benefits
  • W-2 add backs
  • ACA reporting
  • Independent contractor issues
  • 1099 rules and due dates

Date

Thursday, December 6, 2018

Time

9:00 – 10:30 a.m.

Registration

Complimentary Webinar Registration>>>

Questions

Call: 920.337.4544

Email: info@hawkinsashcpas.com

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Hawkins Ash CPAs Exhibit Expertise in Employee Benefit Plan Audits with AICPA Advanced Certificate https://hawkinsashcpas.com/hawkins-ash-cpas-exhibit-expertise-in-employee-benefit-plan-audits-with-aicpa-advanced-certificate/ Wed, 17 Oct 2018 20:03:08 +0000 https://hawkinsashcpas.com/?p=6647 Hawkins Ash CPAs is pleased to announce that Erica Knerzer, CPA, Charles Wendlandt, CPA, Randall Miller, CPA, Abe Leis, CPA, and Randy Juedes, CPA, have earned the American Institute of Certified Public Accountants’ (AICPA) Advanced Defined Contribution Plans Audit Certificate. The certificate program was designed to show certificate awardees’ high level of competency and commitment to performing […]

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Hawkins Ash CPAs is pleased to announce that Erica Knerzer, CPA, Charles Wendlandt, CPA, Randall Miller, CPA, Abe Leis, CPA, and Randy Juedes, CPA, have earned the American Institute of Certified Public Accountants’ (AICPA) Advanced Defined Contribution Plans Audit Certificate.

The certificate program was designed to show certificate awardees’ high level of competency and commitment to performing high-quality audits. Developed by leading experts and members of AICPA’s Employee Benefit Plans Audit Quality Center, the competency-based examination for certification tests one’s ability to plan, perform and evaluate employee benefit plan audits in accordance with the latest AICPA standards and Department of Labor and IRS requirements. The certificate acknowledges their achievement by declaring their dedication to quality and distinguishes their knowledge and expertise in this area.

Learn more about Hawkins Ash CPAs ERISA Audit Services>

Erica Knerzer, CPA

Knerzer is a senior audit manager in the Hawkins Ash CPAs La Crosse, Wis., office. She serves as the co-chair of the Employee Benefit Plan services group, focusing on the development of employee benefit plan audits and also works on audits of privately held organizations. Erica joined the firm in 2000 and is also a member of the firm’s Audit and Accounting Committee. She is a graduate for UW-La Crosse and is a Certified Public Accountant.

 

Charlie Wendlandt, CPA

Wendlandt joined Hawkins Ash CPAs in 2011. As a manager in the firm’s Marshfield office, his main responsibilities include planning, test of transactions and preparation of financial statements for ERISA audits outside of tax season. During tax season, he works on compilations and reviews and the preparation of corporate tax returns. Charlie serves as co-chairperson of the firm’s Employee Benefit Plan Service Group. He is a graduate of UW-Eau Claire and is a Certified Public Accountant.

 

Randy Miller, CPA

Miller has provided accounting and auditing services from the firm’s Manitowoc, WI office since 1982. He is the quality control partner of the firm’s Accounting and Auditing Committee and is the chairperson of the firm’s Executive Committee. He is also a member of the firm’s Employee Benefit Plan Service Group and Governmental Service Group. He has extensive experience providing accounting and auditing services to commercial entities, governmental entities, nonprofit organizations and employee benefit plans. He is the firm’s designated partner for the AICPA Governmental Audit Quality Center. He is a graduate of UW-Whitewater and is a Certified Public Accountant.

Randy Juedes, CPA

Juedes joined Hawkins Ash CPAs in 2001. As partner-in-charge of the Hawkins Ash CPAs Medford, WI, office, his experience includes audits of commercial entities and employee benefit plans and individual and corporate taxation. He is a member of the firm’s Employee Benefit Plan Service Committee and Accounting and Audit Committee. He also serves on the firm’s Executive Committee. He is a graduate of UW-Eau Claire and is a Certified Public Accountant. He is the firm’s partner for the AICPA Employee Benefit Plan Audit Quality Center.

 

Abe Leis, CPA

Abe LeisLeis is the firm’s Managing Partner, based in La Crosse, WI, the firm’s headquarters. He joined Hawkins Ash CPAs in 1998 after starting his career as an intern in the firm’s Medford, WI, office. Prior to becoming Managing Partner, he was a member of the firm’s Executive Committee, a partner-in-charge of the La Crosse office and HUD fee accounting division, and an Emerging Leaders Academy guide. He has extensive knowledge and experience working with commercial entities, real estate entities, tax credit projects, retirement plan audits, and public housing authorities. He is a graduate of UW-La Crosse and is a Certified Public Accountant.

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Tax+Business Alert: October 2018 https://hawkinsashcpas.com/taxbusiness-alert-october-2018/ Wed, 10 Oct 2018 21:07:51 +0000 https://hawkinsashcpas.com/?p=6624 View our October 2018 Tax+Business Alert. Headlines lines in this edition include: Are You a Member of the Sandwich Generation? Podcast: Independent Contractor vs. Employee Avoid Penalties by Abiding by the NQDC Tax Rules DOL Has Increased Scrutiny of Defined Benefit Plans Read now> Subscribe now>

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View our October 2018 Tax+Business Alert. Headlines lines in this edition include:

  • Are You a Member of the Sandwich Generation?
  • Podcast: Independent Contractor vs. Employee
  • Avoid Penalties by Abiding by the NQDC Tax Rules
  • DOL Has Increased Scrutiny of Defined Benefit Plans

Read now>
Subscribe now>

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Podcast: The Advantages of Being an Independent Contractor https://hawkinsashcpas.com/the-advantages-of-being-an-independent-contractor/ Wed, 10 Oct 2018 19:47:56 +0000 https://hawkinsashcpas.com/?p=6620 Script Last week we talked about being an employee vs. independent contractor – mostly from the classification point of view. This week I wanted to expand that a little and talk about the advantages and disadvantages of owning your own business and becoming an independent contractor. WHAT ARE THE ADVANTAGES OF BEING AN INDEPENDENT CONTRACTOR? […]

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Script

Last week we talked about being an employee vs. independent contractor – mostly from the classification point of view. This week I wanted to expand that a little and talk about the advantages and disadvantages of owning your own business and becoming an independent contractor.

WHAT ARE THE ADVANTAGES OF BEING AN INDEPENDENT CONTRACTOR?

There are tax benefits and there are non-tax benefits.

Let’s talk about the non-tax benefits. When you run your own business, it provides you with flexibility. You control your own schedule. You are independent because you are your own boss. You get to make the decisions on how the business operates. But from a tax point-of-view, it allows you to do things that you just can’t do now under the new law, as if you were an employee. For example, your employee business expenses are deductible if you run your own business. So things like mileage, tools, supplies, cell phones, and even a part of your home if you use it exclusively for your business can be deducted.

Under the old rules, as an employee, you could deduct those expenses as miscellaneous deductions, but that has gone away with the new tax law. That is why these benefits are really now only available if you run your own business, but not if you are an employee anymore.

You can also do retirement plans, such as 401(k) plans, simple plans, and SEP’s. Even though you are just a one-person operation, you can still do your own retirement plans.

WHAT ARE THE DISADVANTAGES?

The biggest disadvantage in my eyes is that you do not get unemployment benefits. Therefore, if work slows down or if something happens, you cannot rely on those unemployment benefits to get you through that time. You also need to supply your own insurance, tools, and other things.

When you are an employee, a lot of those things are supplied by your employer. But as a self-employed individual, you have to do those things. You have to remember that when you are making this transition, you should build those into your prices that you charge to your customers. There is also no withholding on a W-2. You might have to pay your own estimated taxes. Speaking of estimated taxes, that includes what is called a self-employment tax. As an employee, you pay one-half (1/2) of your Social Security and Medicare, and your employer pays the other half. Now you are both the employee and the employer, so you pay both halves. This can sting some people that aren’t aware of that, and you really need to watch your cash.

HOW DOES A PERSON GET STARTED IN OWNING THEIR OWN BUSINESS?

Certainly, you have to have that self-employed mindset. You have to want to do your own thing. But from an accounting point of view, it is essentially a matter of doing four (4) things:

1. Choosing the type of entity you want to be;
2. Getting an employer identification number;
3. Setting up a business bank account; and
4. Setting up an accounting system to see if you are making any money or not.

Individuals should weigh the advantages and disadvantages of owning their own business, and it is really important to get counseling from your attorney or your accountant to make sure you get that business set up correctly right from the start.

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Client Feature and Executive Director Q&A-Home and Community Options https://hawkinsashcpas.com/client-feature-and-executive-director-qa-home-and-community-options/ Wed, 10 Oct 2018 18:16:34 +0000 https://hawkinsashcpas.com/?p=6475 Home and Community Options (HCO) is a nonprofit organization that serves children and adults with developmental disabilities who are in need of residential and support services in order to live happily in Winona, MN, and area communities. Its mission is to help people with disabilities to become part of the community, providing engagement and personal […]

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Home and Community Options (HCO) is a nonprofit organization that serves children and adults with developmental disabilities who are in need of residential and support services in order to live happily in Winona, MN, and area communities. Its mission is to help people with disabilities to become part of the community, providing engagement and personal growth opportunities.

HCO hosts an annual musical that serves as the nonprofit’s largest fundraiser and provides a way for individuals with developmental disabilities to become involved in the performing arts. Each year, the production raises nearly $100,000. HCO’s productions draw sell-out crowds and have the ability to pull in nearly 300 volunteers annually. It is estimated that these community volunteers donate $16,000 worth of volunteer hours each year.

This year’s production of The Little Mermaid involved more individuals with disabilities than ever, and casted more than 90 people. While some were part of the cast, many individuals who HCO serves helped create the set and served as emcees, vending, and backstage help during the productions. This year marked HCO’s 21 st musical.

Funding for disability services often does not cover all the various needs of those the organization serves. Money raised from the annual musical assists HCO in providing accessible equipment, medications, or other basic necessities for its clients who otherwise wouldn’t receive these supports as a result of budget shortfalls.

Suzanne Horstman serves as the organization’s Executive Director. Suzie began her career with HCO while in college 27 years ago. After discovering a personal connection with the organization’s mission and values, she turned her part-time gig into her life’s work. She has served in various roles at HCO. She became Executive Director in 2013. We had a chance to talk with Suzie about being a nonprofit leader. Here’s what she had to say.

1. What are some things you know now that you wish you knew when you first started as a nonprofit leader?

When I first started as an Executive Director, I didn’t realize the knowledge and support that other nonprofit leaders would offer me. We live in an amazing community and the nonprofit leaders have been a wonderful resource. I would definitely encourage new nonprofit leaders to start out their new role by reaching out and developing relationships with their nonprofit colleagues.

2. What has been your biggest source of pride as executive director?

My greatest joy has been watching the individuals with developmental disabilities that we serve gain independence and confidence as they become strong self-advocates. What an amazing sight to see a previously shy individual speak to three of her legislators in a room filled with more than 40 constituents!

3. What are your three biggest accomplishments in your career as a nonprofit leader?

I would never want to take credit away from the two previous executive directors or the amazing leadership team that really moves HCO forward. With that being said, three of the biggest accomplishments of HCO have been:

  1. Moving individuals out of institutions.
  2. Providing innovative solutions (such as using smart home technology) to support our individuals so they can become more independent.
  3. Providing opportunities for the individuals we serve to learn how to become strong self-advocates so they have a voice to change their world.

One of the most enjoyable parts of my career has been being a part of the HCO musicals.

4. What are the dominant challenges that you see nonprofit organizations facing, and what do you think would be viable solutions?

For any health and human service agency in Minnesota, the biggest challenge is finding qualified employees with a limited available workforce. Securing nurses, social workers, and skilled direct care professionals is difficult with the current workforce shortage and unemployment at an all-time low. One solution that we have identified is reaching out to the ever-increasing number of retirees that are looking for a way to give back to the community. We believe that this population has a great deal to offer those we serve.

5. What aspects of nonprofit accounting do you find most challenging?

Most of HCO’s funding comes from the state and federal government through Medicaid dollars. During the past month, we have seen a 7% reduction that will be passed on to providers. The most challenging part of our nonprofit accounting is the uncertainty of whether these funds will be available in the future.

6. How do you see the organization changing in the next two years, and how do you see yourself creating that change?

As our main funding stream is going through significant changes and demographic research shows a continued decline in the workforce, we know that our agency will look very different two years from now. To maintain quality services for the individuals we support, we will need to continue to engage our community by offering opportunities for them to become more involved in the services that we provide.

More information about HCO and its annual musical can be found at www.HCO.org.

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QuickBooks Connect Roundtable-Recordings https://hawkinsashcpas.com/quickbooks-connect-roundtable-series/ Fri, 05 Oct 2018 16:32:15 +0000 https://hawkinsashcpas.com/?p=6603 View the recordings of our most recent QuickBooks Connect Roundtable calls below. Register for an upcoming QuickBooks Connect Roundtable here>>> Accounts Receivable September 20, 2018

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View the recordings of our most recent QuickBooks Connect Roundtable calls below.

Register for an upcoming QuickBooks Connect Roundtable here>>>

Accounts Receivable

September 20, 2018

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Understanding a SOC Report and Its Purpose in Relation to an Employee Benefit Plan https://hawkinsashcpas.com/understanding-a-soc-report-and-its-purpose-in-relation-to-an-employee-benefit-plan/ Tue, 02 Oct 2018 09:06:45 +0000 http://hawkinsashcpas.com/?p=5858 SOC Report. SSAE 16 or 18. What do these terms mean? Your employee benefit plan auditor may request these reports from you during a plan audit and you may be wondering what they are asking for. A SOC (System and Organization Controls) report is a report on controls at a service organization which are relevant […]

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SOC Report. SSAE 16 or 18. What do these terms mean? Your employee benefit plan auditor may request these reports from you during a plan audit and you may be wondering what they are asking for.

A SOC (System and Organization Controls) report is a report on controls at a service organization which are relevant to the user entities’ internal control over financial reporting. The report is also referred to as an SSAE (Statement on Standards for Attestation Engagements) 18 report (formerly 16 until May 2017), which is a regulation created by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA) for defining how service organizations should report on various compliance type controls. Basically, when you hire a third party service provider to do a service for you, you are relying on their internal controls as an extension of your controls. Your employee benefit plan auditor will typically want to review those reports to see if your service providers (record-keepers, trust companies, payroll providers, etc.) have certain controls in place, whether those controls have been tested, and if there are issues with the controls. They use the report to help determine how much audit testing is needed.

Plan sponsors have a responsibility to understand this report as well since it is considered an extension of their controls. The service provider is handling sensitive data of your plan participants. If your service provider is having a lot of issues, you may need to implement more controls on a plan sponsor level or it may be enough to warrant switching service providers.

Some Key Components of the SOC Report to Review and Understand

Service Auditor’s Report

When reviewing a SOC report, one of the first components to review is the service auditor’s report. There are some key things to look for when reviewing.

Is it a Type 1 report or a Type 2 report?
Another term you may hear your employee benefit auditors refer to is a type 1 or type 2 SOC report. In essence, a type 1 report simply lists the controls the service provider has in place, whereas a type 2 SOC report actually does some tests on those controls and comes to a conclusion on the effectiveness of the controls. In an employee benefit plan audit, it is the hope to be able to obtain a type 2 SOC report so your auditor can feel comfortable that the internal controls are not only in place but that they have been tested by an independent party as well. When reviewing the service auditor’s report, if they don’t refer to the effectiveness of the controls, it is most likely a type 1 report (meaning no detailed testing was done on those controls).

Does it cover a recent period?
You will want the audit report to cover a recent timeframe—preferably the timeframe that correlates with the year of the employee benefit plan you are having audited. It isn’t uncommon for these audits to be done on a different timeframe than your plan year, but try to make sure it is the most recent report available, and request a bridge or gap letter to cover any months they are not covering of your plan year.

Is it a reputable auditor?
You will also want to see who is preparing the service auditor’s report. Is it a well-known reputable accounting firm? If you are not familiar with the name of the firm, you may want to do some inquiries to make sure it is a firm that is indeed competent and capable of issuing quality work.

Subservice Organizations

Oftentimes service providers may outsource some of their functions as well. You will want to see what they are outsourcing, and if you feel that item is significant, you may even want to obtain a SOC report for that subservice organization as well to make sure they don’t have any major compliance issues.

Complementary User Controls

The plan sponsor will want to pay close attention to the complementary user control section of the SOC report. The service provider is relying on their customers (the plan sponsor in this example) to have certain controls in place on their end in order for the service provider controls to be effective. The plan sponsor will want to get familiar with those controls and make sure if they do not have those controls in place that they get them implemented.

Description of Tests of Controls and the Results of Testing (In the Case of a Type 2 Report)

The report will go through the various controls that are in place, describe the tests that were performed to test those controls, along with the results of the testing. Typically your employee benefit plan auditor will look to see if tests were performed in the following areas and will want to see if there were a lot of negative testing results (some of the areas recommended to be reviewed by the AICPA Employee Benefit Plan Audit Quality Center):

  • Information technology (such as access to programs and how changes are made to programs)
  • New plan setup in relation to plan provisions as well as plan participants (accounts and investments)
  • Eligibility, enrollment and participant data
  • Contributions on a plan level and participant level
  • Participant income and expense allocations
  • Distributions to participants/beneficiaries
  • Plan expenses
  • The safekeeping and valuation of investments held
  • Purchases/sales of investments and market gain/loss
  • Investment income
  • Loans
  • Investment election changes

Regardless of whether or not your plan needs an audit, it is recommended that you get familiar with these reports to ensure optimal internal controls. As a plan sponsor, it is your responsibility to protect participant data. When switching service providers, you may want to review these reports as well prior to making the decision to switch to them to make sure the results are positive and the controls are in line with what you would like to see tested.

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Independent Contractor vs. Employee: Podcast https://hawkinsashcpas.com/independent-contractor-vs-employee-podcast/ Fri, 28 Sep 2018 14:59:03 +0000 https://hawkinsashcpas.com/?p=6588 Many small and medium sized businesses face the issue of when someone is an employee and when they are an independent contractor. It is critical that owners correctly make this determination as there are consequences if someone is misclassified. Click the orange circle to listen to the podcast. SO WHAT ARE THE MAIN DIFFERENCES BETWEEN […]

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Many small and medium sized businesses face the issue of when someone is an employee and when they are an independent contractor. It is critical that owners correctly make this determination as there are consequences if someone is misclassified. Click the orange circle to listen to the podcast.

SO WHAT ARE THE MAIN DIFFERENCES BETWEEN AN EMPLOYEE AND AN INDEPENDENT CONTRACTOR?

As an employee:

  • Paid by the hour or salary on a Form W-2
  • Employer withholds SS, Medicare, federal and state taxes
  • Employer pays part of the employees Social Security and Medicare
  • Employer pays the unemployment and workers compensation insurance

As an independent contractor:

  • Paid by the project on a Form 1099
  • Responsible for payment of their Social Security and Medicare and liability and workers compensation insurances
  • Pays their taxes via quarterly estimates
  • Is not eligible for unemployment compensation

In summary, as an employee you are basically paid by the hour and as an independent contractor you are paid by the job. Also, as an employee your employer withholds Social Security, Medicare, federal and state taxes and they also pay a portion of your Social Security and Medicare taxes. As an independent contractor, you are responsible for paying both halves of that Social Security and Medicare, which is often called self-employment tax, along with your own worker’s compensation insurance. The other thing is that as an independent contractor you are not eligible for unemployment.

HOW DOES AN EMPLOYER DETERMINE THE CORRECT CLASSIFICATION?

The IRS provides some guidance, but all determinations are based on facts and circumstances. If you look at it an employee usually works exclusively for one company, the company provides the tools, the company tells the employees what to do, the company sets the working hours, and the company gives a person vacation and pays the expenses. If you are an independent contractor, you work for many companies, you provide your own tools, you decide how the work is completed, you set your own working hours and you may even hire someone else to help you out with the job. Those are the kind of things that are different between an employee and an independent contractor.

WHAT CAN AN EMPLOYEE DO IF THEY FEEL LIKE THEY ARE BEING MISCLASSIFIED?

  • Workers who believe that they are misclassified can file a form with their return to figure and report the employer’s share of uncollected tax.
  • Even if they previously agreed, former employees can file this form and cause issues for their former employers.

Here is the scenario that happens. You hire an employee and everyone agreed that they are going to be an independent contractor, but later on you have a falling out, and now this person says they feel as if they were actually an employee not an independent contractor. So what that employee does is file a form with their return saying they are going to only pay their half of their Social Security and Medicare because they believe they were an employee rather than an independent contractor. So even though the employee and the employer previously agreed, this can cause problems depending on how the situation works out.

WHAT ARE THE BENEFITS OF BEING AN EMPLOYEE VS. AN INDEPENDENT CONTRACTOR?

Some of the benefits of being an employee is that you obviously get the benefits of the company, where if you are an independent contractor you have to supply your own benefits. The biggest thing is how you pay your taxes. As an employee you pay half of the Social Security, half of the Medicare, and as stated before, your employer actually takes off for your federal and state withholding. As an independent contractor you have to pay that full part of the self-employment tax, essentially both halves of Social Security and Medicare, which is like 15.3%. You also have to make sure that you pay in your own federal and state taxes via quarterly estimates.

WHAT ARE THE CONSEQUENCES FOR BEING MISCLASSIFIED?

  • Company may be liable for employment taxes (SS, Med, unemployment).
  • Penalties and interest.
  • But employers can apply for a Voluntary Classification Settlement Program that can provide them with the opportunity to reclassify their workers with partial relief from federal employment taxes.
  • Federal and state agencies have put a greater emphasis on this issue in the recent years. If your business were to get audited, they will ask for a list of your independent contractors.

A Company can be liable for those back taxes that they didn’t pay, whether that be Social Security, Medicare, or Unemployment. Because you didn’t pay those timely, there is also some penalties and interest that can be applied. If there is an employer that feels that they treated this person as an independent contractor for a number of years, but they really should be treated as an employee, the IRS does have a voluntary classification settlement program that can help bridge that gap between taking that independent contractor and converting them essentially into an employee. This will allow partial relief from some of the federal employment taxes and some of the penalties. One thing that we found is that federal and state agencies have really put a greater emphasis on this issue in recent years so if your business were to ever get audited, even if it wasn’t for this issue, one of the things that they are going to ask for is a listing of your independent contractors because they want to see the determination as to whether this person should be an employee or an independent contractor.

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Fundraising Event Considerations: Part II https://hawkinsashcpas.com/fundraising-event-considerations-part-ii/ Tue, 18 Sep 2018 18:04:21 +0000 https://hawkinsashcpas.com/?p=6468 In the May 2018 Nonprofit Connection, we discussed ways to safeguard cash and other assets at special events. The following article discusses other important items to consider in planning special events. Quid Pro Quo Quid pro quo in relation to special events is a payment of more than $75 that a donor makes to a […]

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In the May 2018 Nonprofit Connection, we discussed ways to safeguard cash and other assets at special events. The following article discusses other important items to consider in planning special events.

Quid Pro Quo

Quid pro quo in relation to special events is a payment of more than $75 that a donor makes to a charity that is part contribution and part purchase of goods or services. The best example of this is the purchase of a dinner ticket. A donor pays $100 for a ticket but the dinner is valued at $30. The tax deductible contribution part of the ticket is $70. This is considered a quid pro quo contribution.

The organization must provide the donor a disclosure statement because the donor’s payment is more than $75. Usually this statement is included on the dinner ticket. Although the deductible contribution is only $70, disclosure is required because the full payment made is more than $75. IRS imposes a penalty on an organization if this disclosure is not made. The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing.

Auction Items

It is important to develop a method for tracking auction items as they are collected. An inventory list can guard against theft of auction items, provide good records for sending donor acknowledgement letters, and provide a history of donors for future fundraising events. The list should include the following: item description, item value (if supplied by the donor), who gave the item, and who received the item. After the event, update the list with the amount received for each item during the auction. Proceeds on the list should be reconciled to the accounting records.

Accounting for auction items is commonly done incorrectly. This is the proper accounting for auction items under two different scenarios.

Scenario #1: Item was purchased by the organization.

Scenario #2: Item was donated to the organization for auction.

Scenario #2 is the preferred method for recording items donated for auction. Consider the size of your auction and how long items are held before deciding to switch to this method.

Raffles

Requirements for raffles vary by state. During the planning phase of your event, you should gather information on the license requirements, the types of raffles allowed, and who can participate. The license requirements for Wisconsin and Minnesota are as follows.

In Wisconsin, any organization conducting a raffle must obtain a license through the Division of Gaming’s Office of Charitable Gaming. There are two types of licenses – Class A and Class B. The Class A raffle license is needed when tickets are sold in advance and the day of the raffle. The Class B raffle license is needed when tickets are only sold the day of the raffle. Bucket raffles and 50/50 raffles are common examples of a Class B raffle. An organization conducting both Class A and Class B raffles must obtain both license types. Applications and more information can found at: https://doa.wi.gov/Pages/LicensesHearings/RaffleLicense.aspx.

In Minnesota, an exemption from gambling activity such as raffles may be obtained from the Minnesota Gambling Control Board if the organization qualifies. An exempt permit is required when the following applies: 1) the total value of all prizes donated and purchased is less than $50,000 for the year, and 2) gambling activity is limited to five days during the year. An application for the exempt permit must be filed for each year. Organizations that don’t meet these two requirements must obtain a lawful gambling license. Applications and more information can found at: https://mn.gov/gcb/raffles.html.

There are also federal requirements regarding raffles. If the organization generated over $15,000 in raffle and other gambling proceeds, it must complete Part III of Form 990, Schedule G. Revenue and expenses related to the raffles or other gambling activities are reported on this schedule. If a single donated prize is valued at more than $5,000, it must be reported on Schedule B of Form 990. Prize winners of cash or gifts valued at over $600 should be issued a 1099-MISC (included in Box 3). Also, winners from wagering activities that receive winnings over $600 should be issued a Form W-2G.

Other Items

Lastly, consider these other items when planning your next event:

  • Creating a budget for event expenses
  • Obtaining event insurance
  • Obtaining a liquor license or event permit, if either are applicable
  • Training volunteers before the event
  • Reconciling revenue and expenses to supporting schedules and auction inventory listing
  • Scheduling a debriefing meeting shortly after the event to discuss and make note of possible improvements

The post Fundraising Event Considerations: Part II appeared first on Hawkins Ash CPAs.

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Tax+Business Alert: September 2018 https://hawkinsashcpas.com/taxbusiness-alert-september-2018/ Mon, 10 Sep 2018 19:29:52 +0000 https://hawkinsashcpas.com/?p=6516 The September 2018 Tax+Business Alert publication includes the following headlines. TCJA Draws a Silver Lining Around the Individual AMT Podcast: When to Take Social Security QuickBooks Connect Roundtable Series High-Income Earners Back in the AMT Spotlight How Spouse-Owned Businesses Can Reduce Self-Employment Taxes Click here to read more>

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The September 2018 Tax+Business Alert publication includes the following headlines.

  • TCJA Draws a Silver Lining Around the Individual AMT
  • Podcast: When to Take Social Security
  • QuickBooks Connect Roundtable Series
  • High-Income Earners Back in the AMT Spotlight
  • How Spouse-Owned Businesses Can Reduce Self-Employment Taxes

Click here to read more>

The post Tax+Business Alert: September 2018 appeared first on Hawkins Ash CPAs.

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