Hawkins Ash CPAs https://hawkinsashcpas.com Part of your business. Part of your life. Fri, 04 Dec 2020 18:28:29 +0000 en-US hourly 1 https://wordpress.org/?v=5.5.3 Capital Campaigns: Where to Start and What to Avoid https://hawkinsashcpas.com/capital-campaigns-where-to-start-and-what-to-avoid/ Fri, 04 Dec 2020 18:27:12 +0000 https://hawkinsashcpas.com/?p=13030 Most not-for-profit entities have at least considered running a capital campaign at one point, but many do not know where to start. By definition a capital campaign is an intense fundraising event that could span several years for a specific purpose. In order to have a successful capital campaign, management, the accounting department and the […]

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Most not-for-profit entities have at least considered running a capital campaign at one point, but many do not know where to start. By definition a capital campaign is an intense fundraising event that could span several years for a specific purpose.

In order to have a successful capital campaign, management, the accounting department and the board of directors of the entity should sit down and discuss why they need a capital campaign, how much is needed for the project and decide if they are ready to start.

The first step in starting a campaign is creating a strategic plan on how the campaign will be conducted. Many questions need to be answered before the campaign can be started. The planning phase is where to find the answers. Here are some steps to get started on a capital campaign:

1. Develop a team to spearhead the campaign. An ideal committee should consist of members of the Executive, Finance and Development teams as well as the board of directors and additional members as needed. Try and choose team members who have strong connections in the community. This team could also include a fundraising consultant. Consistent and clear communication is key so team members understand what is going on during all aspects of the campaign.

2. Determine the goal of the capital campaign. Define how much is needed to complete the project and how long should the campaign be held. A comprehensive budget will include anticipated revenues as well as costs for the entire project. By creating a budget, it will be easier to create progress reports that show potential and existing donors the status of the campaign.

3. Conduct a feasibility study to see if the community will support the campaign. Thirty to forty individuals in the community should be interviewed, including an employee of the entity, a present and past board member of the entity, community leaders and known major donors.

4. Make a list of prospective donors. Start this list with approximately 15-20 leaders depending on the size of the community. Contact these leaders by writing a letter or an email letting them know that the entity is thinking of holding a capital campaign and would like their advice before moving forward. Create a short list of 6-8 questions to ask concerning holding the capital campaign. Let the prospective donors know the approximate time it will take for this conversation. This is not the time to ask for a donation, but simply a meeting to get feedback.

5. Create a case statement for the campaign to give to donors. It should state why the project is needed, how the project can be completed, and what the impact of the donor’s contribution will have on the project and the community.

No matter how thorough the planning is, there are still pitfalls that should be avoided to ensure a successful capital campaign.

1. Not completing a feasibility study. This is one of the largest errors an entity can make. Without the study, the campaign committee will be working in the dark which could lead to misinformation or no information at all. The more information, the greater opportunity to have a successful campaign.

2. Having an unattainable goal. This, too, is an error that could lead to an unsuccessful campaign. This is one of the areas where a feasibility study will help determine an achievable goal.

3. Not detailing how the funds will be held within the entity. Ensure the campaign materials that are presented to donors are specific in how the funds will be used. If part of the campaign is creating an endowment, be sure to indicate if those funds will be considered board designated or held in perpetuity.

4. Going into the public phase (when donations are solicited from the general public) too soon. This could lead to less funds raised than if the public phase had been delayed. During the quiet phase (when donations are solicited from major donors and corporations) of the campaign, at least 50% – 75% of the goal should be reached.

5. Forgetting to say thank you for a donation or pledge throughout the campaign. A thank you letter should be sent out within 24-48 hours after the gift has been received. Throughout the campaign, thank you letters, emails and/or phone calls should be given to ongoing donors as well as one time donors. By keeping in contact with donors, they will be more likely contribute to future campaigns.

6. Not involving the accounting department from the onset of the campaign. Recording the campaign is an important part of the process. The accounting and development departments should reconcile their books monthly to catch errors timely and discuss factors to consider in developing an allowance for uncollectible pledges. Procedures for writing off pledges should also be created and documented to ensure the integrity of the campaign. Too often, this aspect is overlooked and leads to large write offs at the end of the campaign rather than as they occur. Improperly recording the campaign pledges, receivable, revenues, and expenses could result in misstated financial statements. Overstating revenues or understating expenses could lead to donors believing the goal has been met and the entity does not need their donation.

Not-for-profits are not all made from the same mold and will have different circumstances that need to be addressed to have a successful campaign. The steps mentioned above are just a few of the more common ways to ensure a successful campaign and prevent errors to avoid an unsuccessful one. Strategic discussions and planning every aspect of a capital campaign will lead to a successful campaign.

Please contact your Hawkins Ash CPAs representative if you have questions related to capital campaigns.

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Businesses Should Review Sales Tax Laws https://hawkinsashcpas.com/businesses-should-review-sales-tax-laws/ Wed, 02 Dec 2020 21:28:30 +0000 https://hawkinsashcpas.com/?p=13027 It’s been more than two years since the U.S. Supreme Court ruled in South Dakota v. Wayfair that states may require out-of-state sellers to collect sales and use tax even if they lack a physical presence in a state. Since that time, most states that have a sales tax have enacted “economic nexus” laws that […]

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It’s been more than two years since the U.S. Supreme Court ruled in South Dakota v. Wayfair that states may require out-of-state sellers to collect sales and use tax even if they lack a physical presence in a state. Since that time, most states that have a sales tax have enacted “economic nexus” laws that expand the reach of their sales tax collection obligations beyond their borders.

Many of these laws are similar to the one upheld in Wayfair. It applies to sellers that, on an annual basis, deliver more than $100,000 in goods or services into the state or engage in 200 or more separate transactions for the delivery of goods and services into the state. Some states have eliminated the number-of-transactions threshold, to avoid applying their laws to small sellers, such as those that sell 250 items at $1.50 each.

Since the COVID-19 pandemic was declared, online transactions have soared. If your business sells products or services in states in which it lacks a physical presence, review the economic nexus laws in those states and assess their sales-tax-compliance impact. Also, some states have issued specific guidance on whether telecommuting employees temporarily working in a state because of the COVID-19 crisis create nexus for an employer who doesn’t operate in that state. We can help you explore and respond to these matters.

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Utilizing Qualified Disaster Relief Payments for Work-at-Home Employees https://hawkinsashcpas.com/utilizing-qualified-disaster-relief-payments-for-work-at-home-employees/ Wed, 02 Dec 2020 20:52:29 +0000 https://hawkinsashcpas.com/?p=13022 If your business employed individuals who were forced to work at home during the pandemic, there is a year-end tax planning strategy available that benefits both you, the employer, and your employees. On March 13, 2020, President Donald Trump declared COVID-19 a national emergency. As a result of this declaration, IRS Internal Code Section 139 […]

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If your business employed individuals who were forced to work at home during the pandemic, there is a year-end tax planning strategy available that benefits both you, the employer, and your employees.

On March 13, 2020, President Donald Trump declared COVID-19 a national emergency. As a result of this declaration, IRS Internal Code Section 139 rules regarding Qualified Disaster Relief Payments began to take effect. The IRS defines Qualified Disaster Relief Payments to include any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster. For purposes of this article, we will be exploring the benefit of reimbursing an employee for work-at-home expenses they incurred during the 2020 pandemic.

The benefit to reimbursing an employee via a qualified disaster relief payment is that the payment is not subject to employment taxes for the employer (yet still tax deductible) and the payment received by the employee does not have to be included in their taxable income. The non-payroll expense for the employer and the non-taxable income for the employee is a win-win for both parties.

Below are some examples of work-at-home costs that can be covered with Qualified Disaster Relief Payments:

  • Over-the-counter medications, hand sanitizer and home disinfectant supplies
  • Child care or tutoring due to school closings
  • Work-from-home expenses such as setting up a home office, increased utility expenses, and higher Internet costs
  • Increased commuting costs, such as taking a taxi instead of using public mass transit
  • Unreimbursed health-related expenses

This is just a sample of expenses. If you are unsure of what other costs may qualify, please consult with your CPA.

Another benefit from the employer’s side is that there is little to no documentation required. Unlike other employer-provided, tax-free reimbursements, there are no express substantiation requirements for these Qualified Disaster Relief Payments. Therefore, employers are not required to collect and review receipts and related documentation of expenses. However, the payments must be reasonably proportionate with the amount of unreimbursed reasonable and necessary COVID-19-related expenses. If you are unsure that you have the proper documentation necessary to substantiate your reimbursements, please consult with your CPA.

In conclusion, if you are about to prepare a bonus check for employees as a holiday bonus, you may want to see if a reimbursement for Qualified Disaster Relief Payments would be better suited for them. The tax-free income paid via a Qualified Disaster Relief Payment will be a much better stocking stuffer to your employee who worked at home in 2020 than a bonus check that is subject to payroll and income taxes.

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Tax+Business Alert – December 1, 2020 https://hawkinsashcpas.com/taxbusiness-alert-december-1-2020/ Wed, 02 Dec 2020 20:29:23 +0000 https://hawkinsashcpas.com/?p=13017 View and sign up for our latest Tax+Business Alert newsletter. Headlines in this edition include the following: Utilizing Qualified Disaster Relief Payments for Work-at-Home Employees Businesses Should Review Sales Tax Laws PODCAST: No Politics, Just Facts: Biden’s Tax Plan Decreases Intrafamily Loans and a Family Bank  

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Housing Authority Accounting Basics https://hawkinsashcpas.com/housing-authority-accounting-basics/ Mon, 23 Nov 2020 20:35:55 +0000 https://hawkinsashcpas.com/?p=12953 Kick-off the new year with a free training opportunity! Join us for Accounting Basics with Angie Campbell and Hawkins Ash CPAs. In the Public Housing industry, it is important for any employee or board member involved with financial decision making to understand the basics of accounting. Understanding the basics will help you better comprehend and […]

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Kick-off the new year with a free training opportunity! Join us for Accounting Basics with Angie Campbell and Hawkins Ash CPAs.

In the Public Housing industry, it is important for any employee or board member involved with financial decision making to understand the basics of accounting. Understanding the basics will help you better comprehend and interpret how your agency is financially performing.

This complimentary, one-hour session will provide a framework for you and will provide the training you need to be able to:

  • Understand Accounting Basics
  • Understand the Chart of Accounts
  • Read and Understand Financial Statements
    • Balance Sheet/Statement of Net Position
    • Income Statement/Statement of Activities

Date

Thursday, January 14, 2021

Time

10:00 a.m. – 11:00 a.m. Central

Complete this form to Register for Free

About the Presenter

Angie Campbell, Principal

From the Firm’s La Crosse, WI office, Angie leads a team that provides financial accounting and consulting services to housing authorities nationwide. She joined Hawkins Ash CPAs in 2006 and has been the principal of the firm’s housing authority services division since 2018. Angie is a speaker at financial training events the firm presents to housing authorities. She is a member of the National Association of Housing and Redevelopment (NAHRO) and Wisconsin Association of Housing Authorities (WAHA).

About Hawkins Ash CPAs

For more than 50 years, Hawkins Ash CPAs has provided fee accounting and consulting services to hundreds of U.S. Housing Authorities that administer numerous programs, including Public Housing, Section 8 Programs, Rural Development, and Tax Credit. Our teams’ experience allows them to provide effective consulting as well.

Throughout the years, our clients have trusted us for accurate and on-time HUD/REAC submissions, efficiency, responsive expertise, cost-effectiveness, seminars, and one-on-one training. Our accounting and auditing experts provide financial direction and specific recommendations for improving efficiencies, procedures, and profitability along with strengthening management procedures and control.

Learn More

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No Tax Deductions for PPP Loan Expenses https://hawkinsashcpas.com/no-tax-deductions-for-ppp-loan-expenses/ Fri, 20 Nov 2020 21:16:52 +0000 https://hawkinsashcpas.com/?p=12936 To stop Paycheck Protection Program (PPP) loan participants from claiming deductions and then later getting forgiveness for eligible PPP loan expenses, like payroll and rent, the IRS has issued Revenue Ruling 2020-27. As a result of this ruling, borrowers who have “reasonable expectation” that the loans will be forgiven, yet in 2020 or in 2021, […]

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To stop Paycheck Protection Program (PPP) loan participants from claiming deductions and then later getting forgiveness for eligible PPP loan expenses, like payroll and rent, the IRS has issued Revenue Ruling 2020-27. As a result of this ruling, borrowers who have “reasonable expectation” that the loans will be forgiven, yet in 2020 or in 2021, may not claim the valid PPP expenditures as tax deductions.

The IRS describes two situations. In the first, a borrower pays payroll and mortgage interest that are valid PPP expenditures. The borrower applies for forgiveness in November 2020 and satisfied all requirements under the CARES Act to have it forgiven, but doesn’t yet have an answer as to whether it will be forgiven. In the second case, the borrower paid the same type of expenses with its PPP loan but expects to apply for forgiveness in 2021. In both cases, the IRS says the business cannot deduct these business expenses.

The IRS also released Revenue Procedure 2020-51 which provides a safe harbor for PPP borrowers whose loan forgiveness has been partially or fully denied or borrowers who choose to forego requesting loan forgiveness to claim a deduction for certain otherwise eligible payments on a timely filed return, amended return, or administrative adjustment request.

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]]> Do You Know the “Hidden” Advantage of HSAs? https://hawkinsashcpas.com/do-you-know-the-hidden-advantage-of-hsas/ Fri, 20 Nov 2020 19:20:15 +0000 https://hawkinsashcpas.com/?p=12934 A Health Savings Account (HSA) coupled with a high-deductible health plan can be a powerful tool for funding medical expenses on a tax-advantaged basis. For 2020, individuals with self-only coverage can make up to $3,550 in tax-deductible contributions to an HSA, while those with family coverage can contribute up to $7,100. These limits are increased […]

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A Health Savings Account (HSA) coupled with a high-deductible health plan can be a powerful tool for funding medical expenses on a tax-advantaged basis. For 2020, individuals with self-only coverage can make up to $3,550 in tax-deductible contributions to an HSA, while those with family coverage can contribute up to $7,100. These limits are increased by $1,000 for individuals 55 or older.

Funds may be withdrawn tax-free to pay qualified medical expenses. Once you reach age 65, you can withdraw funds penalty-free for any purpose (subject to tax if not used for qualified medical expenses).

But there’s also a “hidden” advantage of HSAs, or at least one that many people overlook: These accounts can play a helpful role in your estate plan. HSAs have an advantage over traditional IRAs and 401(k) plans in that they’re not subject to required minimum distributions at age 72. This means, to the extent you don’t use the account for medical expenses, the account can continue growing on a tax-deferred basis indefinitely — providing valuable benefits for your loved ones.

If your spouse inherits the account, it will be treated as his or her own HSA. If someone else inherits it, the HSA will terminate and the recipient will be taxed on its value, less any qualified medical expenses of the decedent paid by the transferee within one year after the date of death.

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Catching Up on Catch-Up Contributions https://hawkinsashcpas.com/catching-up-on-catch-up-contributions/ Fri, 20 Nov 2020 19:18:12 +0000 https://hawkinsashcpas.com/?p=12930 When it comes to retirement planning, many people tend to focus on two things: opening a retirement savings account and then eventually drawing funds from it. However, there are other important aspects to truly doing everything you can to grow your nest egg. One of them is celebrating your 50th birthday. This is because those […]

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When it comes to retirement planning, many people tend to focus on two things: opening a retirement savings account and then eventually drawing funds from it. However, there are other important aspects to truly doing everything you can to grow your nest egg.

One of them is celebrating your 50th birthday. This is because those age 50 or older on December 31 of any given year can start making “catch-up” contributions to their employer-sponsored retirement plans by that date (assuming the plan allows them).

These are additional contributions to certain accounts beyond the regular annual limits.
Maybe you haven’t yet saved as much for retirement as you’d like to. Or perhaps you’d just like to make the most of tax-advantaged savings opportunities. Whatever the case may be, now is a good time to get caught up on the latest catch-up contribution amounts.

401(k)s and SIMPLEs
Under 401(k) limits for 2020, if you’re age 50 or older, you can contribute an extra $6,500 after you’ve reached the $19,500 maximum limit for all employees. That’s a total of $26,000. If your employer offers a Savings Incentive Match Plan for Employees (SIMPLE) instead, your regular contribution maxes out at $13,500 in 2020. If you’re 50 or older, you’re allowed to contribute an additional $3,000 — or $16,500 in total for the year. (Be sure to check with your employer because, while most 401(k) plans and SIMPLEs offer catch-up contributions, not all do.)

Self-Employed Plans
If you’re self-employed, retirement plans such as an individual 401(k) — or solo 401(k) — also allow catch-up contributions. A solo 401(k) is a plan for those with no other employees. You can defer 100% of your self-employment income or compensation, up to the regular yearly aggregate deferral limit of $19,500, plus a $6,500 catch-up contribution in 2020. But that’s just the employee salary deferral portion of the contribution.

You can also make an “employer” contribution of up to 20% of self-employment income or 25% of compensation. The total combined employee-employer contribution is limited to $57,000, plus the $6,500 catch-up contribution.

IRAs, too
Catch-up contributions to non-Roth accounts can not only enlarge your retirement nest egg, but also reduce your 2020 tax liability. And keep in mind that catch-up contributions are available for IRAs, too.

However, the deadline for 2020 contributions is April 15, 2021, and deductible contributions may be limited or unavailable based on your income and whether you’re covered by a retirement plan at work. Please contact us for more information.

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Employee Benefit Plan Resources – November 2020 https://hawkinsashcpas.com/employee-benefit-plan-resources-may-2020/ Fri, 20 Nov 2020 19:09:57 +0000 https://hawkinsashcpas.com/?p=12926 View and sign up for our latest Employee Benefit Plan (EBP) Resources newsletter. Headlines in this edition include the following: Considering a Change to Your TPA? Here’s What You Need to Know. Definition of Plan Compensation The Year-End Plan Census   Sign Up to Receive COVID-19 Email Updates Be sure you’re getting the latest insights […]

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View and sign up for our latest Employee Benefit Plan (EBP) Resources newsletter. Headlines in this edition include the following:

  • Considering a Change to Your TPA? Here’s What You Need to Know.
  • Definition of Plan Compensation
  • The Year-End Plan Census
View Newsletter Subscribe Browse Our EBP Newsletter Articles in CPA-HQ

 

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Contact us to talk through the challenges your business faces as you navigate through this unprecedented time. No doubt you’ll need help assessing cash flow and making smart projections, reviewing loan covenants, lining up bridge financing, talking to banks and lenders, figuring out staff loads and employee counts, handling disrupted supply chains, and so much more.

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Tax+Business Alert – November 17, 2020 https://hawkinsashcpas.com/taxbusiness-alert-november-17-2020/ Fri, 20 Nov 2020 19:03:33 +0000 https://hawkinsashcpas.com/?p=12922 View and sign up for our latest Tax+Business Alert newsletter. Headlines in this edition include the following: Catching Up on Catch-Up Contributions PODCAST: No Politics, Just Facts: Biden’s Tax Plan Increases Do You Know the “Hidden” Advantage of HSAs?  

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