Article Archives: 2014

Most organizations view the prospect of an audit by a federal or state taxing authority with trepidation, akin to the prospect of a root canal or a long weekend with the in-laws.  However, with the proper preparation and understanding of what the auditor needs to accomplish, much of this fear, loathing and dread can be removed from the equation. Here’s what you can expect from a Washington state tax audit and how best to prepare so that the process is as efficient and painless as possible.

When the Washington State Department of Revenue audits a not-for-profit organization, there are certain targeted objectives for which the auditor will review.

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Posted by: Shelly Archuleta

By Shelly Archuleta, CPA

Over the last decade, an increasing number of plan sponsors and third-party administrators (record-keepers) have moved to a paperless environment. Almost anything can be kept on a hard drive or in the cloud. Employee records and payroll data are often kept electronically without a hard copy being printed and stored in an employee file. Most plans now allow participants to make changes to their deferral and investment elections, or request loans or benefit payment online or over the phone with minimal oversight or review by the plan sponsor.

In an electronic world, plan sponsors may not realize the importance of keeping proper documentation to support information required to be reported under ERISA or to demonstrate appropriate oversight and monitoring of the plan.

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Posted by: Cheryl R. Olson

By Cheryl Olson, CPA, CGMA

Due to highly publicized fraud cases and poor governance practices, as well as state budget issues, more people are scrutinizing the activities of not-for-profit organizations. This, of course, results in greater board and committee member expectations, donor questions and new regulatory requirements.

With all of this increased scrutiny, it’s essential that not-for-profit organizations learn how to navigate all of the rules and regulations, especially those relating to state laws. To assist in that goal, here are relevant information and good practices for your organization to follow that apply to charitable organizations under 501(c)(3) of the Internal Revenue Code,

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The IRS has busted through the logjam of applications for recognition of exemption due in part to the now available Form 1023-EZ. A shorter application released in July, the 1023-EZ provides certain “small” organizations with a streamlined process for obtaining a determination.

call out box NFP October 2014The IRS created the 1023-EZ to alleviate the ever-increasing backlog of applications awaiting determinations. In 2013, some organizations waited a year or longer before receiving their determination letters from the IRS. A combination of factors contributed to the backlog, including but not limited to fewer IRS staff, more section 501(c)(4) applications (because of the political scandal involved with the IRS’ handling of those (c)(4) applications),

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In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. This standard will impact all entities that have contracts with customers, including not-for-profits.

Many not-for-profit organizations are unsure how this new standard will impact them. Those concerns include which revenue sources the standard applies to, how to apply the standard, and when the standard will take effect.

Below are five key things to know about the new revenue recognition standard.

1. Converges with International Accounting Standards

The new standard is the result of a convergence with FASB and the International Accounting Standards Board (IASB) and took the two standard setting bodies over 10 years to complete.

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Posted by: Joe Haberzetle

By Joe Haberzetle, JD, LLM

Many Washington not-for-profits benefit substantially from the various property tax exemptions provided in state law. Private schools, churches, hospitals, museums and performing arts centers are among the organizations that can be granted exemptions from property taxes on the land and buildings they use, as well as on their personal property such as equipment, furniture, fixtures and exhibits. However, a relatively obscure provision in these laws can lead to harsh results when exempt property is sold or converted to a non-exempt use.

Generally, when exempt property ceases being used for an exempt purpose (or is sold,

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Myth #1-Cash is “safe”

Reality Check-Money Market, Savings Accounts, T-Bills, and Cash under the mattress are all considered cash equivalents. These are great vehicles for short-term investments or emergency accounts.  These are not the best vehicles for long-term investments since you have inflation working against you and may have negative returns after taxes and inflation.  Also, many people make the mistake of thinking that retirement is a “finish line” and they need to get very conservative with their investments at this time.  Many folks need to remember that they may spend several decades in retirement and may need some stock and/or other forms of growth in their portfolio to combat inflation.

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Posted by: Megan Ryan

By Megan Ryan, CPA

Beginning in calendar year 2015, certain employers must comply with the Affordable Care Act requirement to offer health insurance to full time employees. In conjunction with this requirement, employers are required to report to both employees and the Internal Revenue Service specific information related to the health insurance made available to employees. Such reporting requirements begin in early 2016, as it relates to the 2015 calendar year.

Which Employers Must Comply?

In 2015, the employer mandate and related health insurance reporting requirements will apply only to those employers with more than 99 full-time equivalent employees. In 2016,

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By Jennifer Becker Harris, CPA

New international tax developments over the last six months will affect U.S. charities and provide welcomed relief in some areas and added compliance in others. The following is a summary.

Passive Foreign Investment Companies (PFICs)

What is a PFIC?
A foreign corporation is a PFIC if:

  • 75% or more of its gross income is from passive sources, or
  • the average FMV of assets which produce or are held to produce passive income is 50% or more.

Once a foreign corporation is classified as a PFIC,

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If you are part of organization that is audited or have been involved in audits with a prior organization, you understand that audits can cause a significant amount of stress and anxiety. This is especially true when there are audit adjustments or other deficiencies identified and an internal control letter is issued to the governing board. It’s no surprise that this letter can cause some strain on the relationship between the client and the auditor.

First, what is the purpose of the letter?

Auditors are required by professional standards to report, in writing, internal control matters that they believe should be brought to the attention of those charged with governance (the board).

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