Article Archives: 2018

Earlier this year, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In issuing the guidance, the FASB noted that many not-for-profit organizations have trouble characterizing grants and similar agreements as either exchange contracts or as contributions for purposes of revenue recognition in their financial statements. Several aspects of the new guidance involve considerations that bear a striking similarity to those used when evaluating the taxability of grants and similar contracts for Washington business and occupation (“B&O”) tax purposes.

Grants and the B&O Tax

As noted in a previous article,

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The ultimate goal of providing an organization’s board with financial reports is to help them understand where the organization is and where it needs to go. Unfortunately, it is a common struggle when reporting to strike the right balance between providing meaningful, comprehensive information and being engaging to your readers. Below are some tips on how to accomplish both when presenting essential financial information to the board.

Provide Training

Every board member needs to understand an organization’s financial information to make informed decisions. However, board members bring different skills and talents to the table, and not all are going to know how to read and use not-for-profit financial statements and reports.

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Note: This article, originally published on January 12, 2018, has been updated to include the latest developments regarding the Tax Cuts and Jobs Act.

Among many other things, the Tax Cuts and Jobs Act affected how the government will tax certain employee benefits. Changes were made simultaneously to whether employers could take a deduction for certain benefits and whether employees could exclude certain benefits from income.

The intersections of these multiple changes (and the compounding factor of a whole new category of unrelated business income to tax-exempt employers) led to unprecedented confusion. Treasury has spent the better part of 2018 issuing guidance in the form of Publications,

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Note: This article, originally published on February 21, 2018, has been updated to include the latest developments regarding the Tax Cuts and Jobs Act.

Prior to passing the Tax Cuts and Jobs Act of 2017, certain transportation benefits and, in some rare cases, onsite athletic facility benefits were treated as tax exempt to employees — and tax deductible to employers. This is no longer the case.

Beginning January 1, 2018, for the benefits listed below, there has been a change in the tax law. Originally, the changes appeared to allow employers to determine the taxability of the employee benefits by whether the employer took a tax deduction for the cost of said benefits.

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You are on the board of a not-for-profit organization (NFP) and charged with making wise decisions for the good of the organization and its donors. When is the best time to perform an audit of its financials?

The NFP doesn’t have any outside requirements to have an audit. It does not need to provide one to a lender to fulfill debt covenants, nor does it need to file one with the state because its revenue is over the threshold. None of your big donors have asked for your financial statements in years because they look at your IRS Form 990.

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April 21, 2020 update: To provide accounting relief and clarity during the COVID-19 crisis, the FASB published an exposure draft with proposals to delay the effective dates for Leases (Topic 842). Find more information here.

The implementation date of ASC 606: Revenue from Contracts with Customers is quickly approaching,  which may have some real estate operators feeling a bit apprehensive. For private companies, ASC 606 is effective for years beginning after December 15, 2018. So, if your company has a calendar year-end, ASC 606 will be effective for fiscal years beginning January 1,

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Note: This article, originally published on October 16, 2018, has been updated to include the latest developments regarding the Tax Cuts and Jobs Act. 

The IRS published a draft 2018 Form 990-T* and Instructions** for exempt organizations. These will help organizations gain an understanding of its 2018 unrelated business income (UBI) tax liability. Treasury (the IRS) is using the Form 990-T to provide guidance on two of the most impactful changes to UBI from the Tax Cuts and Jobs Act:

  • The creation of UBI from the provision of non-taxable qualified transportation benefits to employees; and
  • The segregation of separate trade or business activities with losses when there is more than one trade or business activity.

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Congratulations! Your organization has identified a new CFO to help bring your accounting department into line at a very reasonable price. Although you had budgeted for a full-time employee, the prospective CFO has told you that she would like to be hired as an independent contractor. At first thought, this sounds wonderful. Hiring an independent contractor means the organization won’t be responsible for that person’s payroll tax liabilities. Think of the money that would save!

After the deal is struck, you excitedly head into the next board meeting to let members know that there is extra money in the budget to further the mission.

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This year brought many accounting and tax changes for both private and public companies. In addition to the changes brought by the Tax Cuts and Jobs Act (TJCA), the new GAAP revenue recognition standards will take effect for non-publicly traded companies for years beginning after December 15, 2018 (unless the company elects to apply these standards earlier).

These revenue recognition standards require companies to evaluate their revenue contracts and obligations to determine the amount of revenue they expect to be entitled to under a customer contract. They will then need to determine if they are required to recognize that revenue for book purposes,

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In 2017, Congress passed the Tax Cuts and Jobs Act, which promised a tax cut for most taxpayers. Based upon early calculations, the IRS issued tax tables which taxpayers then used to fill out Forms W-4 at the beginning of 2018. It seems now, these tax tables were overly optimistic about the effect of the tax cuts. Consequently, individual taxpayers may have entered information on their W-4 giving themselves more in their take-home pay than they should have been receiving.

The IRS now estimates as many as 10 million taxpayers may be facing penalties for underpayment of estimated taxes when they file their personal 2018 tax returns in early 2019.

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