The CPA Desk

A Thought Leader Production by PKFTexas

Is Your Nonprofit Doing What It Takes to Avoid a Conflict of Interest?

Not-for-profit board officers, directors, trustees and key employees must avoid any conflict of interest because it’s their duty to do so. Any direct or indirect financial interest in a transaction or arrangement that might benefit one of these individuals personally could result in the loss of your organization’s tax-exempt status — and its reputation.

Here’s a quick checklist to gauge whether your nonprofit is doing what it takes to avoid conflicts of interest:

  • Do you have a conflict-of-interest policy in place that specifies what constitutes a conflict and lists exceptions?
  • Do you require board officers, directors, trustees, and key employees to annually pledge to disclose interests, relationships and financial holdings that could result in a conflict of interest?
  • Do they understand that they must speak up if issues arise that could pose a possible conflict?
  • Do you provide training in conflicts of interest?
  • Do you have procedures in place that outline the steps you’ll take when a possible conflict of interest arises?
  • Are individuals with possible conflicts asked to present only the facts, and then remove themselves from any discussion of the issue?
  • Do you keep minutes of the meetings where the conflict of interest is discussed, noting those members present and voting, and indicating the final decision reached?
  • Do you put projects out for bid — with identical specifications — to multiple vendors?
  • Do you supply a written contract to each vendor that details the service the company will provide, specific deliverables, cost estimates and a time frame for delivery?

If you answered “no” to any of these questions, contact us. We can help you make sure that you have an adequate conflict of interest policy in place and a full set of procedures to support it.

File Your 2017 Tax Return Early to Avoid Identity Theft

The IRS has just announced that it will begin accepting 2017 income tax returns on January 29. You may be more concerned about the April 17 filing deadline, or even the extended deadline of October 15 (if you file for an extension by April 17). After all, why go through the hassle of filing your return earlier than you have to? But it can be a good idea to file as close to January 29 as possible: Doing so helps protect you from tax identity theft.

All-too-common scam

Here’s why early filing helps: In an all-too-common scam, thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. This is usually done early in the tax filing season. When the real taxpayers’ file, they’re notified that they’re attempting to file duplicate returns.

A victim typically discovers the fraud after he or she files a tax return and is informed by the IRS that the return has been rejected because one with the same Social Security number has already been filed for the same tax year. The IRS then must determine who the legitimate taxpayer is.

Tax identity theft can cause major headaches to straighten out and significantly delay legitimate refunds. But if you file first, it will be the tax return filed by a potential thief that will be rejected — not yours.

The IRS is working with the tax industry and states to improve safeguards to protect taxpayers from tax identity theft. But filing early may be your best defense.

W-2s and 1099s

Of course, in order to file your tax return, you’ll need to have your W-2s and 1099s. So another key date to be aware of is January 31 — the deadline for employers to issue 2017 Form W-2 to employees and, generally, for businesses to issue Form 1099 to recipients of any 2017 interest, dividend or reportable miscellaneous income payments.

If you don’t receive a W-2 or 1099, first contact the entity that should have issued it. If by mid-February you still haven’t received it, you can contact the IRS for help.

Earlier refunds

Of course, if you’ll be getting a refund, another good thing about filing early is that you’ll get your refund sooner. The IRS expects over 90% of refunds to be issued within 21 days.

E-filing and requesting a direct deposit refund generally will result in a quicker refund and also can be more secure. If you have questions about tax identity theft or would like help filing your 2017 return early, please contact us.

Adapting to Change in Business

Byron: Hi, my name is Byron Hebert and this is another Tool Time Update brought to you by your friends at PKF Texas and the Entrepreneur’s Playbook. We’ve been talking about the Birkman personality profile examination; how we use it here in our organization for hiring executives, we use it for coaching, we use it for putting teams together and for conflict resolution. It’s got many good tools we can use for our biggest asset in our company, our most important asset, which is our people; getting to know them a little bit better and how they work and what their work style is.

Again, we’re going through the 11 components that we measure in Birkman and remember we talked about our usual style, that’s the way people see us, that’s the way we come to work every day and where we want to stay. Our needs; how we need to be communicated and how we deal with each one of these 11 components ourselves. And our stress behavior which is what we want to avoid because that’s destructive to the organization and to our own careers. And the way we stay out of that stress behavior is getting our needs met, right?

So we’re going to talk about change today and that component within Birkman. Change is how well we deal with change, how we accept change, how quickly we are at accepting change. Change is happening all the time in our business and so we have to accept it. But this may give you an indication as to how well people are going to accept it and what you need to do to get people ready for change. If you have a low change score, your low usual style – low need, that sort of thing – that means that you’re not going to like change very much. Change is going to be hard for you and so how you deal with that. As a leader, we may want to start getting them interested in that or involved in that change initiative so they could ask questions and be involved in it and be part of the change, and that’s one way we can deal with that.

Someone with a very high change usual style of need, they’re going to be fine; with whatever change you give them they’re going to move faster, they’re going to be able to adapt to change a little bit quicker and it’s not going to be as stressful for them.

So change is how well we deal with change in our organization and it’s good to know how our people are going to respond to that and how we can help them deal with that – their score, whichever it is. And to keep them out of that stress behavior which is where we want to keep them out of because that becomes destructive to the organization and to their own careers. My name is Byron Hebert, this has been another Tool Time Update brought to you by your friends at PKF Texas and The Entrepreneur’s Playbook.

Switch Up Your Nonprofit’s Fundraising Efforts to Avoid Donor Fatigue

After a flurry of year-end fundraising, you and your not-for-profit’s staff are probably ready for a little break. Your supporters may be tired, too. At some point, even the most philanthropic individuals experience donor fatigue and start saying “no” — even to their favorite charities.

Here’s how to remain engaged with donors and keep your fundraising efforts from eroding relationships and causing donor fatigue.

Stagger your attention

When you do a mass mailing for donations, do you blanket your entire donor base each time? Doing so can lead to donor fatigue. To avoid this, stagger your solicitations. Solicit your most significant donors in person, for example, but contact the next tier of donors with a personal letter or email. Follow up both communications with a phone call. Solicit all other donors by mass mailing.

Also, consider scaling back the number of donation requests you make. Donors may be annoyed by monthly appeals (especially in the form of mass mailings). But if they know you only ask once or twice a year — or in the event of emergencies — they’re more likely to be there when you need them.

Think of alternatives

Consider forgoing soliciting your major donors for money every year. A corporate sponsor’s nonmonetary donation — such as the use of a venue for an event — may be just as valuable. Or, instead of returning to the same event sponsor every year, seek new sponsors, but keep the established sponsor engaged by asking for support in another form. For example, request the donation of an auction item or gift basket.

The same holds true for individual donors. While you’d hate to miss out on a donation by simply not asking, consider requesting that significant donors contribute in ways besides writing a check. Your biggest supporters are likely well-established community members and have friends and colleagues who are charitably inclined. Ask major donors to donate their time by chairing a committee, emceeing an event or hosting a fundraising function on your nonprofit’s behalf. As a result, they’ll likely introduce your organization to others.

Be sensitive

A dedicated donor base is critical to your nonprofit’s continuing operation. To avoid alienating your biggest fans and creating donor fatigue, be sensitive to possible donor fatigue and know when to use a lighter touch.

Visit us at www.PKFTexas.com/NotforProfit/.

Bonus Depreciation in the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return.

Pre-TCJA bonus depreciation

Under the pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building.

TCJA expansion

The TCJA significantly expands bonus depreciation: For qualified property placed in service between September 28, 2017, and December 31, 2022 (or by December 31, 2023, for certain property with longer production periods), the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property.

The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions placed in service on or after September 28, 2017. Productions are considered placed in service at the time of the initial release, broadcast or live commercial performance.

Beginning in 2023, bonus depreciation is scheduled to be reduced 20 percentage points each year. So, for example, it would be 80% for property placed in service in 2023, 60% in 2024, etc., until it would be fully eliminated in 2027.

For certain property with longer production periods, the reductions are delayed by one year. For example, 80% bonus depreciation would apply to long-production-period property placed in service in 2024.

Bonus depreciation is only one of the business tax breaks that have changed under the TCJA. Contact us for more information on this and other changes that will impact your business.

Use Quadrants to Improve Your Time Management Skills

Byron: Hi, my name’s Byron Hebert and this is another quick Tool Time update brought to you by The Entrepreneur’s Playbook and your friends at PKF Texas. What I want to talk to you about today is time and the most precious resource you have. We all have the same amount of time, but how we use that time is critical So, Steven Covey came up with the four quadrants of time management and you can see on this upper axis we’ve got “Urgent” and “Not Urgent” and over here we have “Important” and “Not Important”. So, in quadrant one is items that are urgent and important. That is the necessity quadrant.

That’s where we spend most of our time. That’s urgent things that come up that we have to do – deadlines and things like that. This quadrant here where is “Not Important” but “Urgent” is the quadrant of deception. This is time where we spend a lot of time but really, we feel like things are urgent but they’re really not that important – things like some phone calls, emails, things like that. Over herein this quadrant where the quadrant of “Not Important” and “Not Urgent” is the waste. We spend a lot of time – waste a lot of times sometimes on things that we – that are really not urgent or not important. Now, this quadrant is the quadrant of quality – “Not Urgent” but “Important”. This is where we think of things like strategy, training, family time.

This is where we want to focus a little bit more time. Keep out of the quadrant of deception, the quadrant of waste and look to spend more time in the quality of quadrant. Now, how do you do that? This is a good time of year to reassess the things that you do every day. Think of the 80/20 rule. 20 percent of the things you do add 80 percent of the value to your company, so focus on those areas. Think of the other 80 percent. What are you doing that doesn’t add value to your company or to your life? And of those things, you want to try to eliminate it. You either get rid of them, or delegate them to somebody else. So, again, you want to stay out of these quadrants, focus more on this quadrant – quadrant of quality – to improve your life and improve your company. Thank you. This is Byron Hebert. This has been another quick Tool Time update brought to you by your friends at PKF Texas and The Entrepreneur’s Playbook.

Find Out What Drives Your Business with a Business Excellence Model

Byron: Hi, my name is Byron Hebert, and this is another Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

What I want to talk to you about today is a business excellence model that was developed actually by the European Foundation for Quality Management back in the ’60s as a way to reward companies that were performing well. And what they found was that there are certain enablers in your business that help you perform well. One of them being leadership. The right people. The right strategy. Partners, and processes. And they actually weighted those in order of importance in order to process and leadership and people have a significant role in your ability that enables you to run your business effectively.

So then if you have these enablers in place, that drives your results, which are your people results, customer results, society results, good corporate citizenship, and your key performance indicators, as in your sales, profitability, cash flow and things like that.

So how you can use this model in your business is to rate yourself right now in terms of your enablers. If out of 100 how important is leadership, how well are you at leadership? How good is your company right now, or do you need to develop a leadership team or a leadership training? So maybe you’re an eighty there and you want to get to 100, you’ve got a twenty gap, and you start working on how you can effectively move the dial from eighty to 100 by training, or making an emphasis on rewarding those who show leadership. Things like that.

As far as your people, do you have the right people in the organization? On a scale of ninety, if it was ninety, where are you? Eighty-five is pretty good. Maybe you’re at a sixty, and you’ve got a thirty gap there that you need to fill and start getting some ideas of how you can get the right people in your organization.

So again, this is a business excellence model. The enablers are your leadership people, strategy, partnership and processes, and with that you’ll get the results that you can measure in your people, customers, society, and key performance indicators.

Again, my name is Byron Hebert. This has been a quick Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

For those of you listening in on the radio and would like to see the graphic form of this tool being demonstrated, you can go to TheBusinessmakers.com and look for the videos under Entrepreneur’s Playbook.

Retirement Plan Contribution Limit Changes for 2018

Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, most of the limits remain unchanged for 2018. But one piece of good news for taxpayers who’re already maxing out their contributions is that the 401(k) limit has gone up by $500. The only other limit that has increased from the 2017 level is for contributions to defined contribution plans, which has gone up by $1,000.

Type of limit 2018 limit
Elective deferrals to 401(k), 403(b), 457(b)(2)
and 457(c)(1) plans
$18,500
Contributions to defined contribution plans $55,000
Contributions to SIMPLEs $12,500
Contributions to IRAs $5,500
Catch-up contributions to 401(k), 403(b), 457(b)(2)
and 457(c)(1) plans
$6,000
Catch-up contributions to SIMPLEs $3,000
Catch-up contributions to IRAs $1,000

If you’re not already maxing out your contributions to other plans, you still have an opportunity to save more in 2018. And if you turn age 50 in 2018, you can begin to take advantage of catch-up contributions.

Higher-income taxpayers should also be pleased that some limits on their retirement plan contributions that had been discussed as part of tax reform didn’t make it into the final legislation.

However, keep in mind that there are still additional factors that may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.

If you have questions about how much you can contribute to tax-advantaged retirement plans in 2018, check with us.

How Your Nonprofit Can Successfully Execute a Capital Campaign

When your not-for-profit desperately needs a new facility, costly equipment or an endowment, a capital campaign can be the best way to raise funds. But to be successful, a campaign requires strong leadership, extensive planning and dedicated participants.

Leading the troops

Capital campaigns generally are long-term projects — often lasting three or more years. To carry out yours, you need a champion with vision and stamina. Consider board members or look to leaders in the greater community with such qualifications as:

  • A fundraising track record,
  • Knowledge of your community and local issues,
  • The ability to motivate others, and
  • Time to attend planning sessions and fundraising activities.

Most capital campaigns require a small army to raise funds through direct mail, email solicitations, direct solicitations and special events. In addition to staff and board members, reach out to current volunteers, like-minded community groups and clients who’ve benefited from your services.

Approaching donors

Identify a large group — say 1,000 individuals — to solicit for donations. Draw your list from past donors, area business owners, board members, volunteers and other likely prospects. Then narrow that list to the 100 largest potential donors and talk to them first. Secure large gifts before pursuing anything under $1,000.

Be sure to train team members on how to solicit funds and provide them with sample scripts. To help volunteers make effective phone solicitations, record a few calls and play them back for the group to critique.

Focus on execution

It’s important to ensure that key constituents share your fundraising vision and strategies for reaching the campaign’s goals. Break down your overall goal into smaller objectives and celebrate when you reach each one. Also regularly report gifts, track your progress toward reaching your ultimate goal and measure the effectiveness of your activities.

Also pay attention to how you craft your message. Potential donors must see your organization as capable and strong, but also as the same group they’ve championed for years. Instead of focusing on what donations will do for your nonprofit, show potential donors the impact on their community.

Many measures of success

You’ll know you’ve reached your goal when you’ve raised a certain dollar amount. But don’t forget about other measures of success, such as return on investment or percentage of past donors contributing. We can help you identify the most valuable metrics.

Year-End Giving: What You Need to Know

Charitable giving can be a powerful tax-saving strategy: Donations to qualified charities are generally fully deductible, and you have complete control over when and how much you give. Here are some important considerations to keep in mind this year to ensure you receive the tax benefits you desire.

Delivery date

To be deductible on your 2017 return, a charitable donation must be made by Dec. 31, 2017. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Qualified charity status

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Potential impact of tax reform

The charitable donation deduction isn’t among the deductions that have been proposed for elimination or reduction under tax reform. In fact, income-based limits on how much can be deducted in a particular year might be expanded, which will benefit higher-income taxpayers who make substantial charitable gifts.

However, for many taxpayers, accelerating into this year donations that they might normally give next year may make sense for a couple of tax-reform-related reasons:

  1. If your tax rate goes down for 2018, then 2017 donations will save you more tax because deductions are more powerful when rates are higher.
  2. If the standard deduction is raised significantly and many itemized deductions are eliminated or reduced, then it may not make sense for you to itemize deductions in 2018, in which case you wouldn’t benefit from charitable donation deduction next year.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making — or the potential impact of tax reform on your charitable giving plans.