Limited staff and financial resources during the novel coronavirus (COVID-19) pandemic may have your not-for-profit looking for new ways to achieve your mission. Have you considered partnerships?

a blackboard with white letters spelling "world vs. corona; 1:0; #WeWillWin," image used for a blog post about not-for-profits partnering up during COVID-19 pandemic

Partnerships with a like-minded organization potentially enables you to pool funds, staff and supporters — temporarily or permanently.

Continue Reading Setting Up Not-for-Profit Partnerships During COVID-19

The coronavirus (COVID-19) pandemic has affected many Americans’ finances.

a pen sitting on top of a blank page of a journal with "notes" on top of the page; image used for a blog post about COVID-19 tax questions

Here are some answers to questions you may have right now.

My employer closed the office and I’m working from home. Can I deduct any of the related expenses?
Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.)

Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

Continue Reading Your COVID-19 Tax Questions are Answered Here

On Thursday, April 30, 2020, the IRS released Notice 2020-32. Specifically, “this notice clarifies that no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).”

The IRS takes the position that any expenses paid from the proceeds from a loan from the Paycheck Protection Program will be disallowed to the extent the loan is forgiven and excluded from taxable income. The result is denying a double benefit of receiving excludible loan forgiveness income while simultaneously deducting the expenses used with the loan proceeds.

Please know that legislative dialogue in Washington, D.C. continues as to the possible final tax treatment of this matter. We will continue to monitor future forthcoming Stimulus Acts for possible updates and/or amendments to IRS Notice 2020-32, promptly advising you should the current contents of the Notice be revised or amended.

If you have questions about how this IRS announcement applies to your tax situation, please connect with your PKF Texas tax team members.

J. Del Walker, CPA
Director, Tax Practice Leader
(713) 860-1420
Martin Euson, JD
Director, Tax
(713) 860-5436
Frank Landreneau, CPA
Director, International Tax
(713) 860-1429
Rafael Carsalade, CPA
Director, International Tax
(713) 860-5412
Nikki Homratsamy, CPA
Director, Tax
(713) 860-5425
Jim Streets, CPA
Director, Tax
(713) 860-5440
Gary Voth, CPA, JD
Director, Tax
(713) 860-1410

Additionally, we are keeping PKFTexas.com/COVID-19 up-to-date with information and resources to assist you as we all navigate these quickly-changing times.

As a result of the coronavirus (COVID-19) crisis, your business may be using independent contractors to keep costs low. But you should be careful that these workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be an expensive mistake.

four emojis faces wearing medical masks; image used for blog post about hiring independent contractors during COVID-19 pandemic

The question of whether a worker is an independent contractor or an employee for federal income and employment tax purposes is a complex one. If a worker is an employee, your company must withhold federal income and payroll taxes, pay the employer’s share of FICA taxes on the wages, plus FUTA tax. Often, a business must also provide the worker with the fringe benefits that it makes available to other employees. And there may be state tax obligations as well.

These obligations don’t apply if a worker is an independent contractor. In that case, the business simply sends the contractor a Form 1099-MISC for the year showing the amount paid (if the amount is $600 or more).

Continue Reading Hiring Independent Contractors During COVID-19

The novel coronavirus (COVID-19) pandemic has forced many of us to work differently — whether it’s isolated at home or in-person wearing facial masks and other protective gear. Even if your not-for-profit’s board of directors usually meets in person, current events strongly suggest the need for a Plan B, such as virtual board meetings.

a man and woman talking via webcam chat on Zoom application | image used for blog post about NFP virtual board meetings during COVID-19

Here are some best practices for holding virtual board meetings.

Anticipate Hurdles
With many board members under continued stay-at-home or quarantine orders, virtual meetings can enable more people to attend and your board to achieve a quorum. But before you set up a Zoom, WebEx or other online video meeting, check your state’s laws. Some states, for example, allow not-for-profit boards to hold teleconferences but not videoconferences. Your organization’s bylaws might also prohibit virtual meetings. Continue Reading Best Practices for Not-for-Profit Virtual Board Meetings

Last week, the IRS issued proposed regulations, which will help to simplify the rules around how not-for-profit entities should calculate their unrelated business income tax (UBIT) for more than one unrelated trade or business.

close up angle of three people sitting at a wooden table near a window overlooking the city with pens and notepads; image used for blog post for IRS new regulations for not-for-profits UBIT calculation

UBIT is applicable to any trade or business activity a not-for-profit engages in that is not substantially related to the tax-exempt purposes of the organization.

As part of the 2017 Tax Cuts and Jobs Act (TCJA), there is a provision which requires not-for-profits to calculate UBIT separately for each trade or business. For those organizations with many diverse income streams, this change created many challenges and complications.

The newly proposed regulations from the IRS provide clarity on identifying separate trades or businesses and offered a way for certain income streams to be combined.

The classification system used is the North American Industry Classification System (NAICS). The NAICS uses six-digit codes to identify the business purposes of an activity. Initial guidance from the IRS implied that only activities with the same six-digit codes, of which there are over 1,000, could be combined. This led to not-for-profit entities fearing they would have to break down their various unrelated trades or businesses into an unreasonably large number of separate categories, causing unnecessary burden.

With welcomed relief, these newly proposed regulations now state that income can be combined for activities with the same first two digits of their respective NAICS codes, rather than needing to match all six digits. The first two digits of an activity’s NAICS code represents the sector, the general category of economic activity, in which it is involved. This limits the potential number of income streams not-for-profits must divide into a maximum of 20 categories.

To read more about the proposed regulations, visit the following link: https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-06604.pdf

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Kimberly Wood, an Audit Senior Manager and one of the faces of the PKF Texas Transaction Advisory Services Team. Kimberly, welcome back to The Playbook.

Kimberly: Thanks for having me.

Jen: Last time you gave us an overview of the due diligence process. What are some ways to facilitate due diligence?

Kimberly: There are five key ways that the buyer can help facilitate this process:

  1. They can get their house in order, both financially and operationally.
  2. They can show a history of growth. They want to be able to demonstrate or perform a deep analysis of their historical branch level sales. This will just help the buyer see and understand the story better and show their potential for growth.
  3. They want to prove their potential. They want to be able to demonstrate opportunities for revenue, profit, and market growth.
  4. They want to prevent their partners or employees from diverting the process.
  5. They want to be prepared to sell at the right time.

Jen: Perfect. So now, does this apply to both buy side and sell side?

Kimberly: These are things that the sell side will want to do to get ready for the buyer.

Jen: Perfect. We will get you to talk a little bit more about some due diligence topics soon.

Kimberly: Sounds great.

Jen: For more about due diligence, visit PKFTexas.com/TransactionAdvisoryServices. This has been another Thought Leader Production brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.

As unemployment and financial insecurity become widespread during the novel coronavirus (COVID-19) crisis, many not-for-profit donors find themselves unable to provide monetary support to favorite charities. Instead, your organization may receive offers of gifts in kind (GIK) or donated services. Although you likely welcome these gifts, you may be unsure about how to record and value them.

a person forming a heart with their hands against the sun; image used for blog post about how not-for-profits can handle gifts in kind and donated services during COVID-19 pandemic

Here’s a brief summary.

Continue Reading Handling Gifts in Kind and Donated Services During COVID-19

Millions of eligible Americans have already received their Economic Impact Payments (EIP) via direct deposit or paper checks, according to the IRS. Others are still waiting. The payments are part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

coins--pennies, quarters, dimes and nickels--pouring out of a glass jar into a pile; image used for blog post about answers for Economic Impact Payments during the COVID-19 pandemic

Here are some answers to questions you may have about EIPs.

Who’s eligible to get an EIP?
Eligible taxpayers who filed their 2018 or 2019 returns and chose direct deposit of their refunds automatically receive an Economic Impact Payment. You must be a U.S. citizen or U.S. resident alien and you can’t be claimed as a dependent on someone else’s tax return. In general, you must also have a valid Social Security number and have adjusted gross income (AGI) under a certain threshold. Continue Reading Economic Impact Payments – Answers to Your Questions

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Kimberly Wood, an Audit Senior Manager and one of the faces of our PKF Texas Transaction Advisory Services team. Kimberly, welcome to The Playbook.

Kimberly: Thanks for having me.

Jen: You’re on our Transaction Advisory Services team, and I know you tend to handle due diligence. What is it, and why should somebody do a due diligence project?

Kimberly: Due diligence is an investigation of a company or a business, and basically, we are validating the information or assumptions that haven’t been provided, or that should have been provided. It’s an essential information gathering process, whether it’s for legal, operational or financial due diligence. Basically, the goal of both parties is that they want a lack of surprises. The process helps them identify all the potential risks that could come up in the transaction or any potential deal killers.

Jen: And who is requesting the projects? Is it a banker? Is it an attorney? Can you request a due diligence on yourself?

Kimberly: It can be either. There could be a buy-side or there could be a sell-side.

Jen: Perfect. And when would you recommend doing a project?

Kimberly: Generally, on the buy-side, it comes when they’re getting a letter of intent and they’re ready to dive in.

Jen: Kimberly, that sounds great. We’ll get you to talk a little bit more about due diligence in another episode. Does that sound good?

Kimberly: Sounds great.

Jen: Perfect. For more about this topic, visit PKFTexas.com/TransactionAdvisoryServices. This has been another Thought Leader Production brought to you buy PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.