strategic planning

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Every nonprofit needs an executive search plan. Even if you aren’t facing an imminent vacancy, your organization is smart to prepare for what can be a long process. In fact, executive searches generally take several months — even if you end up hiring someone already known to your nonprofit. So make plans now.

Focusing energy

Start by forming a search team made up of board members. Even if your current executive director isn’t leaving, the existence of a committee enables members to stay abreast of compensation trends and be on the lookout for potential successors to current executives.

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If you made large gifts to your children, grandchildren or other heirs last year, it’s important to determine whether you’re required to file a 2019 gift tax return. And in some cases, even if it’s not required to file one, it may be beneficial to do so anyway.

Who must file?

Generally, you must file a gift tax return for 2019 if, during the tax year, you made gifts:

  • That exceeded the $15,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
  • That you wish to split with your spouse to take advantage of your combined $30,000 annual exclusion,
  • That exceeded the $155,000 annual exclusion for gifts to a noncitizen spouse,
  • To a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2019,
  • Of future interests — such as remainder interests in a trust — regardless of the amount, or
  • Of jointly held or community property.

Keep in mind that you’ll owe gift tax only to the extent that an exclusion doesn’t apply and you’ve used up your lifetime gift and estate tax exemption ($11.4 million for 2019). As you can see, some transfers require a return even if you don’t owe tax.…
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A majority of large U.S. companies offer programs of matching gifts to boost the impact of their employees’ charitable gifts. Double the Donation estimates that $2 to $3 billion is donated through matching gift programs every year.

a small box wrapped in brown paper with blue and white starts on it sits on a wooden table; image used for a blog post about not-for-profits matching gifts to double donor contributions

At the same time, between $4 and $7 billion in matching gift funds goes unclaimed annually. Is your not-for-profit doing everything it can to claim its share of this pool of corporate gifts?

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If you own a home, the interest you pay on your home mortgage may provide a tax break. However, many people believe that any interest paid on their home mortgage loans and home equity loans is deductible. Unfortunately, that’s not true.

a photograph of a white paint house with copper orange roof, with green grass lawn and a cloudless blue sky; image used for a blog post about homes providing a tax break

First, keep in mind that you must itemize deductions in order to take advantage of the mortgage interest deduction.

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Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here with Chip Schweiger, one of our audit Directors and one of the faces of the PKF Texas SEC team. Chip, welcome to the playbook.

Chip: Thanks, Jen. Good to be here.

Jen: So, I know this is the time of year where public companies are getting ready to file their financial statements, their disclosures… What do they need to look at with their Form 10-Ks when they’re getting ready to prepare those?

Chip: Yeah. So, Jen, last year we put out an analysis: comment letter trends from the SEC based on the last three years of comments. We saw some things on there that you would expect: the use of non-GAAP financial measures, comments on the management’s discussion and analysis and comments on fair value measurements, but there are also some new items on the list.

Jen: What kind of new items?

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If you’re self-employed and work out of an office in your home, you may be entitled to home office deductions. However, you must satisfy strict rules.

Large screen computer monitor sitting on a grey wooden desk in front of a computer rolling chair; image used for blog post about home office deductions

If you qualify, you can deduct the “direct expenses” of the home office. This includes the costs of painting or repairing the home office and depreciation deductions for furniture and fixtures used there. You can also deduct the “indirect” expenses of maintaining the office. This includes the allocable share of utility costs, depreciation and insurance for your home, as well as the allocable share of mortgage interest, real estate taxes and casualty losses.

In addition, if your home office is your “principal place of business,” the costs of traveling between your home office and other work locations are deductible transportation expenses, rather than nondeductible commuting costs. And, generally, you can deduct the cost (reduced by the percentage of non-business use) of computers and related equipment that you use in your home office, in the year that they’re placed into service.

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Russ: This is the PKF Texas Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host, and I’m here once again with Frank Landreneau, a Director and one of the faces of the International Tax team here at PKF. Frank, welcome back to The Playbook.

Frank: Thank you.

Russ: Our last time together, we got into the Tax Cut and Jobs Act, and of particular interest to me was how the interpretation of how you handle certain things from that Act has sort of evolved and matured and maybe even changed over time now that we’re in it two years. There was one particular—I had asked you to give me an example of how that rolls out, and you said, “Yeah, there’s this one part of running an international business, where there’s, like, three options that have evolved, really.” Mainly, from international tax people like you. One was literally to create a corporation and, correct me if I’m going down this path wrong, but one was to create a corporation.

Frank: That’s correct.

Russ: The second one was to actually elect a holding company that would play like it was the company.

Frank: That’s right.

Russ: And the third, mostly I guess for SMEs, was to actually create something that you’re just treated like a foreign company. Was I even close on those three?

Frank: Very close, actually. In tax law there is a lot of elections that create a tax treatment that may not be in line with legal structuring and so forth.

Russ: Yeah, you want to avoid that legal stuff, don’t you?

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An outside financial audit may seem like an extravagance to not-for-profits working to contain costs and focus on their mission. But undergoing regular audits allows your organization to identify risks early and act quickly to prevent problems.

overhead view of someone highlighting documents with numbers in pink on top of a stack of papers; image used for blog post about not-for-profit preparing for financial audit

Independent audits also provide valuable reassurance to donors. Fortunately, you can reduce the cost of external audits with good preparation.

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Married couples often wonder whether they should file joint or separate tax returns. The answer depends on your individual tax situation.

two gold wedding rings sitting on top of a dictionary defining "marriage;" image used for blog post about married couples filing tax returns separately

It generally depends on which filing status results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. This means that the IRS can come after either of you to collect the full amount.

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