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While the Tax Cuts and Jobs Act (TCJA) generally reduced individual tax rates for 2018 through 2025, some taxpayers could see their taxes go up due to reductions or eliminations of certain tax breaks — and, in some cases, due to their filing status. But some may see additional tax savings due to their filing status.

Unmarried vs. Married Taxpayers
In an effort to further eliminate the marriage “penalty,” the TCJA made changes to some of the middle tax brackets. As a result, some single and head of household filers could be pushed into higher tax brackets more quickly than pre-TCJA. For example, the beginning of the 32% bracket for singles for 2018 is $157,501, whereas it was $191,651 for 2017 (though the rate was 33%). For heads of households, the beginning of this bracket has decreased even more significantly, to $157,501 for 2018 from $212,501 for 2017.

Married taxpayers, on the other hand, won’t be pushed into some middle brackets until much higher income levels for 2018 through 2025. For example, the beginning of the 32% bracket for joint filers for 2018 is $315,001, whereas it was $233,351 for 2017 (again, the rate was 33% then).

2018 Filing and 2019 Brackets
Because there are so many variables, it will be hard to tell exactly how specific taxpayers will be affected by TCJA changes, including changes to the brackets, until they file their 2018 tax returns. In the meantime, it’s a good idea to begin to look at 2019. As before the TCJA, the tax brackets are adjusted annually for inflation.

Contact your advisor for help assessing what your tax rate likely will be for 2019 — and for help filing your 2018 tax return.

Below is a look at the 2019 brackets under the TCJA:

Single individuals
10%: $0 – $9,700
12%: $9,701 – $39,475
22%: $39,476 – $84,200
24%: $84,201 – $160,725
32%: $160,726 – $204,100
35%: $204,101 – $510,300
37%: Over $510,300

Heads of households
10%: $0 – $13,850
12%: $13,851 – $52,850
22%: $52,851 – $84,200
24%: $84,201 – $160,700
32%: $160,701 – $204,100
35%: $204,101 – $510,300
37%: Over $510,300

Married individuals filing joint returns and surviving spouses
10%: $0 – $19,400
12%: $19,401 – $78,950
22%: $78,951 – $168,400
24%: $168,401 – $321,450
32%: $321,451 – $408,200
35%: $408,201 – $612,350
37%: Over $612,350

Married individuals filing separate returns
10%: $0 – $9,700
12%: $9,701 – $39,475
22%: $39,476 – $84,200
24%: $84,201 – $160,725
32%: $160,726 – $204,100
35%: $204,101 – $306,175
37%: Over $306,175

Traditionally, Americans have supported charities not only for tax breaks and a vague sense of “giving back,” but also for a variety of other financial, emotional and social reasons. Understanding what motivates donors and how their motivations vary across demographic groups can help your not-for-profit more effectively reach and engage potential supporters.

Money Matters
Asset protection and capital preservation traditionally have motivated many wealthy individuals to make charitable donations. And certain strategies — such as gifting appreciated stock or real estate to get “more bang for the buck” — may be particularly appealing to donors who make charitable giving a piece of their larger financial plans.

But high-income donors sometimes have less-obvious financial motivations, such as a wish to limit the amount their children inherit to prevent a “burden of wealth.” Warren Buffett, for example, plans to leave the vast majority of his wealth to charity rather than to his children. As he told Fortune, wealthy parents should leave their children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” To appeal to these kinds of donors, you may want to offer to work with the entire family so that they can begin a multi-generational tradition of giving.

Social Considerations
Research by the Center on Philanthropy at Indiana University has found that younger donors — those between 20 and 45 — as well as wealthier and better-educated individuals are more likely to want to “make a difference” with their gifts. Those with lower incomes and a high school degree or less often donate to meet basic needs in their communities or to “help the poor help themselves.”

Donors of all stripes are motivated by the perceived social effects of giving. Research published in American Economic Review reported that donors typically gave more when their gifts were announced publicly.

Similarly, numerous studies have found that people are more likely to give — and to give in greater amounts — if asked personally, particularly if they know the person making the appeal. These donors may want to make an altruistic impression, and some may seek the prestige of being connected with a well-established and admired not-for-profit “brand.” Such individuals are more likely to buy pricey tickets to annual galas or join a not-for-profit’s board to meet and socialize with others in their socioeconomic group or business community.

Get — and Keep — Their Attention
There are probably as many motivations as there are donors, and most people have more than one reason to support a particular charity. To get — and keep — donors’ attention, perform some basic market research to learn who they are.

While most provisions of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018 and either apply through 2025 or are permanent, there are two major changes under the act for 2019.

Here’s a closer look:

1. Medical Expense Deduction Threshold
With rising health care costs, claiming whatever tax breaks related to health care that you can is more important than ever. But there’s a threshold for deducting medical expenses that was already difficult for many taxpayers to meet, and it may be even harder to meet this year.

The TCJA temporarily reduced the threshold from 10% of adjusted gross income (AGI) to 7.5% of AGI. Unfortunately, the reduction applies only to 2017 and 2018. So for 2019, the threshold returns to 10% — unless legislation is signed into law extending the 7.5% threshold. Only qualified, unreimbursed expenses exceeding the threshold can be deducted.

Also, keep in mind that you have to itemize deductions to deduct medical expenses. Itemizing saves tax only if your total itemized deductions exceed your standard deduction. And with the TCJA’s near doubling of the standard deduction for 2018 through 2025, many taxpayers who’ve typically itemized may no longer benefit from itemizing.

2. Tax Treatment of Alimony
Alimony has generally been deductible by the ex-spouse paying it and included in the taxable income of the ex-spouse receiving it. Child support, on the other hand, hasn’t been deductible by the payer or taxable income to the recipient.

Under the TCJA, for divorce agreements executed (or, in some cases, modified) after December 31, 2018, alimony payments won’t be deductible — and will be excluded from the recipient’s taxable income. So, essentially, alimony will be treated the same way as child support.

Because the recipient ex-spouse would typically pay income taxes at a rate lower than that of the paying ex-spouse, the overall tax bite will likely be larger under this new tax treatment. This change is permanent.

TCJA Impact on 2018 and 2019
Most TCJA changes went into effect in 2018, but not all. Contact your advisor if you have questions about the medical expense deduction or the tax treatment of alimony — or any other changes that might affect you in 2019. We can also help you assess the impact of the TCJA when you file your 2018 tax return.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here with Miriam Rouziek, an Audit Manager and a member of the PKF Texas SEC team. Miriam, welcome to the Playbook.

Miriam: Thank you for having me, Jen.

Jen: As a member of the SEC team I know you handle comment letters for our clients and work with them on those. What trends are you seeing coming from the SEC in regard to those letters?

Miriam: We’ve noticed a steady decline in SEC comment letters over the years. Since 2018, there’s been a steady decline of about 25%, which is comparable to the decline we saw in 2017. The comment letters are going to be focused on revenue recognition, coming up soon, since the new guidance has been implemented for about a year with the SEC companies.

The majority of comment letters are still going to be focused on larger companies, usually with a market cap of $700,000,000 or more. Those are your larger and more highly accelerated filers who have an accelerated due date – usually in February. These companies are going to have the majority of comment letters. Smaller companies, like the ones PKF handles, are usually going to have a smaller portion of the comment letters, and especially in more technical areas, they’re not going to see as many comment letters on those.

Jen: If a company receives one of these comment letters, they should call you guys, right?

Miriam: Correct. Usually, they should call us or call their attorney, who handles their SEC filings. We can have meetings with the SEC attorney and with the client, and we will be able to talk them through the process, talk them through the comments that the SEC has and any issues they have with the process, helping them figure out what they need to do. Most companies think that the first thing they need to do is call the SEC and have a restatement of their financial statements, but that’s not actually true. Most of the SEC comments are usually geared towards requesting more information, walking the SEC through the disclosures and the thought process of the company.

Jen: Perfect. Well, I think we’ll have to get you back to talk a little bit more. Can we get you back?

Miriam: Absolutely.

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

Not-for-profits that direct and benefit from the actions of their volunteers can be held accountable if those individuals are harmed or harm others on the job. Lawsuits involving volunteers often arise from allegations of negligence or intentional misconduct, even when volunteers act outside the scope of their prescribed duties. Your organization needs to take steps to limit risk associated with unpaid workers.

Volunteers as Employees
Your volunteer recruitment process should be almost as formal and structured as your paid employee hiring process. Develop job descriptions for open positions that outline the nature of the work, any required skills or experience and possible risks the job presents to the volunteer or your nonprofit.

Once you have volunteer candidates, screen them according to the risks that might be involved based on your nonprofit’s mission, programs and likely volunteer activities. Some positions will pose few risks. For those, ask candidates to fill out an application and submit to an interview, and then check their work and character references.

Positions that carry greater risks — such as work involving children, the elderly and other vulnerable populations, or direct access to cash donations — should involve more rigorous screening. This might include criminal history and credit report checks and verification of driver’s licenses, certifications or degrees.

Training and Performance Plans
Once volunteers are on board, provide training, supervision and, if necessary, discipline. Hold an orientation session to explain your nonprofit’s mission and policies. After volunteers have begun working for you, continue active supervision to verify that they understand expectations.

To encourage professionalism and responsibility in your volunteers, consider devising performance plans that include goals — and rewards for achieving them. Such plans can also provide you with a framework to evaluate and dismiss volunteers who may be putting your nonprofit at risk by, for example, failing to follow safety procedures.

Role of Insurance
No risk reduction plan is complete without insurance coverage. In addition to general liability, consider supplemental policies that address specific types of exposure such as medical malpractice or sexual misconduct.

It’s also a good idea to have legal advisors periodically review policies and procedures pertaining to volunteers. Attorneys and financial advisors can help you determine whether your organization is doing all it can to reduce risks.

The dawning of 2019 means the 2018 income tax filing season will soon be upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly.

With the biggest tax law changes in decades — under the Tax Cuts and Jobs Act (TCJA) — generally going into effect beginning in 2018, most businesses and their owners will be significantly impacted. So, refreshing yourself on the major changes is a good idea.

Taxation of Pass-Through Entities
These changes generally affect owners of S corporations, partnerships and limited liability companies (LLCs) treated as partnerships, as well as sole proprietors:

  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
  • A new 20% qualified business income deduction for eligible owners (the Section 199A deduction)
  • Changes to many other tax breaks for individuals that will impact owners’ overall tax liability

Taxation of Corporations
These changes generally affect C corporations, personal service corporations (PSCs) and LLCs treated as C corporations:

  • Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Replacement of the flat PSC rate of 35% with a flat rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)

Tax Break Positives
These changes generally apply to both pass-through entities and corporations:

  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
  • A new tax credit for employer-paid family and medical leave

Tax Break Negatives
These changes generally also apply to both pass-through entities and corporations:

  • A new disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
  • New limits on net operating loss (NOL) deductions
  • Elimination of the Section 199 deduction (not to be confused with the new Sec.199A deduction), which was for qualified domestic production activities and commonly referred to as the “manufacturers’ deduction”
  • A new rule limiting like-kind exchanges to real property that is not held primarily for sale (generally no more like-kind exchanges for personal property)
  • New limitations on deductions for certain employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Preparing for 2018 Filing
Keep in mind that additional rules and limits apply to the rates and breaks covered here. Also, these are only some of the most significant and widely applicable TCJA changes; you and your business could be affected by other changes as well. Contact your advisor to learn precisely how you might be affected and for help preparing for your 2018 tax return filing — and beginning to plan for 2019, too.

Retirement plan contribution limits are indexed for inflation, and many have gone up for 2019, giving you opportunities to increase your retirement savings.

  • Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $19,000 (up from $18,500)
  • Contributions to defined contribution plans: $56,000 (up from $55,000)
  • Contributions to SIMPLEs: $13,000 (up from $12,500)
  • Contributions to IRAs: $6,000 (up from $5,500)

One exception is catch-up contributions for taxpayers age 50 or older, which remain at the same levels as for 2018:

  • 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

Keep in mind that additional factors 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.

Many not-for-profits look international, beyond the United States, to boost revenue. They recruit members, sell products, promote conferences or solicit donations abroad. But it’s important to look before you leap borders; consider not only potential windfalls, but also pitfalls.

Research Your Target
Before your nonprofit invests funds internationally, make sure that the need in your target country for your services or products is robust enough to justify the costs of doing business there. For instance, what will your competition be like? Ample research is essential before making a decision.

This includes gathering information about the country’s relevant laws and regulations. If you plan to sell products or services there, investigate sales and tax issues thoroughly. If, for example, the country engages in free trade, it may be easy to do business there. But if the country isn’t a party to a free trade agreement with the United States, high tariffs might prove an insurmountable obstacle.

Consult with legal and financial advisors as you chart your business plan. Foreign activities also may require analysis to ensure that your American contributors retain their tax deductions and that you don’t jeopardize your organization’s own tax-exempt status.

Put People First
Your understanding of the target country’s people will be key to your success. Setting up a cultural advisory committee in the United States that includes expatriates is one way to develop insights into your new market. If English isn’t the primary spoken language in the target country, bring a translator along on exploratory visits.

Offering membership to individuals in other countries can be your initial step toward becoming a global organization. Some organizations hold seminars and conferences for these potential new members and even open local offices to establish roots.

If you appoint a member from the target country to your board, be willing to accept different approaches to issues. Board meetings probably will continue to be held at your U.S. headquarters. But videoconferencing applications and collaborative software can help board members participate fully in meetings regardless of physical location.

Consider Currency
Finally, don’t discount the potential impact of currency exchange rates. If the U.S. dollar is weak, it could work to your advantage in selling products and services abroad. On the other hand, a strong dollar will likely go further when leasing foreign property or compensating international staff.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Ryan Istre, an Audit Director and a member of the PKF Texas SEC team. Ryan, welcome back to The Playbook.

Ryan: Thanks for having me, Jen.

Jen: So, with the revenue recognition rules for ASC 606 that have come out and were applicable as of January 1, 2018, what do we need to know about that?

Ryan: That’s a good question, Jen. So, the SEC hasn’t had a whole lot of new comment letters come out about ASC 606. We do probably expect a lot of those to come out right around February and March of next year, because that’s when the companies will have a full cycle of revenue recognition under their belt for the full year.

Jen: So, do you expect them to come out with anything else?

Ryan: Again, they haven’t ever said officially. We’ve just sat through forums and a lot of CPE updates, and what we’ve heard to this point is that the SEC is suggesting that while most of the companies that they’ve been reviewing have been meeting the minimum requirements, they are suggesting that there are still a few more quarters that are available for the rest of the year for them to actually beef up their disclosures. So, we’re thinking they might believe a little deficiency is there but probably not enough to issue a formal comment letter so far.

Jen: Now, are there things in the disclosures that you’re recommending be enhanced based on that?

Ryan: Yes. So, what we’ve heard is that they’re recommending enhanced disclosures around what constitutes a specific performance obligation and what management is determining is the actual point in time in which the companies are meeting those performance obligations.

Jen: Okay, so it sounds like there’s definitely more information to come and that they should if they’re looking at it at all they need to contact someone like you so that we can give them guidance on what to do.

Ryan: Exactly. That would be a good idea; definitely contact the auditors, contact us. What we’ve heard in recent forums is that the Office of the Chief Accountant will continue to respect companies’ disclosure practices and procedures if those disclosures are well-grounded and based upon the principles of the new revenue recognition guide. So, I guess we’ll have to wait and see.

Jen: Yeah, so, let’s get some real-world application and see if it makes common sense maybe?

Ryan: Common sense, principles-based – it’s a toss-up, but only time will tell.

Jen: Perfect. Well, we’ll get you back once we know more information.

Ryan: Definitely.

Jen: Thank you. For more about this topic, visit our Revenue Recognition Central page on PKFTexas.com. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

To err is human, but some errors are more consequential — and harder to fix — than others. Most not-for-profits can’t afford to lose precious financial resources, so you need to do whatever possible to minimize accounting and tax mistakes.

Get started by considering the following five questions:

Have we formally documented our accounting processes? All aspects of managing your not-for-profit’s money should be reflected in a detailed, written accounting manual. This should include how to accept and deposit donations and pay bills.

How much do we rely on our accounting software? These days, accounting software is essential to most not-for-profits’ daily functioning. But even with the assistance of technology, mistakes happen. Your staff should always double-check entries and reconcile bank accounts to ensure that transactions entered into accounting software are complete and accurate.

Do we consistently report unrelated business income (UBI)? IRS officials have cited “failing to consider obvious and subtle” UBI tax issues as the biggest tax mistake not-for-profits make. Many organizations commonly fail to report UBI — or they underreport this income. Be sure to follow guidance in IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations. And if you need more help, consult a tax expert with not-for-profit expertise.

Have we correctly classified our workers? This is another area where not-for-profits commonly make errors in judgment and practice. You’re required to withhold and pay various payroll taxes on employee earnings, but don’t have the same obligation for independent contractors. If the IRS can successfully argue that one or more of your independent contractors meet the criteria for being classified as employees, both you and the contractor possibly face financial consequences.

Do we back up data? If you don’t regularly back up accounting and tax information, it may not be safe in the event of a fire, natural disaster, terrorist attack or other emergency. This data should be backed up automatically and frequently using cloud-based or other offsite storage solutions.