Tag Archives: auditing

FASB’s New Standard Aims to Improve Not-for-Profit Financial Reporting

In August, 2016, the Financial Accounting Standards Board (FASB) launched new reporting standards for Non-for-Profit Entities that will be effective for 2018 calendar year-ends or 2019 fiscal year ends. It is important to be familiar with the requirements ahead of time, but we are not recommending early-adoption, since you have to implement the entire standard.  Please call Schutte & Hilgendorf, CPAs with questions about the new standard and implementation.

Click on the link for a summary of the requirements:

 

New Non-for-Profit Reporting Standards

 

Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona.   With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting.  We also provide tax planning and preparation, sales tax and payroll tax return preparation, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors).  Given our small size, we can still provide a personal touch with professional expertise. Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona or call us at 928-778-0079.


Overtime rules for Business Owners

There has been an important update on the new DOL Overtime Rules that were set to go into effect on December 1st. Yesterday a U.S. District Judge issued an injunction against the new rules. This means that the new overtime rules will not go into effect on December 1st. The injunction stops implementation or enforcement of the new  rules until further action is taken by the Department of Labor, most likely through appealing the ruling. At this point it is uncertain when, if ever, the new rules will go into effect.

We will keep you apprised of any new developments. Please check our website as well for any updates. Contact us if you have any questions about how this will affect your business.

Since the release of the new overtime regulations from the Department of Labor, we have received many questions from our business clients. One reoccurring question we would like to address is how/if the new overtime rules will affect the business owner’s salary. An employee who owns at least 20 percent equity interest in the enterprise in which they are employed and who is actively engaged in its management is not subject to the salary level requirements of the overtime regulations. This rule applies to LLCs, Partnerships, S Corporations, Corporations or any other entity type. Because of this, the final rules recently released should not have an effect on business owners who own 20 percent or more of their company. Any owners who own under 20 percent would have to apply the standard overtime tests and requirements. If you have any questions about your specific situation, please give us a call at 928-778-0079.

 

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting. We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


IRS Tax Tip 2016-20:

What You Need to Know About Taxable and Non-Taxable Income  (click on the link below)
IRS Tax Tip 2016_20

 

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting. We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


Tax-Exempt Church Schools – Frequently Asked Questions

As we enter tax season, important questions that have been in the back of our minds for the past year float to the surface.  Attached is an article from the American Institute of Certified Public Accountants (AICPA) addressing frequently asked questions regarding Tax-Exempt Church Schools that we would like to share with our clients.  As the season progresses, we will share these frequently asked about topics and other important accounting and tax issues as they arise, so stay tuned…..

Tax Exempt Church Schools FAQs

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting.  We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


Charitable Solicitations – What is Required in Arizona and Other States

We have been asked by our clients where to locate information regarding laws for charitable solicitations in Arizona and other states.  Laws regulating the solicitation of funds can vary from state to state.  The IRS provides some basic information with links to other resources to answer these state by state questions. 

 

See the link below for specific information on these requirements.

 

IRS Information for Charitable Solicitations

 

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting.  We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


Non-Cash Contributions – Have your Documentation

From Western CPE

eTax Alert™

 

Court Shows No Charity in Disallowing $37,315 of Non-cash Contributions (Kenneth Kunkel, TCM 2015-71)

Kenneth and Susan Kunkel claimed a $37,315 charitable deduction for non-cash contributions on their 2011 tax return. The Kunkels claimed to have donated property to four organizations: their church, Goodwill, Purple Heart, and Vietnam Veterans. They had no receipts, photos, or other documentation for the contributions, but claimed that they didn’t need receipts because each donation was less than $250.

What documentation is required?

$250 or more. For all contributions of $250 or more, the taxpayer generally must obtain a contemporaneous written acknowledgment from the donee (§170(f)(8)).

Less than $250. “Separate contributions of less than $250 are not subject to the requirements of Subscribe Share Past Issues Translate §170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable year equals $250 or more” (§1.170A-13(f)(1)).

$500 or more. Additional substantiation requirements are imposed for contributions of property with a claimed value exceeding $500 (§170(f)(11)(B)).

More than $5,000. Still more rigorous substantiation requirements, including the need for a “qualified appraisal,” are imposed for contributions of property with a claimed value exceeding $5,000 (§170(f)(11)(C). “Similar items of property” must be aggregated in determining whether gifts exceed the $500 and $5,000 thresholds (§170(f)(11)(F)).

What are “similar items?” The term “similar items of property” is defined as “property of the same generic category or type,” such as clothing, jewelry, furniture, electronic equipment, household appliances, or kitchenware (§1.170A-13(c)(7)(iii)).

The court categorized similar items from Kunkel’s list of non-cash items.

Clothing – $21,920
Books – $8,000
Furniture – $3,090
Household items – $1,653
Toys – $1,072
Telescopes – $800
Jewelry – $780

No appraisals and no receipts equal no deduction.
Clearly the clothing and book donations exceeded the $5,000 value and required appraisals to properly substantiate the deduction. All other categories exceeded $250 and required receipts. The court agreed with the IRS’s disallowance of all non-cash contributions.

Tax practitioner idea. Claiming a $6,000 contribution of “household goods” would require an appraisal. Claiming a $3,000 donation of furniture and a $3,000 donation of clothing would not. Categorize the donations carefully.

 

© Vern Hoven and Sharon Kreider 

Western CPE

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting.  We are located in Prescott and serve all of Yavapai County, and Northern Arizona.


Document Retention and Destruction Policy

Many clients ask about record retention.  Click on the link below for a suggested record retention policy for non-profits, proposed by the AICPA.  It can be used by just about anyone that has business or non-profit organization records.

Not-for-Profit Document Retention Policy

If you have additional questions about this post or any other, please contact us directly at 928-778-0079.

Schutte & Hilgendorf is a leading Prescott CPA firm, offering superior client service to individuals, small businesses, non-profit organizations, and homeowners associations.

Our services include accounting, bookkeeping, audit, review, tax return preparation, tax planning, payroll and QuickBooks consulting.  We are located in Prescott and serve all of Yavapai County, and Northern Arizona.

 


Are my Social Security Benefits Taxable?

We get a lot of clients that ask us when their Social Security Benefits become taxable.  The following information is provided bythe Social Security Administration and clearly explains when your Social Security Benefits become taxable.  This is also available by

 

CLICKING HERE

 

Should you need assistance or have questions about your Social Security Benefits and their taxability, contact Schutte & Hilgendorf, CPAs, providing tax planning and preparation, auditing, accounting and QuickBooks consulting to the greater Yavapai County. Call us at 928-778-0079 or email at info@prescottaccountants.com

Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits.

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:

  • file a federal tax return as an “individual” and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.
  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.
  • are married and file a separate tax return, you probably will pay taxes on your benefits.

*Note:

Your adjusted gross income

+ Nontaxable interest

½ of your Social Security benefits
= Your “combined income

Each January you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax.

If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

For more information about taxation of benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.


Audits Add Shine to Firms – WSJ.com

By ANGUS LOTEN, WSJ.com

Small businesses whose books are audited—by a hired certified public accountant, not the Internal Revenue Service—improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.

Yet even as owners continue to struggle with tight credit, few can afford the time, effort or cost of preparing complex financial statements, let alone having them audited, small-business owners, lenders and accountants say.

“Banks love when you have audited financials because they view it as a form of insurance,” says Buzz Rose, a certified public accountant in Pittsburgh. “But audits have become very expensive and to have one done ‘just in case’ would seem to be a waste of time and money.”

But the benefits might outweigh the costs.

Based on data from more than 10,000 closely held companies—about half of which have less than 500 employees—a study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses. For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000.

A small-business audit costs anywhere from $5,000 to $75,000, depending on the size of the company, the complexity of its data and other factors—typically double the cost of a financial statement review, the next highest level of CPA-verified assurance after an audit.

An audit provides third-party assurance that a company’s financial statements are correctly prepared and based on verified business data, while a review shows the statements are at least internally consistent with data provided by management.

“There appears to be a very real cost benefit to getting an audit, beyond the obvious value of having your financial statements in order,” says Michael Minnis, a Booth School assistant professor of accounting who led the study. The Booth School study is expected to be published in the Journal of Accounting Research in May.

Similarly, a joint study last year by Michigan State University and Indiana University found small businesses with audited financial statements were “significantly less likely” to be denied credit from banks.

David Leuthold, chief executive of Century Negotiations Inc., a North Huntingdon, Pa., consumer-debt settlement firm, says he started having his books audited annually in 2005 to double-check his own bookkeeping, paying about $8,000 an audit. The move paid off when he applied for a $100,000 line of credit the following year.

“The bank required audited financial statements,” says Mr. Leuthold, whose company made $8 million in revenue last year. Even without audited books, he believes the bank might have approved the loan, though at less favorable terms. “We had what they wanted, so it was definitely worth it,” he says.

Still, for many small businesses seeking a loan, lenders say an audit is costly and unnecessary.

“Audits provide good information. The more concrete information a lender can get, the better,” says Tom Burke, the director of Wells Fargo’s Small Business Administration lending division. But he questioned the necessity of audits for every business.

Mr. Burke says a business with less than $1 million in annual revenue can ask a CPA to prepare a compilation, which is a cheaper, unaudited financial statement based on recorded sales, inventory and other data. Since owners often use these statements to manage daily operations—and they’re prepared by CPAs—lenders have some assurance of the statements’ accuracy in making loan decisions.

“I’d hate to see people taking steps that aren’t necessary, or that they can’t afford,” Mr. Burke says.

Small-business accountant David Wilke, of Carnegie, Pa., says he helps borrowers and lenders negotiate loan terms based on mutually acceptable levels of assurance, ranging from compilations to audits. He says a CPA “adds value by determining what a bank wants and what a business can provide at an early stage,” rather than trying to convince every client to get audited.

Mr. Rose, the accountant in Pittsburgh, says it’s only worth going through an audit—which can require days and even weeks of a manager’s time—when a business owner has a loan in hand that’s contingent on providing audited financial statements.

Audited or not, less than a quarter of businesses with fewer than 500 employees keep financial statements of any kind, according to the Federal Reserve Board’s National Survey of Small Business Finances.

“There’s a lot of criticism that it’s expensive and difficult to prepare and audit your financial statements,” says Teri Yohn, an Indiana University associate professor of accounting who sits on the Financial Accounting Foundation’s blue-ribbon panel on private-company accounting standards. “But there are clearly benefits.”

Schutte & Hilgendorf, PLLC, a Prescott based CPA firm provides audits and reviews to small businesses, government entities, non-profit organizations, and homeowners associations.  We also provide tax preparation and planning services, QuickBooks consulting and training and payroll and sales tax services to individuals and small businesses.  Contact us for pricing or more information about how we can help you!


How many non-profit boards hire an outside auditor?

How many non-profit boards hire an outside auditor?

Eighty-four percent of the respondents of a recent BoardSource governance survey say that they annually hire an auditor to conduct an external financial audit. Smaller organizations are less likely than large organizations to hire an auditor.

Here are five key ways to maximize the audit process:

Be sure the board is in the audit driver’s seat. The nonprofit board has the responsibility to oversee the audit process. This includes assessing the financial controls, policies, procedures, and condition of the organization and overseeing the external auditor.

Review the auditor’s independence. The board should be certain that the auditor is independent and objective in performing duties.

Choose your auditor carefully. Even with rigorous efforts by professional bodies governing the practice of Certified Public Accountants to improve the quality of audits, not all audits are created equal.

Invest your audit dollars wisely. While it is important to be certain the audit fees are reasonable in light of the quality and value of an audit, focusing too much attention on cost can be detrimental to the health of the audit and ultimately to the organization.

Properly use your audit committee. The audit committee should be the fulcrum of the financial reporting function. Start with an independent audit committee. The committee members should not be members of the nonprofit’s staff. Invite staff members to committee meetings to answer questions and to provide information.

Excerpted from the Maximizing the Audit Process by Dan Busby.

Should you have questions regarding this post or any other accounting or auditing needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.