Monthly Archives: April 2015

Wait, What is the IRS Asking Me?

Most people look right to the bottom line of their income tax return to see what they owe or what they are getting back.  However, your tax return can contain a lot of questions that you may not have noticed previously.

The first thing you may have overlooked is on the first page of your return, right next to your name and address.  It is here you are asked if you wish to contribute $3 to the Presidential Election Campaign for either yourself, your spouse, or both.  It doesn’t have any impact on your tax as it simply earmarks $3 of your taxes paid for this specific purpose.  Only 6% of American taxpayers in 2013 opted to check yes to this on their returns.  In 2014, President Obama signed a bill which redirected the portion of these public campaign funds used for conventions towards pediatric medical research.

Now if you have interest and dividend income, your return will include Schedule B.  If this income exceeds $1,500, you are required to answer some questions on the bottom of the form related to foreign accounts and trusts.  With these inquiries, the IRS is throwing out an information net to locate any individuals with foreign assets that may not be reporting them properly.  If you have any interest in, or control over, any kind of foreign financial account, then you would answer yes to one, or possibly several of these questions.  Each yes answer may lead to a requirement to file additional informational forms, such as the FinCen Form 114, most commonly known as the FBAR.  So pay attention carefully to this section if any of these questions apply to you as failure to file any required informational forms can lead to penalties.

Lastly, if you had a business reported on your return (Schedule C), rental or pass-through income (Schedule E), or ran a farm (Schedule F), then you should have seen a question on the top of each form asking if you made any payments that would require you to file form 1099.  A 1099 is generally required to be issued to any individual or partnership to whom you paid $600 or more as part of your business in a given year for services, not goods.  If you answer yes on either of these forms, and have not filed your 1099s, this will potentially open the door for the IRS to hit you with some penalties ranging from $30 to $100 per 1099, depending on timing of when they were filed correctly.

As you can see, it pays to really look at your entire return, not just the bottom line.  As always, you should consult your tax advisor if you have any questions about the above items, or please contact us at accountants@gkgcpa.com

Ray Neubauer, CPA, CGMA, Partner

Big Changes are Expected for Nonprofits

What do users of nonprofit financial statements really want to know?

Most users want to know if the organization’s financial resources are effectively managed and sufficient to assure long-term viability. What resources they have available to them and how are they using these resources.

There have not been any major changes to the nonprofit financial statements since 1993.  It was been suggested that it is time to re-evaluate the financial statement presentation.

The Financial Accounting Standards Board(FASB) is getting ready to issue their proposals that could offer considerable revisions to the way Nonprofits present their financial statements.

The proposals address the areas of net asset classes, financial performance, reporting of expenses, cash flow statement and disclosures to the financial statements.

Here is what we can expect …

Instead of remaining with the three classifications of net assets (unrestricted, temporarily and permanently restricted) there will be two classes, “without donor restrictions” and “with donor restrictions”.

There will be a required footnote disclosure, basically, the organization will need to show if they have enough liquid assets to meet their operational need based upon their time horizon.

There will be flexibility with expense reporting. The organization can report expenses on the face of the financial statements either by function or by natural expense but there will probably be a high level footnote disclosure with a table-type format showing function and natural.  On the plus side, there will no longer be a statement of functional expense required for voluntary health and welfare organizations.

The cash flow will now be presented on the direct method. Some items on the cash flow statement will be categorized. There will be changes to what is considered to be operating verse financing and investing activities.

It will be interesting to hear what comments the nonprofit organizations will offer in regard to these proposed changes.

-Terry Ann Wheeler, CPA, Audit Manager