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Accounting

Tips for 2023 Affordable Care Act Compliance

By | Accounting, Audit, Insurance | No Comments

One of the more controversial aspects of recent legislation was the increase of funding for the Internal Revenue Services’ enforcement team. Many expect that the IRS will turn their attention to previously neglected areas of enforcement, including the Affordable Care Act (ACA).

Affordable Care Act: Compliance Basics

If it’s been a while since you reviewed ACA compliance, here is a brief refresher. Large employers with 50 or more full-time employees are required to provide adequate and affordable medical coverage to their employees. If they fail to do so, the penalties include a fine of $229.17 a month or $2,750 for 2022, multiplied by the total number of full-time employees in excess of 30. The 49080H(b) penalty amount of $343.33 a month or $4,120 for 2022 is assessed on a per-employee basis for every full-time employee who receives a premium tax credit after not being offered adequate or affordable coverage.

Compliant Companies May Still Face Audits

Let’s assume that your company meets the ACA coverage requirements and fully complies with the Affordable Care Act. You may feel you’re in the clear. However, just because your company is complying does not mean it is exempt from an ACA assessment. Failing to complete forms 1094 and 1095-C can raise red flags especially if you report health insurance amounts on forms W2 filed with the IRS. This kind of discrepancy can lead to questions from the IRS and/or employees when trying to file their taxes which could lead to fines and assessments being charged to you for non-compliance. This failure can also flag other governmental agencies leading to other non-compliance fines and penalties.

Up until 2021, the IRS held a policy of “good faith,” meaning that if employers can demonstrate they were trying to comply with the requirements in good faith by showing their due diligence, they were given grace to rectify any incomplete or incorrect reports. That grace period, however, ended in 2022, and many are seeing an uptick in IRS inquiries over incomplete or incorrect ACA reporting.

Common ACA Reporting Mistakes

Employers make many ACA reporting mistakes, but these are the most common. Check to ensure you’re not making these common errors on forms 1094 and 1095-C which can lead to unnecessary penalties and requests from the IRS for further information.

  1. Over reporting employees: You only need to issue 1095-C to full-time employees. There’s no need to issue it to part-time employees.
  2. Not validating safe harbor codes: You must validate, or provide documentation, to claim safe harbor for affordability on 1095-C. Speak with your accounting expert or CPA to determine if your company does indeed meet the safe harbor requirement
  3. Avoid “free” reporting services: If your bookkeeping software comes with “free” ACA reporting features, use with caution, and have someone double check the results that understands ACA 1095/1094 filing requirements, even if it comes out of your payroll/accounting system.
  4. Not responding to marketplace notices: Responding to marketplace notices is the first opportunity to prevent mistaken penalties. When an employee is determined eligible for a premium tax credit to purchase coverage from the Marketplace, they typically receive a notice of eligibility determination. If the employee can prove to the Marketplace that affordable, adequate coverage wasn’t made available by the employer when in fact it was, the employer can and should appeal. Don’t ignore marketplace notices or employee concerns that come up while they try to file their taxes annually.
  5. Get a benefit plan review annually if you are offering health insurance and other benefits to your employees unless you are an expert in ACA compliance and filing requirements. Another option is to outsource ACA processing and associated compliance to a third-party provider like your health insurance plan providers. Paying for a benefit plan review or outsourcing this function to a third party that specializes in this area will be well worth the cost of these services. Increased priority has been given to ACA filing & compliance starting in 2022 from the IRS and is evident with the number of agents they have assigned to this area for 2022.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Four Characteristics of a Successful Finance Leader

By | Accounting, Professional Development | No Comments
people standing and cheering behind another person in an office

What type of leader are you? Do you thrive on interactions with others, exchanging ideas, brainstorming, and working in groups? Or perhaps you are more on the visionary side, sharing stories, examples, and ideas to motivate and inspire your team.

These are just two examples of characteristics or traits of successful finance leaders. Not every leader possesses all these traits; most have a dominant working style, and perhaps a secondary style. No one style is better or worse than another, either. Some leadership styles fit in better with a particular organization’s culture than other styles, but that doesn’t necessarily make them better (or worse).

Each person’s personality is shaped by both innate characteristics and their life histories and experiences. We bring these attributes to our roles as finance leaders and managers. See which one of these four characteristics best describes your leadership style and learn how you can leverage your strengths for the betterment of the entire organization.

Leadership Style 1: The Connected Influencer

This is the leader who uses their connections within the organization—with the CEO, the CMO, and other leaders—to influence and shape the trajectory of their organization. They thrive on teamwork, but more so on using their position to create positive, lasting changes.

Leadership Style 2: The Authentic Disruptor

This is the leader who isn’t satisfied with the status quo. They are constantly asking, “Why?” Why do we do things this way and not another? These questions lead to lasting, positive changes in the organization. They are often viewed by the CEO as innovative and future-focused, someone who can be trusted to lead and manage change.

Leadership Style 3: The Curious Storyteller

The curious storyteller is a leader who connects the dots among various points of information in an organization to grasp and shape the big-picture store. This is the leader who sees the forest for the trees and who rarely gets lost in the details. Instead, they can juggle multiple points of view and sources of information to deeply understand whatever problems need to be solved.

Leadership Style 4: The Value Creator

The Value Creator takes a logical, rational approach to leadership. This is the leader who prefers facts and figures, and who can understand the big-picture consequences of the data presented in a report. The Value Creator focuses on KPIs, metrics, and measurements, and can quantify the value they bring to organization whether they’re addressing the board of directors or a group of employees.

Maximize Your Leadership Style

As you can see, each leadership style is unique. Leveraging the unique strengths of each role is one way to make the most of your personal leadership style.

The Connected Influencer, for example, thrives on making and maintaining connections. This leader benefits from participating in peer groups, attending conferences, and networking to make new connections. By making new connections, such a leader can bring fresh ideas into an organization and develop a support network whenever they need it.

For moribund or staid organizations, the Disruptor may be the one to bring the fresh winds of change into the building. A nonprofit with a venerable history, but set in its ways, may find itself shaken to the core by a disruptor’s leadership style, but in the end, it’s like spring cleaning—unpleasant while it’s underway but the outcome is welcome. Disruptors may wish to look for positions that enable them to ask the right questions to make changes. Organizations that are happy with the status quo probably aren’t for you; ones that are willing to ask and answer important questions will love your leadership traits.

The Curious Storyteller can also be a change agent, but they can also support organizations in crisis by helping them see beyond the immediate situation and into the future. Their unique gift of connecting the dots for people and weaving it into a compelling story can give hope to an organization that is struggling or motivate teams to move beyond the present and into the exciting future.

Lastly, the Value Creator often works best when paired with a visionary CEO or others in the leadership team who need grounding. Because you bring value through careful, clear, and logical analysis, you can offset the more “big picture” thinking of the Visionary. Finding a Visionary you work well with is the key to using your strengths to your advantage.

Are There More Than Four Leadership Styles?

People are like diamonds—they have many facets. Yes, there are more than four leadership styles, and they can be characterized quite differently depending on where they originate.

If you’re curious about leadership styles, it’s a fun area of personal growth to explore. Each management school groups leadership traits differently, and the intersection of personal characteristics (such as those analyzed by a Myers-Briggs, Enneagram or DISC assessment) along with management style theories can help you understand the nature of your personality and how your strengths and weaknesses can be used to benefit your organization and those around you.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Improving Communications with Data and Trend Analysis

By | Accounting, Data, Donations, Nonprofit | No Comments
people looking at papers on a desk with graph overlay

Charts, graphs, and financial reports may seem like they don’t say much to those outside of the accounting and finance department. But with the right data and trend analysis, the information contained in these reports can inform and improve constituent communications.

The Tip of the Iceberg

It’s an old cliché, but a good one—the tip of the iceberg. If you imagine an iceberg, you can only see the tip of it. The majority of the iceberg is underwater but it’s probably the more important part.

The same goes for your organization. The data that you can easily find is the “tip of the iceberg” and readily available. And it’s usually what your team uses to base their decisions.

However, what’s going on underneath the surface is often the more valuable information. Getting to it is the challenging part.

How Nonprofits Can Leverage Data

Many organizations only dig at the surface level into their data. They run basic financial reports to gauge how fiscally solvent an organization is, or which programs require more funding and leave it at that. But the data that can be used to assess funding can also be used to dig deeper into issues such as program demand, program use, and more.

Each nonprofit is unique and tracks different data. But, in general, nonprofits can mine their data to find information to help them improve programs, improve donor communications, and ensure transparency.

Look beyond your existing technology for additional data. Although your current accounting system may provide plenty of data, other data exists. If your nonprofit sells items, look at warehouse and inventory reports. If programs provide participation and survey data, add that to the data repository for examination. Consider many sources to leverage all of your data and build a stronger, better organization.

Improve Programs

Nonprofits that track program participation can look more closely at program data to update their offerings. Programs that receive higher participation, for example, should be examined to determine if they can be spun into additional opportunities. For example, an animal shelter offering a spay/neuter clinic may find that a free rabies vaccination clinic is also in high demand and brings people into the shelter to view (and potentially adopt) homeless pets. An education nonprofit that finds its free mathematics tutoring program for elementary school children in high demand may wish to expand into the high schools and so on.

Better Donor Communications

The same data that reports on your program activities can also be leveraged to improve donor communications. Program participation and success data can be parlayed into donation campaigns demonstrating the efficacy of your offerings. People like to give to successful initiatives as it makes them feel that their donation is worthwhile, so demonstrating how successful the programs are can go a long way towards encouraging additional donations.

Enhanced Visibility

Successful nonprofits know that increasing visibility into their activities and finances is an excellent way to court donors and participants. The more transparency and visibility into their actions, the greater the trust they engender with the public, which in turns leads to better utilization of their programs and increased donations. Sharing the data from your systems and using it to for storytelling purposes can take your nonprofit to new levels.

Increasing Nonprofit Success in a Tough Economic Climate

Inflation and global unrest have created a climate of uncertainty, and this in turn means fewer people donating to nonprofits … or does it? It doesn’t have to lead to a downturn in donations. Instead, leveraging stories and data, improving program offerings based on data, and ensuring transparency and communications can build up programs and services during times when other nonprofits may be struggling. For those nonprofits that can dig deeply into their data, they may find information that can lead them to greater improvements across the organization.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

How Should Your Nonprofit Handle Cryptocurrency Assets?

By | Accounting, Cryptocurrency, Donations, Nonprofit | No Comments
person holding tablet and touching virtual screen with finance and bitcoin graphics

Cryptocurrency presents many challenges to nonprofits that accept it as payment or donations. Crypto such as bitcoin, ether, and the many other digital assets on the blockchain, are becoming ubiquitous with everyone from college kids to grannies dabbling in the new financial asset. And while regulations are being discussed, companies and organizations are left struggling to understand how to track and manage it. Here are the challenges and some advice for nonprofits interested in accepting or utilizing crypto assets.

What Is a Cryptocurrency?

Cryptocurrency, or crypto, is a digital asset tracked on the blockchain—an immutable public register of transactions that enable anyone to track the original and transfer of the asset. While you may know the major “coins” from the news such as bitcoin or ether, there are hundreds of other coins on the market.

Challenges of Cryptocurrency

Crypto is a new category of financial asset and one that regulators continue examining to determine how to account for them. Are they investments (like stocks or bonds) or assets (like gold or silver)?

In addition to challenges understanding classification and the rules governing such classifications, there are additional challenges inherent in accepting them either as payment or donation, including:

  • Highly volatile value: Unlike fiat currency, which offers a stable store of value (despite inflation), the value of digital assets varies widely from day to day, even hour to hour. This makes it difficult to estimate and track over time.
  • Incompatible with ERP setup: Crypto values are tracked to the 16th decimal place, which is completely incompatible with ERP systems set up to track dollars, euros, and other common currency.
  • Difficulty tracking: GAAP rules require tracking of assets on a cost basis (the initial purchase price of the asset), the fair value of their holdings, and the book value. This is impractical with digital assets due to their volatility, but clear guidelines are lacking from regulators.

Forming a Crypto Asset Strategy

Given the many challenges, you may be wondering why your organization should even consider accepting cryptocurrencies. Donors may wish to contribute to your organization using crypto, and this is a valid reason to consider adding it as a donation method. To do so effectively, you’ll need to create a crypto asset strategy to guide your staff in handling such assets.

  • Learn first: As with any new technology, platform, or asset, it’s important to learn all you can about it before diving in. Discuss adding cryptocurrencies to your organization with your accounting team and outside CPAs (if you have one) to understand their point of view.
  • Research payment gateways: Cryptocurrency payment gateways enable you to streamline transactions. Bit Pay and others offer ways in which you can send and receive crypto in the easiest manner possible.
  • Discuss with your board: Your board needs to be fully behind the project to add crypto as a payment or donation method. Bring the issue to your board and ensure a thoughtful discussion by sharing industry statistics and information with them. Some board members will be unfamiliar or even put off by the news from the crypto world and may need some additional information prior to engaging in a discussion.
  • Engage stakeholders: Bring the issue to your internal teams, too. Ask representatives from each department to be on a committee or group to investigate adding crypto to your organization. It’s vital to hear from every department that may be impacted by the decision.

Keep in mind that if you do proceed with crypto, you may need to customize aspects of your accounting system as well as internal controls to adjust to this new method of payment.

Cryptocurrency seemed like a fad when it appeared in 2008, but it’s still going strong. If it looks like an opportunity for your organization, begin exploring it today.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.