Category

Accounting

Dec 01
0

Payroll Tax Credits May Be Available to Businesses That Paid Emergency Leave

By | Accounting, Nonprofit, Tax | No Comments
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If your business paid for emergency leave during the COVID-19 pandemic, you may be eligible for certain payroll tax credits.

Billions of dollars in aid resulted from a series of laws passed around March 2020. These laws were intended to offset the financial burden from small business owners who continued to pay employees wages and paid emergency leave during the pandemic. Now that the national health emergency is over, businesses must be vigilant and claim any rightful tax credits that remain from the pandemic-era laws.

Family First Coronavirus Response Act and Tax Credits

Under the Families First Coronavirus Response Act (FFCRA), private American employers with fewer than 500 employees could receive payroll tax credits to offset the costs of the requirement to provide employees with qualifying paid leave for specified reasons related to COVID-19.

The mandate ended in 2020. However, the American Rescue Plan Act (ARPA) extended and expanded the payroll tax credits, allowing covered employers to take the credits until Sept. 30, 2021, if they voluntarily provided employee paid leave under the FFCRA framework. Keep in mind that the credit could be affected by local and state COVID-19 leave requirements and the interaction with the requirements under FFCRA. Another caveat is that an employer could only qualify for the federal tax credit if the leave met the requirement of the original FFCRA mandate.

What You Need to Know About FFCR Act

From April 1, 2020, through March 31, 2021, American private employers with fewer than 500 employees and self-employed individuals could claim certain COVID-19-related leave credits. The maximum leave days varied based on the situation and the calculation was dependent on regular work hours. Qualifying reasons for leave during this period included various COVID-19-related circumstances, and part-time employees received leave equivalent to their regular hours.

From April 1, 2021, through September 30, 2021, healthcare providers and certain governmental employers became eligible for the credits, and the limit on self-employed family leave credit increased. Non-discrimination rules were also established. Also, during this period, more reasons for leave were added, including COVID-19 testing and vaccination-related leave.

Wage calculations for paid sick leave depended on the reason for the leave, with varying pay rates.

The American Rescue Plan Act (ARPA) introduced changes in the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA), affecting the refundable portion of credits and other details.

Under EFMLEA, the maximum leave amount and eligibility were modified, allowing for an increase in the aggregate amount and extending eligibility to healthcare workers and emergency responders.

Organized Recordkeeping Is Critical for Compliance and Reimbursement

Regardless of whether you granted leave, you must keep all the requests and time tracking information for up to four years. The Department of Labor requires employers to maintain the following documentation for four years:

  • Documentation demonstrating how the employer determined how much paid leave an employee was eligible for
  • Documentation showing how the employer determined the amount of qualified health plan expenses that were allocated to wages
  • Copies of completed IRS Forms 7200 and 941 that employers submitted to the IRS (If you use a third-party payer to meet employment tax obligations, you’ll need a copy of their records to meet this requirement).

Although the pandemic may be over, many of the record-keeping and reporting requirements for businesses will carry over for several years as the reconciliation between applications for tax credits and reimbursements continues. It is always a good idea to maintain clear, consistent records, in an organized fashion, for the required time so that you can back up any claims when needed.

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.

Nov 29
0

Converting from INFR to GAAP: Considerations

By | Accounting, Nonprofit | No Comments
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One unusual question that may arise is when a client wishes to change from INFR (international financial reporting) standards to the GAAP (generally accepted accounting principles) standards. Most of the available literature covers the opposite: GAAP to INFR.

Currently, there is no authoritative standard to refer to when changing from INFR to GAAP. Financial Standards Accounting Board FASB ASC 250 provides guidance solely for reporting accounting changes within the same basis, not for moving from one basis to another. However, we can refer to several nonauthoritative sources and draw inferences to guide the transition.

INFR: Not a Special Purpose Framework

A publication by the AICPA’s Center for Plain English Accounting (CPEA), “Common Questions About Special Purpose Frameworks” points out that IFRS does not constitute a “special purpose framework.” Why is this important? Because nonauthoritative guidance for special purpose frameworks does exist. The AICPA designated the International Accounting Standards Board (IASB) as the body to establish professional standards, including those pertaining to international financial accounting and reporting principles. Because of this, INFR may be considered generally accepted accounting principles. Most literature refers to changes within the same accounting basis, not moving from one basis to another.

Suggestions to Make the Standards Switch

So, if there are no authoritative guidelines, and the nonauthoritative guidelines aren’t clear, then what? Deloitte published a paper in 2020 attempting to address this issue as well. First-time adoption of GAAP after using INFR is a bit more complex than converting INFR to GAAP, but it can be done.

Deloitte’s authors suggest the following:

  • Organizations should review all historic transactions since their inception to determine whether the accounting for such transactions would have been different had U.S. GAAP been applied. If that sounds tricky it’s because it is. For example, you’ll need to consider all historic business combinations and whether there should be any amounts (goodwill, fair value adjustments to long-lived assets) that should be included in the opening balance sheet.
  • Companies moving from INFR to GAAP usually complete a full retrospective application. One of the key principles of IFRS 1 is to apply retrospectively all standards effective as of the reporting date of the entity’s first IFRS financial statements (with some exceptions and exemptions). However, U.S. GAAP requires the application of the standard effective as of the transaction date and apply new or changes in accounting policies in accordance with the respective transition requirements of each standard.

What if your company has a very long history? Long-established companies converting to GAAP may need to refer to the previous accounting hierarchy and original pronouncements to determine the appropriate accounting for a particular transaction.

Disclosing Such a Change

For successor auditors, the question arises as to how to report such a change. Such changes should be reported as a “change in accounting standards” or “change in accounting basis” (not change in accounting) within reports. This makes it clear what has changed. Successor auditors would be wise to proceed with caution if inheriting such a situation and carefully consider all options. The lack of authoritative guidelines makes it challenging, but not impossible. Reading between the lines, making decisions that err on the side of transparency and full disclosure, and common sense can go a long way towards making statements clear.

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.

Oct 17
0

Strategies to Address the Accounting Talent Shortage

By | Accounting, CPA | No Comments
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Although accounting remains a popular undergraduate major, there is a growing shortage of talented accountants in the profession—and especially of CPAs. According to the Society of Human Resource Management (SHRM), over 300,000 accountants left their jobs in 2022, a decline of 17% from a peak in 2019. And while Baby Boomers are retiring in droves, it’s not the only reason for the career exodus; an almost equal number of mid-career professionals and younger generations are also leaving the profession.

This gap has not remained unnoticed. Several industry-leading groups, including the National Pipeline Advisory Group, are exploring solutions to the accounting talent and CPA gap. And while there’s no magic wand to fix the lack of CPAs in the near-term future, there are many strategies that may provide an answer.

Strategy 1: Personal Outreach

It’s old-fashioned but effective: the direct, personal approach. Members of the National Pipeline Advisory Group, as reported in the Journal of Accountancy, are taking a direct approach to encouraging young and mid-career professionals to become CPAs. The direct approach includes speaking to people at conferences and events, joining local organizations and attending meetings, and simply speaking to people who are talented at what they do, enjoy accounting, and may be interested in becoming CPAs.

It may seem obvious that a good career step for an accountant is to obtain their CPA license, but sometimes, people just need a little inspiration. That’s where the direct approach comes into play. Having someone mention it may be just the thing someone needs to explore their next career move. It can’t hurt, and it certainly leads to many industry connections, which benefit everyone in the conversation.

Strategy 2:  Remove Obstacles to the CPA License

As with any professional accreditation, the CPA exam requires an intensive amount of study and preparation. Some suggest changing the 150-hour post-graduate study requirement, for example, which adds approximately one year onto the bachelor’s degree. Perhaps other means of achieving the same high level of education and professional expertise can be explored so that more people can pursue the CPA path. Removing limitations without compromising integrity or quality may be an important path to increasing the number of CPAs.

Strategy 3: Augment with Technology

Technology cannot replace an accountant or CPA. No matter how good the platform, program, or system, it cannot and should not be used as a substitute for qualified accounting advice.

That said, technology can augment your existing accounting staff and improve efficiency by taking repetitive tasks off the plate of your current team. For example, automating legal disclaimers or routing emails that must be sent to clients can save up to an hour per day from a busy company’s time, freeing that time up for more advanced tasks. Other automations such as sending reminder invoices to clients for past due invoices, routing approvals automatically, and running reports can all be done by technology and save time for more advanced tasks for your current staff.

CPAs Matter to All Organizations

CPAs perform vital and irreplaceable functions for organizations of all sizes, including nonprofits. Students view the accounting profession favorably, citing ample job opportunities and room for career growth and interesting career paths as reasons they chose to enter the profession.

However, something is stopping these bright young minds from acquiring the advanced education to become CPAs. If we can work together within the profession to explore why this is occurring and remove potential barriers, we may be able to solve this crisis together.

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.

Sep 19
0

AI: A Powerful Tool for Nonprofit Accounting Needs

By | Accounting, Nonprofit | No Comments
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The introduction of ChatGPT, Bing’s artificial intelligence (AI) powered search engine assistant, set the world abuzz last November. Since then, countless articles, talk shows, and more have discussed, dissected, and analyzed the use of AI in the business world.

AI isn’t new. You’ve probably encountered it before and assumed it was part of a website. Have you ever used a website’s chatbot function to answer a simple question? If so, you’ve likely used AI. Or perhaps you’ve tapped the “design help” function in PowerPoint to help spruce up your presentation. That’s also a great example of AI in action.

AI can assist the average nonprofit in many ways. One way in which AI offers powerful time-saving features is in the accounting department. Here, we’ll unpack why and how AI is a powerful tool for nonprofit accounting needs. Then, if you’re interested in exploring this topic further, reach out to us and we can discuss how AI can be used to automate and improve processes in your nonprofit accounting team.

Why Use AI for Process Automation?

Consider how much time is spent on routine tasks each week: emailing reminders to employees to enter their hours or submitting expense reports, for example, or emailing common forms and paperwork to constituents. Even something as simple as sending a participant quiz to those who have taken a webinar with your organization can take over an hour, depending on how much or little it is automated.

AI is an excellent tool for repetitive, rule-bound tasks. You can automate tasks, workflows, reports, and reminders using AI in your accounting department. A quick estimate of the time saved through automating these tasks is eye-opening. With that time saved, you can focus on more pressing needs requiring creativity and expertise. Let the AI batch and send expense report reminders while you strategize with the program team on their accounting needs; it is time well saved and better spent with your teams.

Improved Data, Analytics, and Forecasting

Another area in which AI greatly helps with accounting and financial needs is in data, analytics, and forecasting. Because AI can analyze vast amounts of data rapidly, it can provide insights into constituents’ needs, program demands, and operational performance. With rapid information at your fingertips, you can make better decisions.

Not All AI Is Created Equal

Now comes the hard part. How do you select the right platforms that have AI enhancements without choosing something that will be obsolete tomorrow?

The key is finding the right consultant to assist you in the process. You need someone well-versed in accounting and financial needs for nonprofits who also understands the software world.

Choose from among vendors with time-tested platforms. Sage Intacct, for example, is used worldwide by over 11,000 for-profit and nonprofit companies. It is a well-known accounting and finance platform that includes many time-saving automations. MIP Fund Accounting is another platform that can be deployed on-premises or in the cloud that offers many time-saving automation for payroll, HR, accounting, and more.

Ultimately, the choice of the right nonprofit accounting and finance software is a decision that may take some time. Most software companies include AI-powered automation in their products, especially as consumer interest and acceptance of using the tool to save time has grown. There is no better use of AI than to automate manual processes, thus freeing up accounting professionals for more creative and challenging tasks.

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.