Category

Accounting

Nov 10
0

The Washington Cares Fund: Making Long Term Care Affordable

By | Accounting, MIP Fund Accounting, Nonprofit | No Comments

Organizations located in Washington state have another benefit they can offer to their employees: the WA Cares fund. This fund, created and managed by the state itself, provides long-term care options to all residents in the state. Residents contribute to the fund while they are working and can access the benefits if they meet certain criteria for long-term care needs.

How Does the WA Cares Fund Work?

In 2019, Governor Inslee signed the LTSS Trust Act into law. Through this act, Washingtonians will begin contributing .58 cents out of every $100 earned into the WA Cares fund starting in 2022. By 2025, those eligible for benefits may tap into them for long term care needs.

Why the WA Cares Fund?

Only about 7.5 million Americans have long-term care insurance, but more than 52% of people age 65 and older are likely to need long-term care at some point in their lives. And, with costs exceeding $300,000 on average over the course of a person’s lifetime, the expenses can be devastating to older Americans.

Washington is now the first state to offer long-term care insurance at an affordable rate for residents who meet eligibility criteria.

What Nonprofit Employers Need to Know

Employers do not need to contribute to the new fund. They do, however, have to track employee hours and wages, and report them to the state. Starting January 1, 2022, you will be required to report employees’ wages and hours worked, as well as collect WA Cares premiums from your employees’ wages. This is the same as you do now for Paid Leave.

You will not need to file a report during any quarters in which your employees have no hours or wages to report.

Are there exemptions?

Employees who wish to be exempt from the WA Cares premium may apply for an exemption. It is their responsibility to apply and to provide you with proof that their exemption was approved. Proof consists of a letter issued by the Employment Security Department (ESD). Once approved, exemptions are permanent, and employees cannot opt back in.

If you are notified that an employee has received approval for an exemption, you must keep a copy of the exemption letter on file and omit collecting the premium from the employee’s wages.

What if my organization offers long-term care insurance?

You may continue offering long-term care insurance to your employees, but it is up to them (not you) whether they should apply for exemption from the WA Cares coverage. There is no organization-wide exemption, so you are still responsible for monitoring wages and hours worked and deducting the appropriate amount of premiums from employees’ wages and reporting them.

You can learn more at: wacaresfund.wa.gov

MIP Fund Accounting Can Help You Track WA Cares Fund Premiums

For nonprofits running MIP Fund Accounting, setting up tracking of the WA Cares premiums is identical to the setup in the system for tracking WA Paid Family and Medical Leave. The only difference is that the setup for WA Cares should deduct .58 cents per every $100 of wages.

Washington is now the first state to offer this important coverage to employees. It’s one more benefit you can use to attract great employees to your organization and to provide your employees with peace of mind for their futures.

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.

Nov 03
0

Acknowledging Donations Graciously – and With Tax Receipts

By | Accounting, Donations, Nonprofit | No Comments

Nonprofit managers know the power of a gracious thank you when it comes to acknowledging donations. It’s part of donor management—ensuring that donors feel valued and appreciated.

But accompanying a lovely thank-you note should be something more ordinary: a tax donation receipt. A receipt for donation isn’t just proof that the donor gave money to your organization, but a document that can be used by donors to take a tax write-off. Here’s what your donation thank you and receipt should include.

Tax Deductions for Nonprofit Donations

Tax deductions may be claimed for those who donate goods or money to a charitable organization. Charitable organizations should be recognized as a 501 (c) (3) organization by the IRS.

A donation means that the money or goods given to the organization are done so without anything given in return. If you paid for a t-shirt at a museum gift shop, for example, that would not count as a charitable donation because you received the t-shirt in return. If, however, you donated $25 to the museum without receiving an item in return, it may be considered a charitable donation.

Thank-You Letters and Tax Documentation

Thank-you letters may seem old-fashioned, but donors do appreciate the acknowledgement of their generosity. In addition to a personalized thank-you letter, your organization should also include a receipt for the donation which the donor can use for charitable tax deductions.

Such receipts should include specific information, such as:

  • The donor’s name, address, and date the donation was received
  • The organization’s legal name
  • The organization’s tax status
  • The organization’s EIR
  • Total dollar amount given
  • If anything other than money was given, a description of the item donated

You should also include a note stating whether or not a gift was given as a thank you. A simple description is fine— “We hope you enjoy this small bookmark as a token of our gratitude” is sufficient. Remember, they are not paying for the gift, but you should acknowledge it in the letter.

Lastly, be sure to include a reminder to the donor to keep the letter and receipt as proof of their donation. Keep a copy in your files, too. You never know when you might get a call from a donor looking for it!

MIP Fund Accounting Makes Donation Receipts Easy

If your nonprofit is running MIP Fund Accounting software, you have the ability to print donation receipts right from your system. It’s part of the general ledger module, and it’s included in every MIP package.

You can access it immediately or, if you’re a current client and can’t quite figure it out, give Vicki at call at Welter Consulting, 206-605-3113. And, if you’re not currently a client but you’re interested in finding out more about how nonprofit accounting software can make your organization run smoothly, we welcome your call too.

Other Ideas to Thank Donors

One of the best ways to thank donors is to do so personally. A handwritten letter, a heartfelt typed letter, and of course, that donation receipt is much appreciated.

Other ways to thank your donors include:

  • Mentions on social media
  • Mentions in printed newsletters
  • Share a story or picture of how the donation was used
  • Create a short “thank you” video
  • Offer a small gift or inexpensive token of appreciation

A gracious thank you goes a long way toward enhancing the donor experience. And, along with a thank you, be sure to include your donor’s receipt so they can take advantage of the tax deduction.

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 fo

Sep 28
0

Tax News for Nonprofits

By | Accounting, Nonprofit, Tax | No Comments

Tax law changes all the time and, with the pandemic, it’s shifting more frequently than ever. Minor changes can add up to big savings (or big mistakes if you’re unaware of them). Here’s a roundup of the latest tax news that nonprofit accounting and finance professionals need to know. Our previous tax tips update may also be helpful.

Paycheck Protection Program Loan Forgiveness Is Deductible

Originally, the IRS ruled in Notice 2020-32 and Rev. Rul. 2020-27 that Paycheck Protection Program loan recipients could not deduct expenses that are normally deductible under the extent the payment of those expenses resulted in PPP loan forgiveness. However, that ruling became obsolete with Rev. Rul. 2021-2.

Congress clarified in the Consolidated Appropriations Act, 2021 (CAA), P.L. 116-260 that deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven. The tax basis and other attributes of the borrower’s assets are not reduced as a result of the loan. This was clarified in December 2020. There is now a safe harbor provision for those who filed a tax year 2020 return on or before Dec. 27, 2020, to deduct those expenses on their 2021 tax return rather than file amended returns or administrative adjustment requests if they are a “covered taxpayer” (as defined in the revenue procedure) and they satisfy all of the requirements for the time and manner of making the election to apply the safe harbor.

Food and Beverage Deductions

50% or 100%? That’s what everyone wants to know.

Typically, food and beverage deductions are 50%. A restaurant meal for business purposes, for example, counts as a 50% deduction.

However, the IRS temporarily increased it to 100%. Under Sec. 274(n)(1), a deduction for any expense for food or beverages is generally limited to 50% of the amount that would otherwise be deductible. The Consolidated Appropriations Act, 2021, P.L. 116-260 removed that limitation for amounts paid or incurred after Dec. 31, 2020, and before Jan. 1, 2023, for food or beverages provided by a restaurant (Sec. 274(n)(2)(D)).

Now, of course, we need to define “restaurant.” According to the definition that applies here, it is any establishment that prepares and sells food or beverages for immediate consumption on or off-premises. A coffee shop that sells breakfast sandwiches and coffee drinks for consumption on-premises or take away would count for 100% deduction but a kiosk or vending machine selling the same products does not.

So, schedule those breakfast, lunch, and dinner meetings as long as it’s safe to do so in your area. Now is the time to patronize local establishments for business meetings (and save your receipts for your accountant).

American Rescue Plan Adds to Wages Qualifying for Sections 3131 and 3132 Credits

The American Rescue Plan is another economic relief package for American families adversely affected by the continuing health crisis. The IRS sent a reminder that under this plan, employers with 500 or fewer workers can take a credit equal to the wages paid to employees for a paid day off to be vaccinated.

IRS Extends E-Signature

The IRS has extended its provision to accept e-signatures on many forms until December 31, 2021. The ongoing pandemic has necessitated that not only will they extend the deadline, but they are also adding more forms. Many of these forms can now be signed remotely, then printed or scanned and sent to the IRS, making it easier to complete required paperwork during the pandemic.

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.

Sep 14
0

How the Pandemic Affects Compensated Absences: Something to Consider

By | Accounting, Nonprofit | No Comments

The global pandemic’s effects are still being felt in many areas. One such area is in the realm of accounting; specifically, the area of compensated absence.

What is compensated absence? It’s vacation and sick time. Many employees deferred vacation time during the pandemic since travel was so restricted. The result is a higher than usual amount of accrued compensated time off, which must be accounted for logically and systematically.

There are no FASB standards for the rate at which such time is accrued. Instead, organizations are urged to look at their record of accounting for such time off. Accountants may choose from the current rate or the likely compensation rate when employees are expected to redeem their vacation days.

The latter is easier said than done. Even though better awareness, knowledge, and testing for COVID-19 have kept much of the nation open, some employees may still be reluctant to take their vacation time. Nonprofits must develop a plan of action to handle the accrual of compensated time off.

Develop Your Plan for Compensated Time Off

To develop a plan for compensated time off, first, review your current definition of such time.

  • How does your organization define compensated time off? Many define it as vacation time, sick days, or personal days. Review your organization’s current definition and method of acquiring time off. For example, is vacation time off based on the number of days worked, or do all employees receive the same amount of time at the start of the calendar or fiscal year?
  • Does your policy allow employees to roll over such time and, if so, how long can they accrue it?
  • If they cannot roll over the time but must “use it or lose it,” are they compensated for it instead?
  • Have you made any emergency declarations, i.e., special arrangements, for employees during the pandemic?
  • Have you reviewed both accrued and vested rights? Are these in line with state and local laws and requirements?

Once you have the facts about your current policies and understand fully all of the considerations for paid time off, think about the following as you create your plan to account for compensated time off.

Accrual for Compensated Time Off

Take into account the substance and spirit of your organization’s vacation and sick leave policies, rather than the actual form. Does your organization provide a generous policy that goes above and beyond the legal rights of employees as governed by state and federal law? If so, then the liability for compensated time off should include all reasonable compensation likely to be paid.

Accountants should use historical data pertaining to compensating employee absences to make projections about the potential of unused accrued time off. This information can be used to estimate the value of lapsed compensated absences.

A spreadsheet can be helpful to estimate the possible adjusted journal entries. Having a computerized accounting system will also make the estimation process easier. Historic reports will show the average balance for accrued vacation and unpaid sick leave, which can be used as a basis to adjust for any anticipated increase due to the unusual years, thanks to COVID-19.

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.