Category

Accounting

Sep 02
0

ACA Compliance for Nonprofits: New Penalties, New Priorities in 2026

By | Accounting, Government, Nonprofit, Tax | No Comments
clipboard with paper which says ACA affordable care act compliance for nonprofits 2026

The IRS recently released Rev. Proc. 2025-26, providing the indexing adjustments for the upcoming calendar year 2026. These indexing adjustments affect applicable large employers (ALEs) starting next year. ALEs are defined as entities having 50 or more employees. Such organizations must either offer minimum essential coverage that is affordable (i.e., provides minimum value to full-time employees and their dependents) or make an employer shared responsibility payment to the IRS, all part of the Affordable Care Act’s employer shared responsibility provisions.

Nonprofit status does not matter in the context of this law; it’s the number of full-time employees that counts. If your organization employs 50 or more full-time employees, it’s important to understand the indexing adjustments to ensure full compliance with the ACA and avoid potential penalties.

What Is an Employer Shared Responsibility Payment?

The Employer Shared Responsibility Payment is a financial penalty imposed by the IRS on ALEs who fail to meet specific health coverage obligations under the Affordable Care Act.

To avoid the ESRP, an ALE must offer its full-time employees and their dependents health insurance that:

  • Qualifies as minimum essential coverage
  • Is affordable based on IRS standards and
  • Provides minimum value, meaning it covers at least 60% of expected healthcare costs

If an ALE does not offer coverage to at least 95% of its full-time employees, or if the coverage offered is unaffordable or inadequate, and at least one employee receives a premium tax credit through the Health Insurance Marketplace, the employer may owe one of two types of ESRPs:

  • A penalty for not offering coverage to enough employees
  • A penalty for offering coverage that fails the affordability or value tests

These payments are calculated monthly and assessed annually, with amounts indexed for inflation. Importantly, ESRPs are non-deductible and apply regardless of an employer’s tax-exempt status.

IRS Implements Updated Penalty Amounts in 2026

Beginning in 2026, the IRS will implement updated penalty amounts under the Employer Shared Responsibility Provisions of the Affordable Care Act. Nonprofit organizations classified as Applicable Large Employers (ALEs) must be especially mindful of these changes. If an ALE does not offer minimum essential coverage to its full-time employees, it may face a penalty of $3,340 per employee annually. Alternatively, if coverage is offered but is deemed unaffordable or does not meet minimum value standards, the penalty rises to $5,010 for each affected employee. These penalties are indexed for inflation and apply to plan years starting after December 31, 2025.

ESRPs are non-deductible expenses, meaning nonprofits cannot offset them through tax savings. This can pose a significant financial strain, especially for organizations operating on tight budgets or relying heavily on grant funding and donations.

Avoid the Penalty and Stay in Compliance

To avoid the Employer Shared Responsibility Payment, companies must first determine whether they qualify as an Applicable Large Employer, which generally means having 50 or more full-time employees or full-time equivalents in the previous calendar year. If they meet this threshold, they are required to offer minimum essential health coverage to at least 95 percent of their full-time employees and their dependents. This coverage must be affordable according to IRS safe harbor standards. It must also provide minimum value, meaning it covers at least 60 percent of expected healthcare costs.

Employers should also accurately track employee hours to determine full-time status and use IRS-approved methods for measurement. In addition, they must report coverage information to both the IRS and employees using the appropriate forms, such as Form 1095-C and Form 1094-C. If contacted by the IRS regarding a potential penalty, employers have a 90-day window to respond and provide documentation. Monitoring and meeting these requirements can help your organization avoid steep penalties from the IRS.

Preparing Nonprofits for ACA Compliance: Why Early Action Matters

As the 2026 updates to the Employer Shared Responsibility Payment take effect, nonprofit organizations must recognize that compliance affects them too. These provisions apply equally to tax-exempt employers as well as for-profit companies. If you don’t follow the IRS rules, your organization will face a steep penalty.

By understanding the rules, evaluating coverage, and proactively preparing for the new thresholds, nonprofits can protect their budgets and continue focusing on their mission. Early planning and informed decision-making will ensure your organization remains compliant and avoids costly penalties in the years ahead.

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.

Jul 22
0

Choosing New Accounting Software? Tips to Find Great Software

By | Accounting, Accounting Software, Nonprofit | No Comments
person at desk using accounting software

What’s driving your need to choose new nonprofit accounting software? Some frequently cited reasons for shopping for a new system include legacy systems struggling to keep up with demand, the need to export data into spreadsheets to use it (or run reports), lack of integration, and lack of modern features, such as AI.

But if these are the reasons driving your software search, slow down. Shopping based on features is often a recipe for failure. Here, we share with you the best practices and tips to truly find the right nonprofit accounting software for your organization.

Don’t Shop Solely by Features

It’s tempting to make your wish list of features and go forth and shop. But it’s not the best idea. Although features are easy to understand, see, and experience, they aren’t always the best indicator of a good fit with your needs. Many packages come with more “bells and whistles” than the average accounting department needs. Such packages may be over-engineering for your organization, and over your budget, too. Although features are important – after all, you don’t want to be exploring spreadsheet data to run your reports anymore – there are more considerations than features alone.

Implementation Speed

One consideration is implementation speed. As you weigh your new software choices, ask the consultant or vendor how quickly the system can be up and running. Longer implementation times can be a sign of a system that’s more than you need or a vendor who can’t give your organization the personal attention it deserves.

How long is too long? Anything longer than six months is a sign of potential misalignment with your needs. And timelines stretching past a year are untenable for the average organization. Changing systems is disruptive, and lengthy timelines exacerbate the disruption. Look for reasonable timelines for weeks, not months, to help you transition efficiently to the new system.

Support and Training

Another important consideration for new software purchases is support and training. A good implementation team is critical, but so is the post-implementation support and service. No matter how tech-savvy your team is, there will be some level of customer support needed. Having local support is ideal, but if that’s not possible, a hotline that puts you immediately in touch with an expert who can walk you through troubleshooting or answer your questions is the next best thing. Read through the vendor’s materials carefully and ask clarifying questions to fully understand the support available to your team.

Training is also essential both to learn the new system and to maximize its use over time. Choosing a power user or super user, someone who will receive additional training, ensures that you have an expert in-house who understands advanced functions in the new system.

A single one-hour training session with the vendor probably won’t be enough. Discuss with the vendor or consultant providing the new software the length and type of training available as part of the implementation package. Different user groups may require varying levels of training, too, so consider that as part of the overall training approach.

Total Cost of Ownership

Lastly, the total cost of ownership (TCO) should be one of the deciding factors in your software choice. Software costs are only part of the equation. Factor into the costs any integrations or customizations required, as well as training and implementation time, and you’ll gain a much clearer picture of the TCO for the software.

Seek Expert Advice

Choosing the right nonprofit accounting software can be a daunting task. It helps to have an expert by your side who knows the right questions to ask and the often-overlooked aspects of software shopping that the average person doesn’t know. Welter Consulting is happy to assist you with your software choices and can guide you through the process from start to finish.

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.

Jul 16
0

The One Big, Beautiful Bill and Its Impact on Businesses

By | Accounting, Nonprofit, Tax | No Comments
One Big, Beautiful Bill

President Trump’s “One Big, Beautiful Bill” Act passed through Congress and was signed by the President on July 4, 2025. The bill codifies many of the tax breaks from Trump’s first term in office that were considered temporary measures and adds new items to the list for both personal and business tax impacts.

For a detailed list of the many items in the bill, please refer to the Journal of Accountancy’s article, Tax Provisions in the One Big Beautiful Bill.

Deductions for Charitable Contributions

The new bill offers taxpayers who do not elect to itemize the ability to claim a deduction of up to $1,000 for single filers ($2,000 for married taxpayers filing jointly) for certain charitable contributions. For those who itemize their deductions, there is a .5% floor on the charitable contribution deduction. This means that the charitable contributions for a tax year are reduced by .5% on the contribution base for the tax year. Corporations have a floor of 1% based on their taxable income. And, for corporations, charitable contributions cannot exceed the current 10% of taxable income limit.

Nonprofits can view this as a win. It may encourage more donations as it makes it easier for individuals to claim their donations as deductibles, even if they are non-itemizers.

No Tax on Tips

One of Trump’s campaign promises was to enact “No Tax on Tips,” and the One Big, Beautiful Bill includes this as a temporary provision. The bill offers a temporary tax deduction of up to $25,000 for individuals who earn tips in occupations where tipping is common. This deduction applies to both traditional employees who receive a W-2 form and independent contractors who receive a 1099-K, 1099-NEC, or report tips using Form 4317. Taxpayers can claim this deduction regardless of whether they take the standard deduction or itemize their expenses.

The benefit begins to phase out once a taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 for individuals or $300,000 for those filing jointly. This deduction is valid for tax years 2025 through 2028. Additionally, for the year 2025, employers who are required to report tips may use any reasonable method to estimate tip amounts.

No Tax on Overtime

This is another temporary provision in the bill. It includes a temporary deduction of up to $12,500 per qualified individual, or $25,000 for a joint return, during a given tax year. If an individual’s MAGI exceeds $150,000, or the MAGI for a joint return exceeds $300,000, the deduction is phased out. The bill defines overtime as per Section 7 of the Fair Labor Standards Act of 1938; this definition states that the pay must be over the individual’s regular rate. The no tax on overtime provision is only for non-itemizers and is effective from 2025 to 2028.

Trump Accounts

This is a new way to save a little nest egg for minors. A “Trump Account” refers to a tax-free savings account for minors. Individuals can save money in an individual retirement account (IRA) but not a Roth IRA for the benefit of minors under the age of 18. Contributions can only be made until the year the beneficiary turns 18, and distributions can only be made after the beneficiary turns 18. Eligible investments include indexed EFTs and mutual funds. Other than qualified rollover contributions, regular contributions are capped at $5,000 per year. Employers can contribute to a Trump account, and the contribution is not included in the employee’s income.

Another benefit: If you have a child born between January 1, 2025, and December 31, 2028, there is a tax credit of $1,000 for opening a Trump account for that child.

More Changes for Personal and Business Taxes

The One Big, Beautiful Bill contains many more changes, some permanent, some temporary. It is essential to consult with your accountant or CPA to find out which, if any, will impact you or your 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.

Jun 19
0

Finding and Supporting the Next Generation of Accountants

By | Accounting, Nonprofit | No Comments
accountant at laptop computer

We’ve written about the anticipated shortage of accountants many times. Fewer college students are graduating with accounting degrees, and among those who are, fewer still become CPAs. There are ways to mitigate against the possible shortage of accounting talent, such as embracing automation, technology, and AI efficiencies, but no amount of tech will substitute for the skills of a good accountant or CPA.

That’s why we celebrated the recent steps that the AICPA has taken to address the possible shortage of accounting talent. Here are all the things they’re doing to help prepare the profession for the future.

The AICPA Pipeline Acceleration Plan

The AICPA Pipeline Acceleration Plan addresses the ongoing talent shortage in the accounting profession by implementing targeted initiatives at various stages of the CPA pipeline. The plan focuses on increasing awareness, improving perceptions of accounting careers, enhancing education and training, and fostering diversity and inclusion.

Highlights of the plan include:

  • Career paths in accounting: CPAs share their career journeys with students, highlighting the daily challenges they face and encouraging them to explore various career paths.
  • Addressing stereotypes: Books, movies, and television often portray CPAs as nerdy and unattractive. By directly confronting these stereotypes, CPAs can offer students a realistic view of the CPA profession that challenges and dispels stereotypes.
  • Interactive sessions: Another way in which CPAs are encouraging students to consider accounting careers is through direct interactive sessions. Career days or classroom visits within their local community can encourage students to ask questions and to consider accounting careers.

Experience, Learn & Earn (ELE) Program

Launched in 2023, this program provides students with paid work experience while earning affordable college credit hours. It is designed to help candidates meet the 150-hour CPA licensure requirement without excessive financial burden. The program goal is to increase both access to and the affordability of the CPA license requirement.

STEM Recognition for Accounting

STEM fields encompass science, technology, engineering, and mathematics. The AICPA is advocating for accounting to be classified as a STEM field, which would allow K-12 STEM grant funding to support accounting education and improve access for underrepresented students. The organization is actively seeking bipartisan support to allow K-12 STEM grant funding for accounting education, as well as adding six accounting degrees to the government’s list of STEM degrees.

Accounting Opportunities Experience

CPAs are also stepping into the classroom to share their experience with students. Part of the AICPA outreach includes the “Accounting Opportunity Experience,” in which CPAs participate in career awareness events at local high schools. Through direct, personal community outreach, these CPAs are introducing a new generation to the profession.

Firm Culture & Business Models

The plan encourages firms to offer competitive salaries, career advancement opportunities, and flexible work environments to attract and retain talent.

The AICPA is working with stakeholders, including state CPA societies, academia, and accounting firms, to implement these strategies and strengthen the profession’s talent pipeline.

What You Can Do

While the AICPA is doing its part, you can do yours as well. Encourage the young people in your life to consider a career in accounting. Teens often view accounting as boring. Help them explore the many ways in which accounting contributes to society and business, including specialties such as nonprofit accounting, forensic accounting, tax accounting, and more. Students often form an impression of a career from television or movies, and there’s so much more to any field than what is depicted in their favorite shows.

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.