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EBSA increases penalties for ERISA violations
Any employer that sponsors a pension plan or a qualified retirement plan, such as a 401(k), is undoubtedly familiar with the Employee Retirement Income Security Act (ERISA). The law also applies to employer-sponsored health maintenance organization plans, Flexible Spending Accounts, and life and disability insurance. Established in 1974, ERISA holds plan fiduciaries responsible for their actions related to the maintenance of applicable benefits plans. The Employee Benefits Security Administration (EBSA), an agency of the U.S. Department of Labor (DOL), is required by law to annually adjust ERISA penalties for inflation. This year, effective for penalties assessed after January 14, 2022, the
Are you ready for the upcoming audit season?
An external audit is less stressful and less intrusive if you anticipate your auditor’s document requests. Auditors typically ask clients to provide similar documents year after year. They’ll accept copies or client-prepared schedules for certain items, such as bank reconciliations and fixed asset ledgers. To verify other items, such as leases, invoices and bank statements, they’ll want to see original source documents. What does change annually is the sample of transactions that auditors randomly select to test your account balances. The element of surprise is important because it keeps bookkeepers honest. Anticipate questions Accounting personnel can also prepare for audit
Feeling generous at year end? Strategies for donating to charity or gifting to loved ones
As we approach the holidays, many people plan to donate to their favorite charities or give money or assets to their loved ones. Here are the basic tax rules involved in these transactions. Donating to charity Normally, if you take the standard deduction and don’t itemize, you can’t claim a deduction for charitable contributions. But for 2021 under a COVID-19 relief law, you’re allowed to claim a limited deduction on your tax return for cash contributions made to qualifying charitable organizations. You can claim a deduction of up to $300 for cash contributions made during this year. This deduction increases
Private companies: Are you on track to meet the 2022 deadline for the updated lease standard?
Updated accounting rules for long-term leases took effect in 2019 for public companies. Now, after several deferrals by the Financial Accounting Standards Board (FASB), private companies and private not-for-profit entities must follow suit, starting in fiscal year 2022. The updated guidance requires these organizations to report — for the first time — the full magnitude of their long-term lease obligations on the balance sheet. Here are the details. Temporary reprieves In 2019, the FASB deferred Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), to 2021 for private entities. Then, in 2020, the FASB granted another extension to the effective date of
5 ways nonprofits can prepare for an audit
No not-for-profit looks forward to annual audits. But regular maintenance and preparation specific to an impending audit can make the process less disruptive. We recommend taking the following steps. 1. Reconcile routinely You shouldn’t wait until audit time to reconcile accounts — for example, cash, receivables, pledges, payables, accruals and revenues. Reconcile general ledger account balances to supporting schedules (bank reconciliation, receivables and payable aging) monthly or at least quarterly. And don’t forget to reconcile database information provided and maintained by nonaccounting departments, such as contributions, events revenue, registration revenue and sponsorships. 2. Prepare supporting documentation Collect all supporting documentation
There’s currently a “stepped-up basis” if you inherit property — but will it last?
If you’re planning your estate, or you’ve recently inherited assets, you may be unsure of the “cost” (or “basis”) for tax purposes. The current rules Under the current fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property equal to its date-of-death value. So, for example, if your grandmother bought stock in 1935 for $500 and it’s worth $1 million at her death, the basis is stepped up to $1 million in the hands of your grandmother’s heirs — and all of that gain escapes federal income tax. The
Many parents will receive advance tax credit payments beginning July 15
Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance child tax credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021. How have child tax credits changed? The ARPA temporarily expanded and made CTCs refundable for 2021. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold. Advance payments will
Do you know the new accounting rules for gifts in kind?
If your not-for-profit organization accepts contributions of nonfinancial assets, such as land, services and supplies, you should know about Financial Accounting Standards Board (FASB) rules approved last year. Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets is intended to increase transparency around gifts in kind. Inflated values The updated rules were generated in response to concerns about U.S. wholesale market prices being used to determine the value of donated pharmaceuticals that can’t legally be sold in the United States. A donor, for example, could contribute such drugs for use only
Retiring soon? Recent law changes may have an impact on your retirement savings
If you’re approaching retirement, you probably want to ensure the money you’ve saved in retirement plans lasts as long as possible. If so, be aware that a law was recently enacted that makes significant changes to retirement accounts. The SECURE Act, which was signed into law in late 2019, made a number of changes of interest to those nearing retirement. You can keep making traditional IRA contributions if you’re still working Before 2020, traditional IRA contributions weren’t allowed once you reached age 70½. But now, an individual of any age can make contributions to a traditional IRA, as long as
Didn’t contribute to an IRA last year? There still may be time
If you’re getting ready to file your 2020 tax return, and your tax bill is higher than you’d like, there might still be an opportunity to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until the April 15, 2021 filing date and benefit from the tax savings on your 2020 return. Who is eligible? You can make a deductible contribution to a traditional IRA if: You (and your spouse) aren’t an active participant in an employer-sponsored retirement plan, or You (or your spouse) are an active participant in an employer plan,
