5 New Year’s Resolutions for Your Business

With 2017 knocking on the door, you might be thinking of New Year’s resolutions you want to make (and stick with). Maybe you want to hit the gym more, or maybe you’re considering clocking some more volunteer hours in the upcoming year.

In planning resolutions for yourself, have you stopped to take time to think about what you could do to better your business in the New Year? Here are five New Year’s resolutions to help your business have a successful 2017.

Get Real

Setting goals for your company is a great way to kick off 2017 on the right foot. Having goals set for your business can be a great roadmap for what you want to accomplish in the coming year. These goals can provide you with KPIs, checkpoints and motivation. However, having goals that aren’t quite realistic can result in just the opposite. If you are struggling to reach your goals, it may lead to a lack of motivation and a sense of failure, which could eventually lead to giving up all together. Keep your 2017 goals realistic, and watch your business be successful in reaching them.

Make Dates…With Your Accountant

Make a resolution to actually spend some time with your accountant. Why? Spending time with your accountant can help you get to know each other better, which can result in a better relationship for your business. Along with forming a better relationship, it’s likely your accountant will give you information on your business that can be extremely beneficial for your success. Who knows – they might even help you understand what they’re talking about, which will ultimately help you get a better understanding of the health of your business. Not sure what you should be asking your accountant? Check out these tips for some questions to ask regarding taxes.

Review, Review, Review

A great resolution to make for your business in 2017 is to actually review all of those receipts, invoices and financial statements you have laying around. Looking at these items can help you get a good idea of where your business is spending money, saving money and even where it should be cutting back. Along with reviewing receipts and statements, it’s also smart to review financial trends in your business from the last year or so to get an idea of where your business will head in 2017. Reviewing these periodically throughout the year can also help make sure your business is on track, and can help you catch any potential errors before they become big headaches. If you’re struggling to make sense of what all the numbers mean, it’s probably time to find a professional who can help you (see above.)

Shameless plug: If you’re trying to read your statements and nothing is making sense, we have trained professionals who can help you make sense of all those pesky numbers.

Get With the Program

Staying up to date on rules and regulations that impact your business is always important. Resolving to stay on top of those changes in 2017 can help you make sure your business is always ready for any surprises that might come up. Some things to keep on track with include tax laws and deadlines, changes to employee regulations such as the new overtime ruling and updates to healthcare policies. With a new presidency beginning in 2017, there is a good chance that changes are going to be taking place. Be prepared for them, and act accordingly.

Get Involved

Make a resolution to get involved in your community this year. Whether you have your entire office volunteer at an event, or just a few employees helping out, getting involved can make a huge difference for your company. A study in 2013 by Cone Communications showed that 91% of people surveyed were likely to switch brands to one that supports a good cause. The Pulse Survey from the Reputation Institute showed that a corporate social responsibility (CSR) program is responsible for roughly 40 %(!!) of a company’s reputation. Not only does volunteering and being involved with great causes help the outward reputation of your business, but it may also help you pull in more job seekers. PriceWaterhouseCoopers found that nearly 88% of millennial job seekers are gravitating towards companies that have established CSR programs.

We hope these resolutions, as well as all of your business and personal resolutions, lead to success in 2017. From all of us at Eide Bailly, we wish you a Happy New Year.

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Nonprofit 101: How to Begin

What is a tax-exempt nonprofit?

The “simple” answer is it is an entity that doesn’t have to pay taxes. While technically true, there’s a little bit more to it …

A tax-exempt nonprofit corporation is an entity formed to carry out a specific purpose which allows it to qualify for tax exemption.  The most common types of exempt missions are charitable, educational, promotion of health or lessening the burden of government.

Here are some of the main differences between a tax-exempt nonprofit corporation and other corporations:

  • A nonprofit corporation is not owned. Therefore, it cannot be sold. Rather, if a tax-exempt nonprofit corporation is dissolved the assets of the corporation must be distributed to another tax-exempt nonprofit.
  • A nonprofit corporation with tax exempt status under 501(c)(3) is exempt from paying income taxes. However, it is not necessarily exempt from all taxes. It may still be subject to sales tax, property tax, payroll tax, unrelated business income tax, and excise taxes unless a specific exemption exists.  Most exemptions depend on specific state rules and often are impacted by the type of entity and the activities of the entity.
  • Once a nonprofit corporation has obtained tax-exempt status under IRC Section 501(c)(3) it may accept tax-deductible donations. Donation receipts should identify the tax-exempt nonprofit (ex. letterhead), the date of the gift and a description of what was received. For cash donations, the amount received should be listed. For donations of goods, a descriptor of the item should be listed. The organization is not required to include the value of the donated good, this is the donor’s responsibility.  In addition, the donation receipt should indicate whether the donor received anything from the organization in exchange for the donation.  If not, a phrase such as “no goods or services where given in exchange for the donation” should be included.

How do you create a tax-exempt nonprofit?

The steps to set up an entity are fairly straightforward. However, you will likely need the assistance of legal and tax professionals to help you navigate through them.

Step 1: File the Articles of Incorporation with the State

Articles of Incorporation are typically filed in the state where the organization will be operated.  You can do it alone but may need the assistance of legal counsel. There are a tax related clauses which must be in the Articles of Incorporation in order for the entity to gain tax-exempt status:

  1. The activities of the organization must be limited to exempt purposes and the Articles must not allow it to engage more than insubstantially in activities that are not in furtherance of this purpose. In determining the exempt purpose, you should consider what you are hoping to accomplish with the nonprofit? The IRS provides the following as an example of an acceptable purpose clause:

The organization is organized exclusively for charitable purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code.

 You can elaborate on the specifics of the charitable purpose, but make sure that the details do not expand beyond the tax exempt requirements.

  1. Your articles must limit the conduct of lobbying activities to an insubstantial part of your activities and specifically prohibit the organization from conducting political activities.
  1. As mentioned earlier, a nonprofit corporation does not have owners. As such, the Articles must include a dissolution clause dedicating the assets upon dissolution to another exempt organization. The IRS example is as follows:

Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose.

 Step 2: Obtain an Employer Identification Number (EIN)

What is an EIN and how do you get it?

An EIN is the corporation’s unique identifying number with the IRS. You can obtain an EIN through an online application process (make sure you select Tax Exempt/Nonprofit as your entity type).

Side Note: Once you have your EIN, it’s a good idea to open a business banking account; it is very important not to mix personal expenses with business expenses.

Step 3: Request tax-exempt status with the IRS

If you wish to be a 501(c)(3), you MUST request an exemption from the IRS.  If you do not apply for tax exempt status, your corporation will be treated as a taxable corporation, subject to corporate income taxation. You must have your state approved Articles of Incorporation and EIN prior to filing the request.

There are two options for applying for tax exempt status, based on the estimated gross receipts you expect to generate on an annual basis.

  1. Form 1023-EZ: This form is available if your gross receipts are expected to be less than $50,000 per year for the first three years of operations. This form can be completed online.
  1. Form 1023: If your gross receipts are expected to be more than $50,000 per year, the longer form must be completed. The form is available online, however it cannot be submitted electronically.

If you need assistance with filing your forms, a tax professional is a good resource.

Step 4: Operate for Exempt Purposes

You should receive notice from the IRS acknowledging your application within two to six weeks. Assuming the IRS approves your application, you will receive a determination letter confirming your exemption within three to six months of filing. Once you receive your confirmation, you can operate the organization for the exempt purpose as stated in your Articles of Incorporation.

If you expand your operations beyond the initial exempt purpose for which your exemption was granted, the expansion may result in unrelated business income (UBI) that results in a tax liability or may result in potential loss of tax exempt status.

Step 5: Complete your annual filings

There are filing requirements at both the federal and state level.

  • Federal Filings: You will be required to submit Form 990-N, 990-EZ or 990 on an annual basis with the IRS. The return is due 4 ½ months after your fiscal year end. The amount of information and the complexity of the filing varies with each form. Use the chart below to help determine what form you need to file.

 

  990-N 990-EZ 990
Gross Receipts <$50,000 <$200,000 No limit
Assets No limit <$500,000 No limit

Note: Annual filing are required even if you have not yet received your determination letter.

  • State Filings: The filing requirements vary by state however here are a few examples of potential requirements:
    • Secretary of State Annual Report- Confirms ongoing existence of the organization.
    • Charitable Report-Typically filed due to holding charitable assets in a state or to solicit contributions in the state
    • State Income Tax Return–Filed to report unrelated business income

We would recommend enlisting legal and/or tax guidance throughout the process if you have any questions or hesitations. These professionals want to see your mission succeed from the start. If you need help finding the resources, we can help!

 

A Holiday Cheat Sheet: What Your Business Needs to Know

Happy holidays from your jolly numbers nerds. Throughout the year, we’ve told you about several upcoming changes that could impact your business. As our gift to you (yeah, we’re nice like that), we’ve wrapped all these updates up in one big inclusive blog so you can find all you need to know in one spot (you’re welcome).

We’ve even thrown in a few new stocking stuffers to make sure you’re in the loop. Why? With a new presidency coming quickly, policies are bound to change, and staying up to date will help your business stay out of trouble.

Taxes

  • The deadline of the W-2 has been moved up to January 31st, rather than the typical due date at the end of February. Form 1099-MISC is also receiving this new deadline. For a refresher on when forms are due, check out this infographic.
  • Partnership tax returns and c-corporation tax returns are getting new deadlines. Partnership returns, which were previously due on April 15th, are now due on March 15th. C-corporation returns switched and are now due April 15th rather than March 15th. Of course, there are some exceptions to this based on when your business operates its fiscal year. If your corporation has a June 30th year-end, you do not get the extra month; your returns still have to be filed by September 15th. Look here for that information.

Affordable Care Act (ACA)

  • Form 1095, which previously had leniency until its March 31st due date, has now moved and become a little more strict. The form now needs to be submitted no later than January 31st to ensure your employees get this form on time. As a refresher, Form 1095 contains three different forms: 1095A, B and C.
    • Form 1095A, which is a health insurance marketplace statement, details the coverage the employee has, how much was paid for insurance and tax credits.
    • 1095B is for employers who offer health coverage with less than 50 full-time employees, while 1095C provides coverage information if your company had more than 50 full-time employees.

Form 1095 isn’t the only one with a new due date. 1094B and C have also moved up to a deadline of February 28th via snail mail, or March 31st if being submitted electronically. Form 1094 has to be provided to the IRS to report minimum essential health care coverage. In other words, it tells the IRS about the health care options your company provides. 1094B will be completed no matter the size of your business, while 1094C is for larger employers, those with 50 or more full-time employees. (Confusing? Yes, but we can help. Just ask!)

  • Don’t forget about the Critical ACA Compliance Test. Under this rule, certain employers, those with 50 or more employees, are required to offer coverage to at least 95 percent of their full time employees, and not doing so can result in huge penalties for your business. For more ACA updates and changes, look here.

Miscellaneous

  • Form I-9 received a face lift. A new form was released, which also included updated instructions to make completing it a little bit easier (how nice of them). Along with the new look came a new date. Employers must start using the new form by January 22, 2017.
  • A long, long time ago (okay, only a few months ago) our friends at the Department of Labor released a new overtime ruling. Under this new ruling, the overtime salary threshold almost doubled to $913/week, starting December 1, 2016. However, here we are at the end of December and this rule hasn’t gone into play. So, what’s going on? Some states weren’t quite impressed with this idea, and challenged this new ruling. Because of this challenge, the changes were put on hold. As of now, there isn’t any news on when and if this ruling will move forward, but if it does, we will keep you posted.
  • We’ve got some bad news for bitcoin. Back in November, the US Department of Justice (DOJ) asked a district court in the Northern District of California for a summons to be issued for bitcoin exchanger Coinbase Inc. This summons will potentially require the company to hand over information related to all bitcoin transactions it handled between 2013 and 2015. Then, the DOJ would share this info with the IRS to match against filed tax returns. Yikes. If your business used bitcoins through this time period, it’s time to review them with your tax advisor. Don’t have one? We can help.

There you have it: a handy cheat sheet to keep you updated on changes effecting your business. With a recent election and a new presidency transition coming soon, more changes are likely on the horizon. When these changes happen, we’ll make sure to fill you in. For now, sit back, relax and enjoy this holiday season.

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Ringing in the New Year with New Mileage Rates

Mileage changesAs you get read to embark on 2017, one of the things to keep in mind is the IRS. Why you may ask? Well the IRS likes to ring in the New Year with all sorts of changes (don’t believe us? Check out this blog).

One of their newest additions is the change in rate for mileage. Beginning on January 1, 2017, the standard mileage rates for business, medical and moving will change. Happy New Year.

The new rates will be:

  • 53.5 cents for business mileage (that’s a whopping half cent change from 54 cents in 2016)
  • 17 cents for medical or moving purposes (it was 19 cents in 2016)

Why the change? As a reminder, the mileage rates for business are based on a fancy study on the fixed and variable costs of operating an automobile. So the IRS is just keeping up with the times.

These are important calculations to watch if you’re reimbursing your employees for driving on or for the job. While half a cent might not seem like much, it can add up if you’re not paying attention to these types of changes. Anything paid to an employee above the federal mileage rate becomes taxable wages to the employee.

Don’t feel like calculating the mileage rates? You can always calculate the actual cost of using a vehicle instead.

 

10 Tips to Ace Your Phone Interview

By Allison Ausmus, Eide Bailly Recruiter 

Let’s face it, job hunting can be a daunting and draining process. You apply to a couple jobs and the one you really want reaches out to you to schedule a phone interview. Eek! Now what?

Companies often use phone interviews as a way to weed out candidates and leave the in-person interviews to those they feel are truly qualified for their open position. In other words, don’t take a phone interview lightly and prepare for it the same way you would for a face-to-face interview.

Here’s what you need to do to prepare and not be among the weeds:

  1. Learn more about the company, their history, mission statement and newest developments. Re-read the job description and prepare a well-thought out list of questions to ask.
  1. Prepare items like your resume and a “cheat sheet” with answers to anticipated questions (strengths, weaknesses, short and long-term goals, why you are looking for a new job, etc.). You’ll also need to be able to address any gaps in your work history. During a phone interview, the person can’t see you (obviously) so use this to your advantage. If you’re a paper person, print things out. Electronic more your style? Pull it up on your computer or smart phone. Just make sure you take time to prepare.
  1. Be prepared to make a case for yourself and point to different skills listed in the job description and how you fit each qualification. You can do this when the recruiter asks you what interested you in applying or when they ask about what your strengths are– make sure you are highlighting the strengths that best fit the job you applied for.
  1. Find a quiet space where you can talk freely. Home is ideal as long as it is a pet-free/child-free zone, devoid of distractions. If you do have a pet or child around, let the interviewer know at the beginning of the call that they might hear noises from kids/pet in the background.
  1. Allow plenty of time for the phone interview so you are not rushed.
  1. Not sure what we mean? Get a family member or friend and give them a list of interview questions to ask you. Then ask them for their feedback, paying attention to details like the speed you talked, if you kept saying “um” or “like” and if you sounded natural and confident.
  1. Smile when you talk! It might sound silly but it will make you sound more friendly and confident. Come on, just try it.
  1. Whatever you do, don’t interrupt your interviewer. If that happens, apologize and let them finish asking a question or talking. You don’t want to appear rude by interrupting your interviewer.
  1. Don’t be the one to bring up salary first. We know this can be an important aspect in your decision about a job. If the recruiter doesn’t bring it up, ask if they can provide the salary range for the position. Just be prepared for the possible result that they won’t give it. Some companies are more transparent than others with salary information.
  1. Ask questions. Just make sure they’re not ones the recruiter has already answered or addressed. And never forget to thank them for their time and ask about next steps in the process.

Sales + Use Tax: E-Commerce Happened

There are more than 10,000 local taxing jurisdictions in the United States. Not to mention, the tax rules in each of these jurisdictions can be different (ugh!). So bottom-line, the tax rules surrounding e-commerce are too complex to cover within the context of a blog. However, we can make you aware of some of the issues surrounding sales and use tax in e-commerce.

Nexus: Brick + Mortar to E-commerce

Let’s be honest, the tax system is old. Back in the day, most sales took place under the brick and mortar business model; customers came to you to purchase tangible goods (we’re talking about goods you could physically touch). Every sale was taxable and only one local (county, city) jurisdiction applied; unless an exemption was applicable.

When e-commerce happened there were concepts like virtual, intangible, etc. that weren’t defined by the tax rules. In addition, determining nexus became more complex. As a result, we began to see a marketplace in which not all sales were taxable.

So, what changed?

The customer’s shopping habits changed. Now, customers can (and a lot of them do) shop online. Not all of the online sales transactions are even taxable. It it all depends on nexus and the rules aren’t even the same everywhere.

Speaking of selling online… if you use a fulfillment agency (like Amazon), ownership is the key to determining nexus. If you retain the ownership of your goods while they are stored in the fulfillment warehouse, you have created nexus in the taxing jurisdiction in which the warehouse is located. If the fulfillment agency purchases the goods from you, the transaction does not create nexus in the taxing jurisdiction in which the warehouse is located.

Intangibles

How goods are delivered changed. Now, goods have become intangible (those are goods you can’t physically touch but still have value) such as cloud-based software, mobile applications and online paid content (we’re talking newspapers and magazines delivered online).

Thinking back a few years, customers bought software off the shelf at the store or had their newspapers or magazines delivered to their homes. These were both tangible goods (and the tax rules knew how to handle that). Now, customers download software from the cloud or view their newspapers or magazines online. So depending on where you have nexus, those rules apply (and yep, they aren’t the same everywhere).

Virtual Employees

Where our employees could work from changed. Now, having virtual employees is easier than ever. But this complicates your responsibility to collect sales and use taxes because those virtual employees create nexus.

Moral of the Story…

There are plenty of other considerations when it comes to e-commerce because (in case you hadn’t guessed), the sales and use tax rules are far from straightforward (in many cases). That’s why we recommend having a sales and use tax expert on your side (and there are some online solutions that can help too). Don’t forget, we have experts who are ready to help your business comply.