While remote working might be a simple task if all your employees are in the same state as your business there are implications you should consider as you develop your remote working policies. Unfortunately, it’s not as simple as sending folks home with a laptop and a VPN connection. There are state tax issues, sales tax issues, insurance issues and potentially federal income tax issues related to having employees in more than one location.

Before you approve your first remote worker, you need to review technology, space available, and productivity; however, you also need to consider your workers comp insurance. Having an employee in their own home but on your clock could cost you extra premium. While they are in their own home, not all policies will cover them if they have a work-related injury. We haven’t yet seen many injury lawsuits surrounding work from home situations yet, it is only a matter of time.

One of the most common issues of having a remote workforce is dealing with state withholding tax issues. This is nothing new for large corporations who have employees in many states, but the pandemic has brought this issue to small businesses across the country in a rapid fashion. Much of the population of the United States lives in regions that cross state lines easily. People who are working in one state and living in another state must still have the appropriate withholding for their own home state taxes. An example would be someone living in Georgia working for a Florida company. The Florida company is not used to dealing with state withholding however it is required for the Georgia employee. This gets more complex if there are multiple states or locations with local tax as well. Make sure you discuss in detail what travel to the office will look like, if required and who will pay for the cost of the travel.

Another issue adding complexity is sales tax. If you are a retail establishment or a taxed service provider, sales tax Nexus may be an issue. Items that an employee sells or facilitates may create a requirement for you to collect and remit sales tax in other states. Many counties and cities also have sales taxes for their municipalities as well. There are services that will manage this requirement for you, but they may be beyond your budget. State sales tax audits are on the rise and notices or questionnaires from a state should be managed carefully and with professional assistance.

Additionally, if your employees are generating revenue in other states, you may have to file a state income tax return for the income generated in that state. The part of the income would be taxable in that state and must be tracked very carefully. When it’s difficult to determine whether an employee is generating revenue or not, careful consideration and documentation must be made to ensure you can support your position in a state income tax audit. Many state income tax audits have become extremely aggressive states fight for funds and struggle to meet budgets.

Before allowing employees to work remotely make sure that you’ve considered all of these issues and have a plan in place for each of them. You should consult your team of professionals, your CPA, your contract or labor law employee, and your insurance professional. In this process it’s also critical to consult your IT professional to make sure you have sufficient policies and procedures in place to protect you from cyber security risks caused by your employees having family members or guests in their home as well as communicating to your server from potentially unsecure locations. If you would like to book an appointment to talk to us about the tax consequences of your situation, please call our office manager at 904-725-5832 or reach out to us at office at fordefirm.com

The post Working Remotely Can Cause Tax Issues for Your Business and Your Employees appeared first on The Forde Firm.

The inflation reduction act recently added around $80 billion to the IRS budget through year 2031. What does this mean to you as a taxpayer?

There are many recaps claiming that this will pay for 87,000 new IRS employees, however; that was merely a suggestion in a 2021 report. They may hire all these new employees, but many will be assigned computer programming, customer support, and other duties with the majority being hired for enforcement. It is believed that an increase in enforcement of taxes already owed to the US Treasury will result in more revenue than the cost of the other programs in the Inflation Reduction Act. Janet Yellen, Treasury Secretary, has said that there is no intent to have added audits on households earning income is less than $400,000 a year. That is not to say there will be no audits on household with incomes less than $400,000 a year, but they are saying that there is no intent to target those households. The IRS has proven repeatedly to have an agenda all their own so only time will tell.

Additionally, the IRS still has more than 7 million individual tax returns that remain unprocessed from 2021 and prior years due to the backlog of mail during COVID-19. While they have claimed they will be caught up by the fall that has not happened. Some of the 87,000 employees are needed to ensure that they can get caught up and provide a better customer service experience. By the IRS’ own estimate only about 24% of the calls received have been answered because of their lack of employees. This is astounding considering they have received 100.5 million calls. Hopefully with added staffing they will be able to increase their customer service quality and answer more phone calls in a timely manner. It is important to remember that these employees would be hired over a period of 9 years ending in 2031. 

IRS computer systems are grossly outdated and ineffective. Hopefully some of the funding to the IRS will allow for updates and upgrades in their system. The suggested amount of funding from the $87 billion to be used for business system modernization is $4.8 billion. Many groups are calling for a better free file service through the IRS. 

With nearly 11% of Americans who are considered no longer in the labor force and only about 3% unemployment, staffing to this level will be a multi-year campaign and isn’t likely to happen quickly.  Our recommendation for our clients is to remain calm and to not be overly concerned about the additional increase in spending or employees at the IRS. The average taxpayer will not be the target of increased enforcement efforts. Many will benefit from better customer service and computer systems.  There is much to read on the internet and social media about the Inflation Reduction Act and unfortunately much of it is false. Please be careful about your sources and the information you receive to make sure you are getting accurate, and clear information. We have reviewed multiple recaps from different reliable sources, and we continue to gather details from the AICPA and FICPA to provide you updates.

If you receive an IRS notice, you should seek professional help no matter how trivial the matter may seem. An outstanding issue with the IRS can cause you other challenges so it is best to deal with it directly and on time to prevent further issues. We standby ready to help and we are ready to help you plan for this year’s taxes as well as for the future. If you have concerns about specific parts of the Inflation Reduction Act or would like to schedule an appointment to talk to one of us about how the markets are affecting your tax situation, please reach out to our office manager at 904-735-5832 or office@fordefirm.com 

The post Effects of the Inflation Reduction Act’s IRS Hiring Provision on You appeared first on The Forde Firm.

Nonprofit experience required

Finding the right investment advisor for your organization starts with identifying a pool of qualified candidates with proven track records. Ask for referrals from local private foundations (possibly ones that have funded you in the past) or other area nonprofits. Also, members of your board may know investment advisors they can recommend. Qualified candidates should have experience working with nonprofit endowments.

Request detailed proposals from candidates on how they’d manage your investments — as well as the fee structure for their services. Generally, investment advisors charge clients based on one (or a combination) of three structures:

1. Fees or commissions on trades,
2. A percentage of the asset values they’re managing, or
3. An hourly rate.

After reviewing the candidates’ proposals and checking their references, allow search committee members to talk to other nonprofit leaders to gauge their satisfaction level with your short list. Then select two or three people to interview.

Grow without incurring excessive risk

Members of your board’s investment or finance committee should interview candidates. They should look for someone who closely follows market movements and trends and is capable of creating and managing a balanced portfolio that can grow without incurring excessive risk. Understanding the candidates’ investment processes, along with their long-term results, is essential.

Other desirable qualities include experience assisting investment committees in drafting and changing investment policies and an ability to clearly explain the processes behind their investment decisions. Committee members might ask candidates, based on what they know of your organization, what changes to your endowment’s current investment strategy they might propose.

Good candidates should express empathy toward the kinds of problems your organization faces and suggest investment solutions specific to your nonprofit. And they should have the time to properly manage your investments. Ask how many hours per month they anticipate spending on your account and whether they’d be able to attend off-hour meetings, if necessary.

Finally, consider how much you trust the candidate. Don’t engage an investment advisor for your nonprofit unless you’d wholeheartedly trust the person to handle your own money.

Referral source

If you’re not sure where to look for a qualified investment advisor, contact us for referrals. Also contact us if you don’t yet have an endowment but would like to establish one.

The post Got An Endowment? You Need An Investment Advisor appeared first on The Forde Firm.

Cover pressing concerns

Once you’ve set a meeting date, prepare an agenda. Email board members to ask if there’s anything they want to add. This will help ensure all pressing concerns can be covered and minimize the chances of “surprise” issues hijacking the meeting.

For each item, the agenda should provide a timetable and assign responsibility to specific members. Include at least one board vote to reinforce a sense of purpose and accomplishment, but be careful not to cram too much into your agenda. Otherwise, the meeting is likely to feel rushed and some items may need to be postponed.

Email a board packet at least one to two days before the meeting. This packet should consist of the agenda, minutes from the previous meeting and materials relevant to new agenda items, such as financial statements and project proposals.

Stick to the agenda

Start with a short pre-meeting reception that allows members to chat. Some board members have little time to spare, but most will welcome the opportunity to get to know their colleagues.

Once the meeting starts, your executive director and board chair should stick to the agenda and keep things moving. This means imposing a time limit on discussions and calling time when necessary — particularly if one or two individuals are dominating the conversation.

Encourage a vote after a reasonable period. But if your organization requires a consensus (as opposed to a majority vote), the board may not be able to reach a decision in one meeting. If members need more time to think about an issue, postpone the decision to a future date and move on. Be sure to end the meeting on a positive note by thanking members for their time.

Complete post-meeting tasks

Board meetings can’t be effective if there’s no follow-up. Find answers and supporting materials for any questions that might have arisen during the meeting and make sure unresolved items are placed on the next meeting’s agenda.

Also ensure that board members are fulfilling their commitments to your organization and fellow members. If their busy schedules are impeding them, step in and help. If the issue continues, consider replacing the board member.

What matters

Your board members are likely busy professionals who volunteer to serve your nonprofit. Respect their time by focusing on what matters during meetings.

The post Keep Nonprofit Board Meetings Short And Sweet appeared first on The Forde Firm.

Support common interests

Trade associations exist to promote their members’ common interests and improve business conditions or “one or more lines of interest.” Typically, associations get into trouble when they interpret terms such as “promote common interests” and “improve business conditions” too broadly. For example, they might provide customized sales training for only some of their members. But associations don’t qualify for tax-exempt status if they exist only to perform services for individual members.

Another potential violation is engaging in business that’s normally carried out on a for-profit basis. And groups that are primarily social or that exist to promote a hobby generally don’t qualify for 501(c)(6) status.

Don’t favor individual members

To avoid IRS scrutiny, you must be able to differentiate between qualified and nonqualified activities. For example, you are generally allowed to:

• Attempt to influence legislation relating to the common business interests of your members,
• Test and certify products and establish industry standards,
• Publish statistics on industry conditions to promote your members’ line of business, and
• Research effective business practices to share with your members.

But you should limit activities if they benefit specific members rather than your industry or profession as a whole. These might include selling advertising in member publications; facilitating the purchase of supplies for members; and providing workers’ compensation insurance to members. Your association’s “primary purpose” is key. Most 501(c)(6) groups perform some activities that don’t primarily serve common interests. But these activities should be limited in scope and number.

Be careful with unrelated business

Even when certain activities don’t threaten your exempt status, performing services for members can trigger unrelated business income tax (UBIT). Typically, members pay for such services directly, instead of through dues or other common assessments. Depending on the services your association provides and the revenues raised, additional reporting may be required and you may owe UBIT.

Stop and reassess if you’re performing more services, or more substantial ones, for individual members. Instead, you might want to consider forming a separate for-profit organization to offer those services.

Observing limits

It’s not always easy to differentiate between acceptable and unacceptable association activities. To help you remain on the right side of the IRS and preserve your tax-exempt status, contact us with questions.

The post Associations Should Prioritize Common Interests, Not Individual Services appeared first on The Forde Firm.

Most prospective employees probably won’t accept a job based on the availability of an accountable plan. But offering one can help you retain valuable workers who submit frequent reimbursement requests.

What’s covered?

The IRS stipulates that all expenses covered in an accountable plan have a business connection and be “reasonable.” Additionally, employers can’t reimburse employees more than what they paid for any business expense. And employees must account to you for their expenses and, if an expense allowance was provided, return any excess allowance within a reasonable time period.

Examples of expenses that might qualify for a tax-free reimbursement through an accountable plan include tools and equipment, home office supplies, dues and subscriptions. Certain meal, travel and transportation expenses also qualify.

Informal documentation

How do you establish an accountable plan? It isn’t required to be in writing. But formally documenting your plan makes it easier for your nonprofit to prove its validity to the IRS if it’s challenged.

When administering your plan, your nonprofit is responsible for identifying the reimbursement or expense payment and keeping these amounts separate from other amounts, such as wages. The accountable plan must reimburse expenses in addition to an employee’s regular compensation. No matter how informal your nonprofit, you can’t substitute tax-free reimbursements for compensation that employees otherwise would have received.

Keep good records

The IRS also requires employers with accountable plans to keep good records for expenses that are reimbursed. This includes, to the extent applicable, documentation of:

• The amount of the expense and the date,
• Place of the travel, meal or transportation,
• Business purpose of the expense, and
• Business relationship of the people fed.

You also should require employees to submit receipts for any expenses of $75 or more and for all lodging unless your nonprofit uses a per diem plan.

Simple process

Because plans don’t have to be formal, they’re relatively simple to establish. But contact us if you need help setting up an accountable plan.

The post Give Your Staffers A Break With An Accountable Plan appeared first on The Forde Firm.

Offering more

The term “AI” is sometimes confused with data analytics or the application of intense mathematics. But AI can be used in everyday applications that enable nonprofits to improve program efficacy.

For example, the Crisis Text Line in New York has used AI to analyze millions of text messages to determine the words most associated with a high risk of suicide in the sender. And various animal welfare and environmental organizations have employed AI to combat poaching. PAWS, for example, uses modeling and machine learning to provide park rangers with information that helps them predict and prevent poachers’ actions. Global Fishing Watch has analyzed billions of messages from fishing boats to identify illegal industrial fishing ships.

Health-focused organizations also have adopted AI technologies. For example, Parkinson’s UK has unleashed AI to plow through reams of existing research data to fast-track new treatments.

Putting it into practice

Your nonprofit might be able to use AI in the following areas:

Fundraising. Machine learning can help you analyze your current donor database and develop models that predict donor behavior. For example, chatbots that simulate conversation might handle smaller donations while directing more complicated contributions to humans.

Human resources. AI software can expedite the hiring process. For instance, it can narrow the field and save interviewing time, freeing up HR staff to deal with other issues. AI also might reduce the risk of discrimination claims because human subjectivity may play less of a role in the process.

Communications. Chatbots, NLP and other tools make it easier to maintain efficient and effective communications with internal and external stakeholders — including potential donors and volunteers. You might be able to automate board packets and donation requests to ensure the timely delivery of information.

Worth considering

The initial investment required for AI may seem difficult to justify in uncertain economic times. However, because most nonprofits have similar operational needs, AI developers have created off-the-shelf solutions that can be customized. Grants or collaborative efforts with other nonprofits could also help your nonprofit pay for AI technology. Contact us for more information.

The post Even Nonprofits Can Benefit From AI Technology appeared first on The Forde Firm.

The typical defrauded not-for-profit loses $75,000 per fraud incident, according to the Association of Certified Fraud Examiners. And that doesn’t account for the negative publicity and subsequent lost donations and support that often follow fraud. Although no preventive measure is 100% effective, strong internal controls can greatly reduce the risk that a crooked staffer or outside criminal will find gaps in your fortress.

Special vulnerabilities

Internal controls are policies and procedures that govern everything from accepting cash to signing checks to training staff to keeping your IT network secure. Most nonprofits have at least a rudimentary set of internal controls, but dishonest employees and other criminals can usually find gaps in environments where controls are only somewhat effective or inadequately followed.

Why might nonprofits skimp on controls or enforcement? Typically, they devote the largest chunk of their budgets to programming and may not allocate enough dollars to fraud prevention. This can be especially problematic in organizations where executives or board members indicate that fraud prevention is low on their priority list. Nonprofit boards may also inadvertently enable fraud when they place too much trust in the executive director and fail to challenge that person’s financial representations. Unlike their for-profit counterparts, nonprofit board members may lack financial oversight experience.

Trust is another potential Achilles’ heel. Nonprofits often regard their staff and dedicated volunteers as family. They may allow managers to override internal controls and volunteers to accept cash donations without oversight — both risky activities.

Don’t let your guard down

Some of the most common types of employee theft in nonprofit organizations are check tampering, expense reimbursement fraud and billing schemes. But proper segregation of duties — for example, assigning account reconciliation and fund depositing to two different staff members — is a relatively easy and quite effective method of preventing such fraud. Strong management oversight and confidential fraud hotlines open to all stakeholders can also reduce employee theft.

Indeed, although you should trust staffers, you should also verify what they tell you. Conduct background checks on all prospective hires, as well as volunteers who’ll be handling money or financial records. Also, provide an orientation to new board members to ensure they have a clear understanding of their fiduciary role.

Finally, handle fraud incidents seriously. Many nonprofits choose to quietly fire thieves and sweep their actions under the rug. However, this tends to encourage fraud by telling potential thieves that the consequences of getting caught are relatively minor. If an incident is hushed up, rumors could do more reputational damage than publicly addressing the issue head-on. It’s better to file a police report, consult an attorney and inform major stakeholders about the incident.

Prioritizing risks

If you’re not sure where vulnerabilities lie or how your budget can be stretched to allocate more resources to fraud prevention, contact us. We can help you prioritize the most serious risks and find affordable solutions for closing control gaps.

The post Your Nonprofit May Have An Internal Controls Gap appeared first on The Forde Firm.

Making a case

The National Council of Nonprofits defines “capacity building” as the “many different types of activities that are all designed to improve and enhance a nonprofit’s ability to achieve its mission and sustain itself over time.” It refers to whatever a particular organization needs to reach the next level of maturity — whether operational, financial, programmatic or organizational.

Businesses regularly engage in such macro-level initiatives, but nonprofits tend to take more of a project-level perspective. The result can be instability that undermines the overall organization. However, capacity building can enable your nonprofit to strengthen its organizational infrastructure, including facilities, equipment or functions such as payroll and accounting. For example, you could target your management and governance capacity by formulating a succession plan.

Joining in

The capacity building process typically begins by identifying an organization’s strengths and weaknesses in a variety of capacities. You might want to launch client surveys or structured self-assessments where various capacities are rated on a scale of 1 to 5.

As an example, your organization might learn that its strengths include leadership from its frontline workers, and its weaknesses include outcome measurement. The next step is to devise methods to mitigate the weaknesses, right? Not necessarily, at least according to research conducted by Stanford Social Innovation Review (SSIR). The researchers say that, while that approach can indeed make poor outcome measurement less glaring two years from now, your nonprofit’s impact on its targeted populations likely won’t have improved much.

Instead, SSIR endorses a strengths- or assets-based route to capacity building. This means that you leverage your strengths, increasing their capacities significantly. So using the earlier example, you’d build on frontline leadership strength by involving worker-leaders in high-level strategic planning. Their in-depth knowledge of day-to-day activities can help shape your vision going forward. Once you’ve made the most of your strengths, you can apply them to address weaknesses in ways that best serve your nonprofit’s needs.

Bottom line

Capacity-building is a worthy pursuit for any nonprofit. But instead of focusing on inadequacies, you may want to concentrate on pumping up your strengths. Contact us for more information and additional management tips.

The post Put Some Muscle Behind Your Nonprofit’s Capacity-Building Effort appeared first on The Forde Firm.

Starbucks, Nike, Pepsi, Uber and scores of other major companies regularly use cause marketing to burnish their image and reach customers. The not-for-profit organizations that partner with these companies can reap multiple benefits, including financial support and raised awareness of their mission. Cause marketing can take many forms, so it’s important to find both the partner and form that match your nonprofit.

How is it different?

Cause marketing is different from a tax-deductible donation or corporate charitable giving program. When a cause marketing partner provides your organization with funds or services, it’s ideally rewarded with an enhanced public image, greater customer loyalty and other marketing advantages.

With this kind of corporate financing and business expertise backing your nonprofit, you might be able to increase your visibility and educate new audiences about your cause. As members of the public become acquainted with your mission, you can probably expect your volunteer and donor ranks to grow. And new connections with your corporate partner’s customers, vendors, employees and other stakeholders can open up all kinds of avenues for growth.

What forms does it take?

Cause marketing takes several forms. For example, transactional giving programs typically involve online platforms such as iGive and AmazonSmile that enable shoppers to donate a dollar amount or percentage of each purchase to their chosen charities. Or donors may be able to convert customer-loyalty program rewards (such as airline miles) into cash contributions.

Another form is message promotion, where a company uses its resources to promote a cause-focused message — usually one related to its own products. Early in the COVID-19 pandemic, The Body Shop launched its “Time to Care” campaign, which used social media to promote self-care and celebrate health care workers. As part of the initiative, the company partnered with shelters and assisted living communities, donating money and cleaning supplies.

Licensing agreements are another option. A company may pay to use your not-for-profit’s name and branding on its products. For example, AARP has, over the years, licensed its name to several insurance and health care companies. Because these partnerships can have legal complications, they’re recommended for larger, more sophisticated nonprofits.

How do you get started?

Before entering into a cause marketing agreement, carefully research potential partners and partnership forms. Be sure to work with an attorney to negotiate terms with partners and draft agreements. Contact us for help determining the financial potential of cause marketing and the possible tax consequences.

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