New Tax Bill: Christmas Gift or Lump of Coal?

As this blog “goes to press,” H.R.1, To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 — aka the Tax Cuts and Jobs Act – is undergoing its final vote to be passed by Congress. President Trump has promised to sign it before Christmas.

Ho, ho, ho!! Is this a gift or a lump of coal in your Christmas stocking? Well, as is often the answer with taxes — It Depends. This tax bill is packed with changes for almost every individual and business U.S. taxpayer. Whether that is a good change or a bad change depends on your circumstances. It also depends on your ability to do tax planning or to hire a qualified tax professional to help you to navigate through the planning process.

Most people don’t have the time to keep up with tax law changes. Interpreting tax law changes is also daunting. If you decide to hire a professional, how do you decide where to get reliable and accurate tax advice?

 

Ask any tax professional you consider engaging these three questions, and make sure you feel good about the answers:

 

  1. How Do You Keep Up with Changing Tax Laws?

Tax laws are changing now, and they will continue to change. It’s important to work with a tax professional who keeps up, so you don’t have to. A qualified tax professional should be able to describe attending conferences, webinars, or other continuing education every year to stay current.

 

  1. What are Your Experience and Credentials?

Tax preparation is an unregulated industry where anyone can participate. Ask all tax professionals you are considering for examples of experience with different tax situations, client types, and complex issues. Working with a credentialed professional, like a CPA or Enrolled Agent, helps ensure the person is qualified. Finally, ask for references – and contact them.

 

  1. How Do You Communicate with your Clients?

Feeling comfortable with your tax professional’s communication style and manner is important. Does the tax professional regularly communicate with and educate her or his clients? Is she or he available if a tax-related question or issue comes up, even after the tax deadline?

 

The Tax Cuts and Jobs Act makes tax planning even more important than ever. If you need help figuring out whether you got a gift or a lump of coal in your Christmas stocking in 2017, ask these three important questions to find a qualified tax professional to advise and educate you.

Volunteering Pays Off during Giving Season (and All Year)

I’ve blogged recently about the huge percentage of total annual charitable donations that are made during Giving Season, the few weeks between Thanksgiving and New Year’s Day. My blogs were from the perspective of both the donors and the nonprofits. With Christmas just a few days away, the deadline for 2017 donations ends soon.

 

But the spirit of giving doesn’t have to end on December 31st. And it doesn’t have to drain your bank account, either. Giving some of your time by volunteering for a nonprofit can happen any time of the year. Volunteering is an investment that not only pays off for the nonprofit and its clients, it can really pay off for your business.

 

There is plenty of evidence that volunteering is good for business. My business is a great example. This month, it was recognized at the Arlington Chamber of Commerce 93rd Annual Meeting with the President’s Award for volunteering. The recognition is an honor, plus it’s a terrific promotion for my business!

 

Three big pay-offs for businesses that volunteer in their community are:

 

  1. Visibility

Community service is one way to get the name of your business in front of more potential customers. Whether you are sponsoring an event or connecting your team with on-site volunteer projects, the name of your business is getting in front of more eyes, such as in the event program or signage at the volunteer site. Sure, volunteering is not free, but if you’re paying to get your business name out there, it may as well be linked with a good cause.

 

  1. Credibility

When you are doing good, people will assume that you are good. Establishing your credibility as an honorable and trusted business through volunteering will make potential customers look at your business first when making a purchasing decision. Why should they go elsewhere, to a business that has not demonstrated its commitment to service?

 

  1. Employee Enrichment

Now, more than ever, employees want a job where they can feel good about what they are doing. They want to contribute to a better future. While workers can certainly volunteer on their own time, businesses that give employees opportunities to volunteer as a team increase engagement, satisfaction, and retention.

Everyone strives for Win-Win situations. Volunteering some of your business time and energy in your community is the ultimate Win-Win-Win for the nonprofit, its clients, and your business. What better way to keep the spirit of giving all year long?

 

Ethical Culture Drives Financial Success

We grew up thinking that good behavior is rewarded. Current events can really rock that thinking. But it’s been proven that good organizational behavior, also known as an ethical culture, can result in financial success. Yes, the Good Guy really can win by running an organization in an ethical manner.

 

In fact, a February 2016, Forbes.com article, The Profit Potential in Running An Ethical Business by @SteveParrish4, says that an ethical business is easier to manage than an organization with disdain for rules and disrespect for accountability. As Mr. Parrish says, keeping a second set of accounting records is time consuming and expensive. Fraud losses and prosecutions can get expensive, too. Just ask the former employees and shareholders of Enron, WorldCom, etc., etc.

 

An ethical culture starts with that proverbial “tone at the top” set by leadership – the Board, CEO, and CFO. Tone at the top sets the organization’s guiding values. So how does ethical culture happen?

 

Leadership takes four actions to establish the right tone at the top to promote an ethical culture and drive financial success:

 

  1. Communicate expectations.Organizations must make it clear that unethical conduct will not be tolerated. Clear and convincing policies should convey the organization’s values and expected behaviors. A first step is to establish a written code of ethics and ethics training.

 

  1. Lead by example.Leadership must set an example through its actions. Observing leadership actively following the organization’s code of ethics increases the likelihood that it will be followed by others. Leadership must also be mindful of perception, and understand how their actions could be interpreted.

 

  1. Recognize integrity.Support an ethical culture by recognizing individuals for ethical behavior. Recognition could be a monetary incentive program, or some other special acknowledgement from leadership. Whatever the reward, publicly celebrate the behavior and clearly communicate the link between ethical behavior and the reward.

 

  1. Establish confidential reporting.No matter what leadership does to promote an ethical culture, some individuals will still engage in unethical, or even illegal, activities. Establish a confidential tip line or other mechanism for reporting real or suspected fraudulent behavior or ethical violations without fear of retaliation. Set up a mechanism to follow-up on tips.

 

These actions alone do not guarantee that everyone in the organization will act in an ethical manner, but they can go a long way to setting an ethical culture and driving financial success.

Tips for Nonprofits during Giving Season

Thanksgiving is the traditional start of Giving Season. To mark the date, I blogged a couple of weeks ago about “Which, Who, What, and How” individuals can deduct charitable donations. Nonprofits receive a large portion of their total donations in the last few weeks of the year. Large donation volumes require protections to prevent some of those funds from “disappearing”.

 

Nonprofits work hard to raise funds. Plus, they have fiduciary responsibility for donor funds, starting when they are received. So, in the spirit of equal time, this week’s blog gives some tips to nonprofits, similar to tips that I gave in November to taxpayers planning to make year-end donations.

 

Four best practices for nonprofits to protect their donations:

 

  1. Segregate Duties

Separate tasks to ensure that funds are protected at all times, and nothing “falls through the cracks”. For example, separate the tasks for receiving and depositing funds. Bank account reconciliations and other verification procedures should be performed by someone who is not involved in receiving or depositing funds.

 

  1. Standardize and Automate

Establish and follow a routine process for each donation method. Define non-routine activity, how to detect it, and how to address it. Investing in automation generally reduces overall cost through efficiency and cost-effective controls. Automation facilitates reporting to track activity and detect/address issues and anomalies.

 

  1. Verify and Reconcile

Independent and regular donation verification is one of the most important protections for your donations. Automated tools are available for bank account and credit card reconciliations. Up-front technology investments generally pay for themselves quickly. Donations that are restricted by the donor for a specific purpose should be verified separately.

 

  1. Manage Donation Channels

All donations should be protected. Priority should be given to donation channels that bring in the largest dollar amounts. Identify your donation channels, such as direct mail, online, events, or walk-ins. Determine the dollar amount and donation volume from each channel. Prioritize protection activities on donation channels that bring in the larger percentages of total dollars. Encourage donors to use less expensive, well-protected donation channels.

 

Following these best practices is not everything nonprofits should do to protect donations, but it’s a start.  What is your nonprofit doing to make sure that your donations are protected?