Tax Professionals Go to Summer Camp, Too

Last week, I joined 2,300 other tax professionals at what I lovingly call Summer Tax Camp. Okay, it’s not really “camp”. It’s the IRS Tax Forum, three days of tax updates and training on more than a dozen topics. All of us “campers” learned about tax regulation updates and issues from IRS representatives and experienced tax professionals. 

All tax professionals need to keep up with the latest income tax changes and new requirements, but not all of them can get to an IRS Tax Forum. Somehow, they need to make sure that they have the skills, education, and expertise to file complete and accurate income tax returns on behalf of their clients. 

Knowing that your tax professional actually knows what she or he is doing is important for many reasons, starting with the fact that taxpayers are responsible for all the information on their income tax return, no matter who prepared it. How can you feel confident that you’re in good hands?

Follow these five tips to select a qualified tax professional who keeps up with tax law changes, either by attending Summer Tax Camp or some other method:

  • Ask about professional credentials recognized by the IRS, such as a CPA or Enrolled Agent. The IRS maintains a Directory of Federal Return Preparers with their credentials and qualifications at https://irs.treasury.gov/rpo/rpo.jsf.
  • Verify that the preparer has a Preparer Tax Identification Number (PTIN) and enters it on your return that is electronically filed with the IRS. Tax returns prepared by a tax professional for a fee are required to be filed electronically.
  • Inquire about the tax professional’s education and training, and how she or he keeps up with tax law changes and IRS processes. Understanding IRS processes is just as important as knowing how to apply the tax rules. 
  • Ask about service fees and get a cost estimate in writing. Steer clear of tax preparers who base fees on a percentage of the refund, or who want their fee paid by direct deposit from your refund. These are unethical practices prohibited by IRS regulations.
  • Make sure the tax professional is available all year, after tax season is over, in case you need her or him. For example, notices can come from tax agencies any time of the year. Tax projections sometimes need refreshing before estimated tax payments are due again. 

Getting dependable tax preparation services starts with selecting a qualified tax professional who keeps up with tax law changes and issues. Whether the tax professional went to Summer Tax Camp or not, following my five tips will get you qualified tax help. Need more? The IRS has it for you at https://www.irs.gov/tax-professionals/choosing-a-tax-professional.

More Competition for Donations under New Tax Law

The nonprofit community has been holding its collective breath since many taxpayers lost their deduction for charitable contributions under the 2017 Tax Cuts and Jobs Act. In the months after the tax act passed, experts in tax and philanthropy speculated about its impact on overall charitable giving. The first clue came after filing season for 2018 tax returns, the first returns filed under the new law.

Based on 2018 returns filed so far, overall charitable donations were down 2% in 2018 compared to 2017, according to the Giving USA Foundation. Sure, 2% doesn’t sound like much, but it means that the pool of donated dollars got smaller, creating more competition for available donations.

More competition for donations means that nonprofits have to make the most of all the ways that they tell their story – their annual report, website and financial statements (yes, the financial statements). Here’s how:

Annual Report

The hallmark of nonprofit story telling is the annual report. Headline with the impact of the organization’s programs and services on its community and clients. Place a dollar value on specific services and equate them to specified donation levels, helping donors understand the power of their gifts. Include high-level financial information with graphs. Don’t have a big printing budget? Many nonprofits only issue an electronic annual report.

Website

A website could contain materials found in an annual report, but why do that when you can include a link to each year’s annual report, audited financial statements, and other details for donors who want more. Since websites can be refreshed frequently, it’s fairly easy to post upcoming events, features on volunteers and clients, and recent accomplishments. Toot your horn loudly! 

Financial Statements/IRS Form 990

Don’t underestimate the power of numbers. Financial statements tell donors about the sources and uses of funds and the organization’s financial health. Notes that accompany the financial statements help donors understand the numbers. The IRS Form 990 has a narrative section to describe programs and their community impact. Don’t scrimp on the narrative section, especially since it’s a public document that could be read by anyone. 

A 2% reduction in overall charitable donations because of the 2017 Tax Cuts and Jobs Act is bad news for nonprofits. More competition for a smaller pool of available donations means that telling nonprofit stories in annual reports, websites and financial statements is more important than ever.

Disaster Charity Scams on IRS 2019 “DIRTY DOZEN”

Floods, tornadoes, wildfires. Disasters are in the news every week, impacting many lives. Charities that serve disaster victims, like the American Red Cross, help with food, shelter and other emergency needs. Legitimate charities use donations to fund those emergency services when they are needed.

Unfortunately, fraudulent charities are out there after every disaster event scamming generous donors. They solicit donations that will never be used to serve anyone other than the fraudsters. The IRS is very interested in stopping fraudulent charities. So interested, charity scams have been on its “DIRTY DOZEN” tax scam list every year for a long time.

Follow these four tips to make sure that the charity asking for your donation is legitimate:

  • Verify, Then Trust – Be wary of charities with names that are similar to a familiar or nationally-known organization. Some phony charities use names or websites that sound or look like a respected, legitimate organization. IRS.gov has a search feature, Tax Exempt Organization Search that allows donors to find legitimate charities. Check it before you give.
  • Watch for Bogus Solicitations – A long-standing scam that occurs after major disasters is to impersonate charities to get money or private information from well-intentioned donor/taxpayers. Scam artists use a variety of tactics, such as contacting people by e-mail or phone solicitations, or even going door-to-door. Treat e-mail solicitations with extra care because they could contain malware, on top of taking your money.

  • Keep Information Confidential – Scam artists may ask for you to provide your Social Security number or passwords that can be used to steal your identity and money. It’s quite common to make legitimate donations using credit cards, but it’s essential to make sure you know who you are speaking with before giving out your information. Did they call you? Confirm the organization and call them back, or make the donation online.
  • No Cash – Ever – For security and tax record purposes, contribute by check or credit card. Those methods provide documentation of the donation. They could also provide some recourse if you have questions or concerns later. Besides, who carries cash anymore? Charities are supposed to provide a contemporaneous acknowledgement after each donation. Keep a record of all donations just in case.

Fraudsters can use disasters as a cover to steal donations intended for legitimate charities that help disaster victims. Following these four tips can prevent your donation from going to a phony charity or avoid giving confidential financial information to an identify thief.