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
  • 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

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.


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. 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.

Financial Health Checkup

We just passed the half-way point in the year. A perfect time for your organization to get a financial health checkup! Think about it…your personal health and your organization’s financial health are very similar. Serious problems could exist that you cannot see or feel without a checkup. A sudden loss of income or an unexpected expense can stop your organization, just like a medical crisis can stop your body.

Organizations should do a financial health checkup that covers these three areas:

Actual vs. Planned Finances

Financial performance should be compared to planned, or budgeted, performance to determine how actual events compare to what you thought would happen. Focus on variances in income and expense categories that most significantly impact achieving your organization’s goals. If the budget or plan was not met, figure out why. Did conditions change?  Were projections unrealistic? Focus on “why” and use that information to refine future budgets and plans.

Cash Flow

Project your cash inflows and outflows for at least three months, preferably for six months or more. Determine whether expected income will cover expected (and some unexpected) expenses. Sounds easy, but this projection and analysis will take some thought and effort. You need to know your payments receivable and payable, regular payments that are required no matter what, such as payroll and rent, and your reconciled bank account balances. Be realistic about payment timing and what it really costs to sustain your organization.

Expense Control

Spending control is the most important and most difficult part of running an organization. Demands to fund day-to-day operations, in addition to investing in technology and infrastructure, are constant. Prioritizing essential expenses and growth investments is a challenge that requires regular attention. This is particularly true in newer organizations where infrastructure investments are most crucial. Ensure that planned expenses are within established plans or parameters. Carefully consider unplanned expenses to ensure that they are aligned with the organization’s objectives.

Your organization’s finances, like your body, should undergo a periodic checkup to alert you to existing or impending problems. Monitoring a few key health areas can alert you to problems on the horizon, and give you an opportunity to act before it’s too late.

Want Clarity? Put Agreements in Writing!

Small businesses and nonprofits sometimes need a professional with specialized skills to help them out, like a human resources or financial consultant. Most organizations need to purchase materials or inventory items. Getting services or goods from a third party, or outsourcing, can add significant value to an organization, as long as it’s managed right. Outsourcing management starts with a clear, written agreement that both parties understand and follow.

A written agreement should address key components of both parties – the vendor’s responsibilities, as well as the organization’s. These four components should be addressed in all vendor agreements to clarify expectations and hold all parties accountable:

Objective and Scope

Clearly describe the results or accomplishments that the vendor should achieve on the organization’s behalf, as well as any requirements for the organization. Specifically describe what the organization expects to get when the vendor’s work is completed. For example, an agreement for an IT vendor to install and maintain a new system would describe, among other things, the end state after the system is installed, performance requirements and any ongoing maintenance.

Time Frame and Frequency

Specify delivery dates and how often your organization needs the goods or services provided. Clarify any unusual needs you have, such as nights or weekends, to avoid misunderstandings   that will prevent the organization from meeting its customers’ expectations. How would it look if a 24/7 café couldn’t get fresh food delivered on a Sunday? Highlight timing and frequency to make sure the vendor knows when she or he is needed.

Delivery and Acceptance

Describe the expected condition, appearance, format, or other requirements that are essential for the goods or services to achieve the organization’s objective. Do the flyers need to be blue with your logo? Does the training class need to be two-hours long and meet specific learning objectives? Should goods be delivered in a certain way? Don’t presume that the vendor will understand all specific needs. Put them in writing.

Cost and Payment

Last, but certainly not least, be clear about the vendor’s total cost and when payment will be made. Specify what is included in the total cost and how that cost is calculated. For example, is the cost for paper per box or per carton? Does the consultant cost an hourly rate plus expenses, or will she or he absorb those expenses? Hold vendors accountable by stipulating that payment will only be made after goods or services have been accepted, or when a specified objective is met.

All organizations need help with professional services or purchase from an outside source. That help can be great, but not if it doesn’t meet the organization’s needs. Having a written agreement that clarifies expectations and holds all parties accountable is the best way for organizations to successfully manage outsourced needs.

Project Cash Flow to Meet Objectives

Objectives are the goal posts for moving your organization forward – adding staff, expanding locations or increasing capacity. Cash makes all of that happen. Reliably projecting when cash will come in and when it goes out may seem like an unnecessary exercise while you are busy running your organization. Not true! Cash flow projections are an essential tool for meeting your objectives.

Can you afford that new position or storefront? When will that new equipment pay for itself with added income? Answering these and other important questions depends on reliable and realistic cash flow projections. That’s great to know, but how in the world do you project your cash flow?

Three tips for projecting cash flow to meet your organization’s objectives:

Payment Commitments

Start by projecting payments that you know are going to happen. Some expenses, like payroll and rent, happen at a specific time, no matter what. Scheduled income payments, like retainers, are also known in advance. Plot out when those payments will come in and go out. Add other payments that are seasonal or occasional in the month or week that you expect or estimate that they will occur.

Past Experience

Past years’ payment history is a gold mine for projecting cash flow. What unexpected items have happened in the past? How likely is that to happen again this year? Timing when payments come in and go out highlights periods when you might be in danger of running low on cash. Seeing in advance that cash your cash will be tight gives you opportunities to make adjustments.

Invest to Keep Up and Grow

After plugging in all the known income and expenses, estimating the variable amounts and adjusting the timing, sit back and examine the results. Is there cash available to invest in technology, improvements or growth? Can you afford that new piece of equipment that you need just to keep up with the competition? Cash flow projections will help you answer those and other important questions.

Meeting objectives requires planning. Organizations need to reliably project when cash will come in and go out to successfully meet objectives, and to make adjustments when projections indicate that cash is about to get tight. Answer important questions about sustaining and growing your organization with reliable and realistic cash flow projections, and meet your objectives.

Retirement and Tax Savings with a SEP IRA

Entrepreneurs and small business owners are constantly on the hunt for ways to reduce their tax bills. I know because my tax clients ask about it regularly. Some tax clients also ask me about saving for retirement. Super good news – they can do both!

When you work for someone else, your employer may set up a retirement plan where you can contribute and reduce your taxable income. When you work for yourself, you can set up a retirement plan for yourself (and your employees, if you have any). Retirement plan types vary, and there are quite a few options. If you want to explore them all, knock yourself out at this IRS website – .

Many entrepreneurs and small business owners choose a retirement plan called a “Simplified Employee Pension Individual Retirement Arrangement,” commonly called a SEP IRA. Here are three reasons why:

Easy and Flexible

A SEP IRA is easy to set-up with your bank, your investment advisor or a mutual fund. Just get it done by the end of the calendar year and fund the account by the tax return due date, including extensions. Annual contributions amounts are flexible, which is good if your business cash flow varies from year-to-year.

Generous Contribution Limits

A SEP IRA allows you an annual contribution of up to 25 percent of net business profits, after netting out the deductible half of self-employment taxes. That calculation is a little tricky so you’ll need some help to get it right. There is an annual dollar limit, too. For 2019, it’s up to $56,000. Contributions must be made for eligible employees.

No Costs

A SEP IRA has no start-up or operating costs that can be required for a conventional retirement plan. However, any investments selected to fund the account may have a management or investment advisory fee. It’s important to get a clear understanding of any fees or charges that will defray your retirement funds.

Other costs need to be considered when deciding if a SEP IRA if for you, like taxes and early withdrawal penalties. Distributions from a SEP IRA works just like a traditional IRA – any funds taken out before age 59½ are subject to a 10% early withdrawal penalty. That’s on top of the federal and state income tax.

Entrepreneurs and small business owners on the hunt for ways to reduce their tax bills can save on taxes and for retirement by setting up and funding a SEP IRA. Saving for today and tomorrow at the same time could be the best news that you get all year.

Start on the Right Track with an Entrepreneur Express Workshop

Wow is it June already? That means it’s almost time for my next FREE workshop to help entrepreneurs understand and get control over their business finances. On Wednesday, June 12th, the Virginia Department of Small Business and Supplier Diversity (SBSD), the City of Falls Church Economic Development Authority and the Falls Church Chamber of Commerce are hosting the Entrepreneur Express – Moving Your Business Forward workshop. 

The workshop is designed to help small business owners take their business to the next level by providing interactive discussions covering key elements of business practices. I am excited to be one of three presenters to discuss topics where small businesses can get into expensive problems – HR Issues, Insurance and Tax Requirements. It’s free but advance registration is required at this link:

Here’s an overview of my portion of the Entrepreneur Express Workshop, “Small Business Tax Requirements” –

Income Tax Basics

Entrepreneurs can file their taxes as one of the three different types of tax entities, a sole proprietor, a partnership, or a Subchapter S Corporation. One person in business by her or himself could choose to operate for tax purposes as a sole proprietor or a Sub S. Two or more people must operate as a partnership or a Sub S. Many other rules apply. Setting things up right the first time will save time and money over the long run.

Non-Income Tax Considerations

In addition to federal and state income taxes, entrepreneurs also need to consider self-employed Social Security taxes, even if the small business has no employees. Sole proprietors and other pass-through businesses pay self-employment taxes equal to 15.3% of net profits. Small businesses also need to register for a local business license and report business assets (e.g., computers and equipment). Both require a small fee.

2017 Tax Law Highlights for Small Business

Recent tax law updates had some really good news for businesses, including small business. Higher asset depreciation limits and the new Qualified Business Income Deduction provide opportunities to invest in equipment and to deduct a portion of profits to reduce tax liabilities. Small businesses need to be aware of tax laws and how they impact business financial decisions.

The Entrepreneur Express – Moving Your Business Forward workshop is from 9:00 AM – 12:00 PM in Falls Church, VA. If you can make it, please come up and say hello afterward. Want to register? Here’s the link

Any questions? Contact Chris Ley at [email protected]