Financial Workshop Reflections

Workshops are a great way to share information that organizations can use immediately. Last week, I got an opportunity to speak with a room of entrepreneurs about three essential elements for a financially healthy organization.


Financial Essentials for Entrepreneurs covered three elements that must be in place for every organization:


  1. Financial Accounts

A separate financial account should be maintained for each business or nonprofit. It’s never too early to open a separate bank account. Each separate and distinct business should also get its own credit card to assist with payments and cash flow. Comingling personal and organizational funds presents a risk of not getting a clear, isolated view of business finances.


  1. Accounting Records

Accounting records should be kept for each organization to substantiate income and expenses. Keep those records up-to-date. You never know when something unexpected will come up. How would you know if you can afford it? Capture the date, amount, business purpose, and income/expense type using a method to that you can keep up with – or hire a professional to do it for you.


  1. Tax Compliance

Organizations must be properly registered the with the state, county, and local level, as applicable. Many counties and local jurisdictions have business property tax requirements. Employees? Got to pay employment taxes. Sales tax could also apply. Then, of course, is tax on net income for federal and state (depending on where you live or operate).


Up-to-date, clear financial information helps organizations stay ready to make an investment or decision. Bottom line, addressing the three essential elements described above are as good as “an apple a day” to keep your organization in good financial health.

Confused about Your Tax Filing Status?

Frequent readers know that my blog posts are often inspired by real events. A very real event right now is the 2017 Tax Filing Season Filing. Several recent conversations alerted me to the amount of confusion out there about tax filing status.


There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child. Filing status is based on a person’s marital status and other circumstances.


Seven facts determine a taxpayer’s filing status:


  1. Marital status on the last day of the year determines marital status for the entire year.


  1. If more than one filing status applies, choose the one that results in the lower tax bill.


  1. Single filing status generally applies to anyone who is unmarried according to state law.


  1. Married couples can select from two filing status options: Married Filing Jointly or Married Filing Separately, whichever results in a lower combined tax liability. Some deductions and credits are limited using the Married Filing Separately filing status.


  1. Surviving spouses who do not remarry in the year of death can usually file a joint return with their spouse for that year.


  1. Head of Household generally applies to unmarried taxpayers who paid more than half the cost of maintaining a home that includes at least one qualifying person.


  1. Qualifying Widow(er) with Dependent Child can be filed if a spouse died during one of the last two tax years and there is a dependent child, plus some other circumstances.


This is just a glimpse of the rules determining tax filing status. Those “other circumstances” really matter. Talking to a qualified tax professional about filing options can help avoid expensive mistakes. To learn more on your own, the IRS has some pretty good tips at


Itemize or Standard Deduction – Which One is Better?

This time of year, there’s a lot of tax talk at home, at work, and on TV. Some of that talk centers on whether taxpayers should “itemize” or take the “standard deduction.”  Knowing the difference and which is better is important for keeping that tax bill as low as possible.


Taxpayers can itemize or take the standard deduction. Not both. Knowing how to choose comes down to these three points:


  1. Filing Status and Age

The standard deduction amount varies based on filing status and age. Amounts are indexed annually for inflation. For 2016, the standard deduction for a person who is single or married filing separately, and is under age 65 is $6,300. Single taxpayers age 65 and over get a $7,850 standard deduction. For married couples filing jointly, it’s $12,600.


  1. Getting the Most Tax Savings

Itemize deductions when the total exceeds the standard deduction. Itemized deductions include amounts paid during the year for state and local income or sales taxes, real estate taxes, personal property taxes, mortgage interest, gifts to charity, uninsured losses, and, depending on the situation, medical and dental expenses.


  1. Qualifying for the Standard Deduction

Some situations prevent taxpayers from using the standard deduction. For example, a married person filing separately from her spouse who itemizes cannot select the standard deduction, even if it’s higher than itemizing. Nonresident aliens, dual-citizen aliens, estates, trusts, and partnerships also do not qualify to take the standard deduction.


As usual, there’s much more to this topic than space allows here. Taxes are complicated. Consult a qualified tax professional for personalized assistance.


Need help choosing on your own? The IRS website has “Six Steps to Help You Choose” at:

Who Can be Claimed as a Tax Dependent?

At tax time, you want to take all the deductions you can, right? So you’re probably interested to know whether the people living under your roof and eating your food can be claimed as dependents on your tax return. For 2016, each dependent can reduce taxable income by $4,050.


Tax filers are allowed to claim a qualifying dependent, even if that dependent files an income tax return. A dependent is defined as a qualifying child or qualifying relative. Not surprisingly, a number of rules define who qualifies as a “child” or a “relative”.


Also no surprise — this space is limited and tax rules are complex. The following is merely a summary of the tax rules about dependents. It does not address all the exceptions and scenarios that could impact your situation.


General Rules


All dependents must be a qualifying child or a qualifying relative.


In all situations, tax filers cannot:

  • Claim any dependents if the tax filer is a qualifying dependent of another person.
  • Claim a married person who files a joint return, unless it is filed only to get a refund.
  • Claim a person who does not pass the residency test.


A Qualifying Child is defined as:

  • Your child, stepchild, foster child, sibling, half -sibling, step-sibling, or their descendants.
  • A person under age 19, under age 24 if a student, or any age if permanently and totally disabled.
  • A person who passes the residency test.
  • A child who did not provide more than half of his or her own support.

Even more rules apply if a child meets the rules to be a qualifying child of more than one person.


A Qualifying Relative is defined as:


  • A person who is not a qualified child of the tax filer or of another taxpayer.
  • A member of your household per local law.
  • A person with gross annual income less than the personal exemption amount.
  • A relative for whom the tax filer provided more than half of the total support.


Special rules may apply to relatives who do not live with the tax filer.


Confused yet? Need more details? Check out the IRS website here:

Nonprofit Board Treasurer Duties

A few weeks ago, I blogged about nonprofit Board duties required to fulfill the financial stewardship and oversight role. This legally-defined role is known as “Fiduciary Responsibility.” This week, I provide more details about the Board Treasurer’s important financial oversight role.


The Treasurer is the primary financial officer of the organization. As such, she or he should have the experience and background to be knowledgeable about financial policies and functions necessary effectively manage and understand nonprofit finances. Some professions that make good Board Treasurers were described in another previous blog post.


Four important Treasurer Duties and Responsibilities are to:


  1. Assure that the organization is following appropriate financial policies and that qualified individuals perform financial functions. The right policies and people are more likely to provide the desired results, such as reliable and complete financial information.
  2. Understand regulatory and legal requirements for financial accounting and standards of practice for nonprofit organizations and assist other Board members in understanding and fulfilling their oversight and fiduciary responsibilities.
  3. Assure that accurate financial records are being kept, monitored, and used to take necessary action to sustain and protect the organization’s finances. Regularly provide the Board Chair and the Board with an accounting of the organization’s financial condition.
  4. Assist in preparing the annual budget and presenting the budget to the Board for approval, and in selecting an independent auditor, reviewing the annual audit results, and answering Board members’ questions about the audit.


Nonprofits with Treasurers who fulfill these four fiduciary duties are more likely to make appropriate financial decisions, meet donor expectations to protect and preserve financial assets, and ensure that regulatory and legal requirements are addressed.