Month: November 2020

Dispelling the Nonprofit Overhead Myth

The COVID-19 pandemic has highlighted many issues that already existed. One of those issues is the financial pressure on nonprofits to operate on a shoestring. Donors can be laser-focused on having their gifts go directly to those in need. That’s a terrific goal, but nonprofits can’t magically deliver 21st century services to their community without any infrastructure cost, or overhead. That’s a myth!

Working with less often means lower results. Financially starving nonprofit operations inhibits  investments in the necessary people and systems to perform effectively. That point was made in a Tweet from The Bridgespan Group, a global nonprofit consulting firm that helps other nonprofits to develop strategies: “Underinvesting is expensive! Starving nonprofits leads to inefficient systems.” 

Data dispels myth. Candid, an information-driven nonprofit organization, used its GuideStar nonprofit data to form a business case to break the “overhead myth” about limiting overhead costs. They offer Five Steps to shift the conversation from “overhead” to the need to invest in people and systems: 

  1. Focus on the impact of service delivery to the community, not the cost ratio. 
  2. Shift the conversation from ratios to the true cost of hiring and retaining qualified, experienced people and of maintaining the systems to make it all run.
  3. Describe the nonprofit’s programmatic objectives and the capacity needed to deliver the services to meet those objectives. 
  4. Quantify the capacity investments needed to establish and sustain the necessary people and systems needed to deliver services and fulfill stewardship responsibilities.
  5. Share recent results and achievements, describe additional objectives and results that you want to achieve, and outline the funding needed to support future achievements.

You can read articles that describe the Five Steps in more depth here: https://search.candid.org/#/search/overhead%20myth/3. More tools and information to help non-profits re-direct donor conversations from the “overhead myth” to results are at www.overheadmyth.com. 

Nonprofits are working harder and incurring more costs to deliver services during this pandemic. Dispelling the overhead myth that pressures nonprofits to operate on a shoestring is even more important than ever. Shifting the conversation from “overhead” to the need to invest in people and systems helps nonprofits raise the funds needed to perform effectively and fulfill stewardship responsibilities.

Cyber Risk and Remote Working

Cyber risk has sky-rocketed in the months that remote working has increased. Hackers know that remote workers often don’t have the same security set-up at home as they do at the office. But even when strong security protocols are in place, hackers get in and data breaches happen. 

Why? Because human action has long been reported as one of the highest cyber risks. Some people just can’t resist clicking on enticing links, no matter where they came from. Temptation to fall for clickbait seems to be even higher for people working at home in their jammies. Plus, people under stress are more likely to act without thinking things through. Hackers know that, too.

In a recent whitepaper titled, “Cyberchology: The Human Element,” 80% of businesses surveyed stated that their cyber risk has increased in 2020. More than 75% of businesses said that one-half or more of their people were working remotely. Up to 47% of survey respondents reported experiencing stress issues. No wonder that cybersecurity breach reports are up 63%!

Click here (yes, a valid link) to read the entire whitepaper. It’s interesting. Plus, it’s free. https://cdn1.esetstatic.com/ESET/UK/Collateral/White_Paper_Cyberchology.pdf

Bottom line, tons of money invested in security can go right out the window if people don’t use systems securely. Your systems are only as safe as the security knowledge and understanding of your least knowledgeable worker. With the extra challenges of remote work and the pandemic, businesses can help workers maintain cybersecurity practices at the office and at home with periodic reminders to:

  1. Keep software systems up to date and use a good anti-virus program.
  2. Examine the email address and URLs in all correspondence to detect a scammer mimicking a legitimate site or email address.
  3. Ignore text messages, emails, or phone calls asking you to update or verify your account information and go to the company’s website to see if something needs your attention.
  4. Never open unexpected attachments until verifying the sender’s email address and use virus scan before opening any document.
  5. Scrutinize all electronic requests for a payment or fund transfers.
  6. Be extra suspicious of any message that urges immediate action.

Human action has long been reported as one of the highest cyber risks. People who click before thinking things through can let hackers into your systems to do all sorts of expensive and embarrassing damage. Periodic cybersecurity reminders, especially for those who are working at home in their jammies, can go along way to reducing cyber risk during this pandemic and over the long run.

Taxes are Part of Getting Married

Taxes are not romantic, even to me. However, taxes are part of getting married. A conversation about income taxes should be part of every engaged couples’ wedding plans. Marriage, like many other life events, impacts how a person’s income taxes are filed. 

Before marriage, taxes are usually filed under the “single” filing status. After those wedding bells chime and the “I Dos” are said, each spouse’s income tax filing status changes to “married.” Engaged couples who are newly married, or about to get married, should be aware of these four points before filing their next income tax return:

  • Taxpayers are required to file income tax returns based on their marital status on December 31st, the last day of the tax year. Couples who get married on New Year’s Eve are considered married for the entire year for tax purposes.
  • Married couples can select the “married filing jointly” (MFJ) or “married filing separately” (MFS) filing status, depending on which option means a lower tax bill. Couples can assess their tax situation annually to select the filing status that results in the lower overall tax liability.
  • Filing MFJ or MFS is a choice. However, it’s important to be aware that different tax rules apply for couples selecting the MFS option. Examples include rules related to itemized deductions, the standard deduction, the capital loss limit, and some refundable and non-refundable tax credits.
  • To plan for filing next year’s income tax return, couples can refer to information from their prior-year tax returns to help determine whether using the MFJ or MFS filing status might result in a lower overall tax liability. Hint – MFJ often results in a lower overall income tax bill.

Newly-married couples can reduce tax stress by learning about how the filing status rules apply to them before filing their next income tax return. Want to know more? Check out the IRS’ webpage with the details about income tax filing status and links to more information https://www.irs.gov/newsroom/correct-filing-status. 

Taxes aren’t romantic, but they are part of getting married. And the IRS has the perfect wedding gift, a helpful checklist for newly married couples – https://www.irs.gov/newsroom/a-tax-checklist-for-newly-married-couples. No thank you note required.

Your Chances of an IRS Audit

Few words strike fear in the hearts of taxpayers like “IRS audit.” People would rather do almost anything other than get an audit notice from the IRS. But what does an IRS audit really mean? What are your chances of an IRS audit? What happens after you are selected for an audit?

An IRS audit can indicate a problem, or not. Basically, an IRS audit is a review of a taxpayer’s tax return and financial documents to determine that income and deductions are reported correctly according to the tax laws. The IRS Deputy Commissioner for Services and Enforcement recently issued the full report of audit actions by income levels. If you’re not up for all the details, here are a few basics about your chances of an IRS audit and what happens if you are selected: 

  • Why is a taxpayer selected for an audit?

Selection for an audit does not always suggest a problem. It can mean that something on a return does not fit a “norm” for similar returns. The IRS also audits returns where information on a return does not match what is reported by a third party, such as interest from a bank account. The IRS could also select a return when performing a “related examination” of business partners or investors whose returns were selected for audit.

  • How does the IRS notify taxpayers of an audit?

Taxpayers are contacted initially by regular mail from the IRS that she or he has been selected for an audit. The IRS notice provides all contact information and instructions, as well as an explanation of the items on the return that do not match or that require additional documentation. All IRS notices include a deadline to reply. Opening and replying on time is an important part of the audit process.

  • How does the IRS conduct an audit?

The IRS manages audits either by mail or through an in-person interview to review the related financial records. In-person interviews could be virtual during COVID-19. Usually, interviews are conducted at an IRS office or at the taxpayer’s home, place of business, or accountant’s office. Mail audit notices will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.

  • How far back can the IRS go to audit my return?

Generally, the IRS can include returns filed within the last three years in an audit. If they identify a substantial error, they could add additional years, but not usually more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years.

Your chances of an IRS audit are not easy to determine. An IRS audit can indicate a problem, or not. Either way, it’s good to know why you were selected, what could happen next, and how the audit is conducted. No matter what, make sure that you open the IRS notice when it arrives, read all the instructions, and reply by the due date.