What Picture Are You Painting With Your Form 990?

Many nonprofit organizations view the Form 990 as a “tax return” – a document that is tedious to complete, and that must be filed with the IRS as one of several requirements to maintain tax-exempt status. However, Form 990 is not really a tax return at all. The core Form 990 and its various sub-schedules are more accurately described as an information return and serve several functions, the most fundamental of which is to serve as a vehicle to transmit information regarding the organization’s activities to the IRS. However, another function of the Form 990 is to paint a picture of the organization that can serve as an invaluable tool to influence public perception, raise awareness for issues important to the organization, and attract new donors.

The Form 990 return is available to the public via guidestar.org and other websites. Private foundations, businesses, and wealthy individuals may review your return (and possibly request the audited financial statements) to make a decision on whether to provide grant funding. Additionally, average citizens may obtain it to decide if they want to volunteer for the organization. In order to make the organization look as attractive as possible and inform the public about all the great things it has accomplished, you should review the return and customize it to include broad concepts such as the mission, long-term plan, and program outcomes. Additionally, the return should include items specific to the most recent fiscal year, such as number of people served, number of volunteers utilized, collaborations with other nonprofit organizations, and projects that were completed.

Create a glowing picture by focusing on these sections

Most of the return is rather standard and doesn’t leave much room for reporting anything other than a number or a ‘yes’ or ‘no’ response. However, you should definitely spend time highlighting the organization in a few key sections:

Schedule O – Supplemental Information to Form 990: This schedule is important since this is where you can elaborate on any other part of the core Form 990, and is one of the only places where the response is not limited to a few lines of text. Schedule O can continue for as many pages as desired and contain elaborate narratives that highlight a wealth of information about the organization.
Part I, Line 1 – Summary of Mission or Most Significant Activities: This is especially important since this is the first page of the return and the first significant piece of information people will see. Only about two lines of text fit in this space, so you may want to simply state, “See Part III and Schedule O,” if you want to convey more information than can be accommodated in this space.
Part I, Line 6 – Total Number of Volunteers: Most organizations simply estimate the number of volunteers and list them in this box, which doesn’t particularly attract attention or tell much of a story. Organizations that have a volunteer program would benefit by expanding on this information in Schedule O and including the number of volunteer hours that were donated, the types of services provided, and the effect of those volunteer hours on the organization.

The more volunteers an organization has, the more important this section becomes. Since donated services must meet certain criteria in order to be recorded on the financial statements, and are not reported on the statement of functional expenses or in the program expense totals in Part III – Program Service Accomplishments, the volunteer services would otherwise go unnoticed. By highlighting the details of the volunteer program, you can illustrate all of the accomplishments that would not be possible without their time and effort at no cost to the organization, and fully illustrate and measure the reach of the organization’s programs. It also shows donors the additional effect every dollar they donate has on the organization’s clients and the community, since the magnitude of a program is not measured solely by the amount of actual dollars spent on it.

Part III – Statement of Program Service Accomplishments: This page is the most important section of the return for “tooting your organization’s horn.” Line 1 should state the organization’s mission, as adopted by the board of directors. Line 4a-4c lists the three largest program services (measured by amount of expenses). There is ample room to describe each program in detail and any program can be explained further in Schedule O. Line 4d can also refer to Schedule O to describe the other programs that are not within the top three already described above. This section is the best opportunity to show the public what the organization accomplished during the past year and why they should donate their time and resources to the organization.
Part IX – Statement of Functional Expenses: This statement reflects how much of the expenses were spent for direct program activities, and for supporting services including management and general activities, and fundraising. Potential donors will use this statement to see how many cents out of every dollar would potentially be spent on administrative costs. Organizations that spend relatively large proportions of their expenses on administrative costs could be viewed in a negative light when compared to other organizations that spend significantly less.

Without a doubt, fundraising is a huge priority for all nonprofit organizations. With all the time and effort spent on soliciting new donors, marketing, and grant writing, any nonprofit organization would be remiss if it did not ensure that the Form 990 paints an enticing picture of the organization. This year, as you prepare or review this important information return, ask yourself: What does my picture look like?

Starting a new business is an exciting time. But before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more.

Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away.

How expenses are handled on your tax return

When planning a new enterprise, remember these key points:

Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one. Organizational costs include the costs of creating a corporation or partnership.
Under the federal tax code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs. The $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
No deductions or amortization write-offs are allowed until the year when “active conduct” of your new business commences. That usually means the year when the enterprise has all the pieces in place to begin earning revenue. To determine if a taxpayer meets this test, the IRS and courts will generally ask: Did the taxpayer undertake the activity intending to earn a profit? Was the taxpayer regularly and actively involved? Has the activity actually begun?

An important decision

Time may be of the essence if you have start-up expenses that you’d like to deduct this year. You need to decide whether to take the elections described above. Recordkeeping is important. Contact us about your business start-up plans. We can help with the tax and other aspects of your new venture.

Now that the April 18 income tax filing deadline has passed, it may be tempting to set aside any thought of taxes until year end is approaching. But don’t succumb. For maximum tax savings, now is the time to start tax planning for 2016.

More opportunities

A tremendous number of variables affect your overall tax liability for the year. Starting to look at these variables early in the year can give you more opportunities to reduce your 2016 tax bill.

For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year-end activity.

More certainty

In recent years, planning early has been a challenge because there were a lot of expired tax breaks where it was uncertain whether they’d be extended for the year. But the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks through 2016, or, in some cases, later. It also made many breaks permanent.

For example, the PATH Act made permanent the deduction for state and local sales taxes in lieu of state and local income taxes and tax-free IRA distributions to charities for account holders age 70½ or older. So you don’t have to wait and see whether these breaks will be available for the year like you did in 2014 and 2015.

Getting started

To get started on your 2016 tax planning, contact us. We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.

Many people itemize deductions on Schedule A of their tax returns, rather than taking the standard deduction. Your tax preparer will generally advise you to do so if your allowable itemized deductions exceed the standard deduction.

Most itemized deductions are well known and fairly well-understood. Examples include property taxes, home mortgage interest, state and local income taxes, charitable donations and medical expenses.

But you can also write off miscellaneous itemized deductions. These are less well known and not always understood, so you may be missing out. Here’s what you need to know to keep that from happening.

Deduction Basics

Miscellaneous itemized deductions fit into two categories.

1. Items that, when added together, can be deducted only to the extent they exceed 2% of your adjusted gross income (AGI). AGI is the number on the last line of page 1 of your Form 1040. It includes all taxable income items and selected write-offs such as the ones for deductible IRA contributions, moving expenses and alimony paid.

2. Items that are not subject to the 2%-of-AGI deduction threshold.

Phase-Out Rules Disallow Deductions for Some

Items in both categories are subject to the itemized deduction phase out rule that applies to high-income individuals. Under this rule, you can lose up to 80% of affected deductions. For 2016, the phase out rule kicks in when AGI exceeds:

$259,400 for singles (unchanged from 2015),
$311,300 for married joint-filing couples (unchanged from 2015),
$285,350 for heads of households (unchanged from 2015), and
$155,650 for married individuals who file separate returns (unchanged from 2015).

Under the phase out rule, the total amount of affected itemized deductions is reduced by 3% of the amount by which AGI exceeds the applicable threshold. But the reduction cannot exceed 80% of the otherwise allowable deductions that you started off with.

Key point: Most taxpayers aren’t troubled by the itemized deduction phase out rule. Even when applicable, it doesn’t make a big difference unless you have a really high income.

Items in both categories are completely disallowed under the alternative minimum tax (AMT) rules. So if you’re liable for AMT for the year, you can forget about any write-offs for miscellaneous itemized deduction items.

What’s Subject to the 2%-of-AGI Threshold

The 2%-of-AGI deduction threshold applies to the following miscellaneous itemized deduction items:

Job-related expenses. These include job-search costs, though you can deduct costs to search for a new job only in your existing occupation or profession. Unreimbursed employee business expenses also fall in this category. These include:

Professional association dues,
Subscriptions to professional publications, mobile devices used primarily for business,
Small tools and supplies,
Safety equipment,
Protective clothing and uniforms (if not suitable for ordinary wear), and
Physical exams required by your employer.

In addition, you can throw in expenses of having an office in your home if it’s maintained for your employer’s convenience.

Tax preparation expenses. These include preparation fees you pay your tax adviser.

Other expenses. These items include:

Expenses incurred for the production or collection of income (such as the cost of legal actions to collect damages, unpaid insurance claims, wages, investment income, alimony and so forth),
Expenses for the management, conservation and maintenance of taxable-income-producing assets (such as office expenses, clerical help, accounting and legal fees, investment advisory fees, custodial fees, trust administration fees, and the rental of a safe deposit box used to store investment-related documents),
Expenses for tax advice (including in divorce situations) and any expenses related to the determination, collection or refund of any tax including federal income tax (including legal and tax professional fees),
Hobby expenses (but only to the extent of income from the hobby activity), and
Legal expenses related to doing or keeping your job, such as fees paid to defend yourself against criminal charges arising from employment.

What’s Not Subject to the 2%-of-AGI Threshold

You can write off the following miscellaneous expenses without having to worry about the 2%-of-AGI deduction threshold:

Gambling losses for the year (but only to the extent of your gambling winnings for the year),
Bond premium amortization for taxable bonds,
Casualty and theft losses of income-producing assets (such as stolen or destroyed securities and losses from Ponzi investment scams), and
Federal estate tax paid on income-in-respect-of-a-decedent.

Referred to in that last point is income that a deceased person would have collected if he or she continued to live but that wasn’t properly included in taxable gross income on the decedent’s final Form 1040. Such not-yet-taxed income counts as an asset of the decedent’s estate for federal estate tax purposes and can result in an additional estate tax hit. If you inherited an income-in-respect-of-a-decedent item, the miscellaneous deduction for the applicable estate tax could apply to you.

Only the Beginning

Believe it or not, this is only the beginning of many tax-saving miscellaneous itemized deductions worth considering. This article doesn’t cover them all. Ask your tax adviser whether you have other expenses that might qualify.

Yeo & Yeo, a leading Michigan accounting firm, and its affiliates, Yeo & Yeo Technology, Affiliated Medical Billing and Yeo & Yeo Financial Services, have launched a firm-wide initiative to benefit the Red Nose Day Fund. Red Nose Day is a FUN-raising campaign benefitting nonprofit organizations that help lift children and young people out of poverty in the United States and in some of the poorest communities in the world.

Red Nose Day encourages people to don red noses and have a laugh for a good cause. Half of the money donated to the Red Nose Fund will be spent in the U.S. The other half will be spent in some of the poorest communities in Latin America, Asia and Africa. All money raised supports projects that ensure kids are safe, healthy and educated.

“Just the simple, silly act of putting on a red nose means that anyone can benefit children in poverty,” says Thomas E. Hollerback, president & CEO. “In staying true to our values―which include continuing dedication to community service―we are pleased to participate in this fun campaign to support children both locally and globally.”

Yeo & Yeo will raise money for the Red Nose Fund through a $5 donation jeans day for its 220 professionals on the official Red Nose Day, May 26. The firm will also encourage its employees to wear their red noses in the community to raise awareness for the campaign and to take silly selfies throughout the month. The firm will contribute $1 to the Red Nose Fund for every photo submitted by its employees.

Locally, Yeo & Yeo CPAs’ Young Professionals group of the Leading Edge Alliance (LEA YP) are taking the firm-wide initiative a step further by incorporating it with the LEA’s annual Global Volunteer initiative. LEA member firms worldwide are encouraged to donate to or volunteer for a local charity.

“Each year we seek opportunities in our communities that will help those in need for LEA’s Global Volunteer Week,” says Brad Booms, LEA YP Group Leader. “Directing efforts to our local Boys & Girls Clubs of America, charity partners of the Red Nose Fund, is a perfect fit because they can be found in many of our Yeo & Yeo communities.”

The firm’s young professionals will collect playground equipment, games and activities for Boys and Girls Clubs located in the communities that Yeo & Yeo serves, as well as volunteer at the Boys and Girls Clubs throughout May.

The Red Nose Day Fund’s month-long campaign will culminate in NBC’s televised fundraising event on Thursday, May 26, at 9:00 p.m. EST. The live two-hour benefit will feature popular comedians, top musicians and Hollywood stars, along with a mix of great comedy, live musical performances and short, compelling films shedding light on the cause.

Early in the history of the Health Insurance Portability and Accountability Act (HIPAA), violations typically involved receiving a warning letter from the Department of Health and Human Services (HHS). It was basically toothless and carried no penalties. In 2009, Congress passed the Health Information Technology for Economic and Clinical Health Act (HITECH), which supplied the government with a range of tools to support enforcement. In short, HIPAA grew fangs.

In 2010, HHS began holding training seminars for state attorneys general on enforcing HIPAA rules. As a result, that year alone saw an increase of 27 percent in the number of HIPAA-related complaint investigations.

Part of what the HITECH Act added to HIPAA was to replace warning letters with mandatory fines for HIPAA violations. The toughest category, “willful neglect,” could carry penalties up to $1.5 million for violations like unsecured protected health information (PHI).

A more typical fine at the physician’s office level are first-tier violations that start at $100. A second-tier violation is the most common for physicians. These fines start at $1,000 per violation and can go as high as $25,000 per violation, which can be levied for multiple infractions.

HIPAA Audits

Prior to 2012, these were referred to as HIPAA investigations, but are now called HIPAA audits. Random audits may be conducted, although the number of physicians in the U.S. compared to the number of auditors makes the odds of being chosen for an audit fairly low.

There are three types of breaches that may result in a HIPAA audit.

1. Breach or a complaint of a breach. Any breach of protected health information that affects more than 500 people must be published on the HHS website. This can be found at: http://www.hhs.gov/ocr/privacy/hipaa/administrative/breachnotificationrule/breachtool.html

2. A complaint of a security or privacy violation. HHS is required by law to investigate all HIPAA violation complaints. Directions for how to file a complaint can be found on the HHS website at: http://www.hhs.gov/ocr/privacy/hipaa/complaints/index.html

3.Filing for Electronic Health Record (EHR) reimbursements. The 2009 American Recovery and Reinvestment Act (ARRA) provided financial incentives for physicians able to demonstrate “meaningful use” of an electronic health record system. Those incentives were as high as $44,000 prior to April 2011, but have decreased yearly until 2016 when they will disappear completely. In order to qualify for the reimbursement, physicians need to describe how their medical practice meets HIPAA compliance requirements. In addition, the EHR must be HIPAA compliant, as well as all the physician’s policies and procedure manuals. Staff in the physician’s office must have documented training in HIPAA.

Audits and Documentation

If audited, physicians must provide documentation of their HIPAA compliance practices. Some of the items examined are:

Prevention, detection, containment and correction of security violations;
List of software used to manage and control access to the Internet;
Policies and procedures for emergency access to electronic information systems; and
Password management policies and procedures.

The list is so long and comprehensive it might seem impossible for anyone to comply. However, most physician professional organizations can supply privacy and security manual templates. Usually a member of the physician’s staff will need to become the privacy/security officer whose job it is to implement and maintain HIPAA compliance records and policies.

When purchasing an EHR system, make sure the product is HIPAA compliant and the vendor is fully aware of HIPAA regulations. The same goes for hiring a HIPAA consultant. Check the consultant’s background and determine his or her specialty (for example, are they focused primarily on accounting or law firms or physician’s offices?).

Audits and Personnel

During an audit, HIPAA auditors will request that key personnel be available for questions. This will include the physician, the practice’s IT person and the HIPAA compliance officer. HHS’s Office of E-Health Standards and Services provides a lengthy list of job titles of people who could be called in during an audit. Click here to read it. It’s worthwhile to keep in mind that many of those titles only exist in large healthcare institutions, like Lead Network Engineer. They would not be expected in a physician’s office.

Questions Likely to Be Asked

The specific questions a HIPAA auditor is likely to ask will vary according to the nature of the audit and type of security breach, as well as the type and size of the organization. Typical questions include:

Are you able to provide a list of software used to manage and control access to the Internet?
Do you have an emergency mode of operations plan?
Show us a list of terminated employees.
Provide a list of antivirus software, service, date of installation and list of updates.
Can you provide a list of users who can access your system remotely?
What is your employee violations/sanctions policy?
Show us a list of systems administrators, backup operators and computer system users.
Show us how your system authenticates users’ access to electronic protected health information (EPHI).
Do you have a disaster recovery plan?

Good Medicine

Although it sometimes seems that HIPAA and the HITECH Act have added yet another layer of bureaucracy to practicing medicine, it’s important to remind yourself that the purpose of both laws is to protect a patient’s confidential health information. In addition, since so much of a patient’s financial information flows through a physician’s office, the regulations cover that as well.

For the most part, HIPAA security regulations are built upon computer security best practices and once in place, are reasonably easy to follow. Yet it seems every week there’s a news story about a major breach at a healthcare institution, doctor’s office or healthcare agency.

Implementing good patient information security practices can save you, your practice and your patients a lot of headaches and potential financial penalties. Plus, it’s just good medicine.

In recent months, there have been several significant tax developments that affect partnerships. They also apply to multi-member limited liability companies (LLCs) that are treated as partnerships for federal tax purposes. (For simplicity, we’ll use the terms “partnership” and “partner” to refer to all entities and owners that are affected by the developments.)

Here are quick summaries of what’s brewing on the partnership tax front.

Accelerated Due Dates

The long-standing due dates for filing partnership federal income tax returns (Form 1065) were changed by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.

For partnership tax years beginning after December 31, 2015, partnerships must file Form 1065 one month earlier than before. That means they’re due two and one-half months after the close of the partnership’s tax year — or March 15 for calendar-year partnerships. As before, six-month extensions are allowed. The deadline is adjusted for weekends and holidays until the next business day.

Under prior law, a partnership’s Form 1065 was due three and one-half months after the close of the partnership’s tax year — or April 15, adjusted for weekends and holidays, for calendar-year partnerships.

Important note. This change affects the due date for 2016 Forms 1065 for partnerships that use the calendar year for tax purposes. Those returns will now be due on March 15, 2017.

Changes to Varying Interest Rules

In August 2015, the IRS issued new final regulations that modify and finalize the so-called “varying interest rules.” These rules were previously contained in proposed regulations issued in 2009.

The varying interest rules are used to determine partners’ percentage interests in partnership tax items — including income, gains, losses, deductions and credits — when the partners’ interests change during the year. For example, interests can change due to the entrance of new partners or the exit of existing ones.

The new final regulations require that 100% of all partnership tax items be allocated among the partners. In addition, no items can be duplicated, regardless of the allocation method adopted by the partnership.

The new final regulations allow partnerships to use either of these two methods to determine distributive shares of partnership tax items when partners’ interests vary during the year:

Interim-closing-of-the-books method. Here, a snapshot of the partnership’s income statement from the beginning of the tax year through the date of the ownership change is used to allocate tax items up to that point of the partnership’s tax year.
Annual proration method. Alternately, partnership tax items for the year can be prorated based on the number of days that an entering or exiting partner is a member of the partnership.

Different methods can be used for different variations that occur within the same tax year. The new final regs are effective for partnership tax years that begin on or after August 3, 2015. For calendar-year partnerships, these changes will be effective for the 2016 tax year.

Partnership Audits

The Bipartisan Budget Act of 2015, which was passed in November 2015, changes how the IRS will audit partnerships. However, the new partnership audit rules generally won’t take effect until partnership tax years beginning in 2018. Until then, the current partnership audit rules will remain in effect unless the partnership voluntarily chooses to follow the new rules sooner.

Family Partnerships

The Bipartisan Budget Act also includes some important new tax provisions for family partnerships. For tax purposes, a family partnership is one that’s composed of members of the same family.

For many years, some taxpayers and tax professionals had argued that the existing family partnership rules provided an alternative test for determining who’s a partner in a partnership, without regard to how the terms “partner” or “partnership” are defined under the general partnership tax rules found in the Internal Revenue Code.

As a result, many partnerships have taken the position that if a person holds a capital interest in a partnership that was acquired as a gift, the partnership’s existence must be respected for tax purposes. They took this position regardless of whether the parties had demonstrated that they actually joined together to conduct a business or investment venture.

The new law attempts to eliminate this argument by making several statutory amendments. First, it clarifies that Congress did not intend for the family partnership rules to provide an alternative test for determining whether a person is a partner in a partnership.

Instead, the new law clarifies that the general partnership tax rules regarding who should be recognized as a partner for tax purposes apply equally to interests in partnership capital that are created by gift. Put another way, the determination of whether the owner of a capital interest that was acquired as a gift is a bona fide partner for tax purposes would be made under the generally applicable partnership tax rules.

Additionally, the new law removes statutory language that implied that the owner of an interest in partnership capital could always be treated as a partner if capital was a material income-producing factor for the partnership.

These amendments take effect starting with tax years beginning after December 31, 2015. So, for calendar-year family partnerships, 2016 federal tax returns could be affected.

Disguised Partnership Payments for Services

In July 2015, the IRS issued new proposed regulations that would treat certain arrangements that result in payments to partners as disguised payments for services, rather than as an allocation of partnership profits and a related distribution of cash.

The proposed regulations are mainly aimed at changing the tax treatment of so-called “fee waiver arrangements,” under which partnership service providers give up their right to receive current fees in exchange for an interest in future partnership profits. Such arrangements are common in the private-equity and hedge-fund industries.

Private-equity firms and hedge funds are often classified as partnerships for tax purposes. And they typically charge investors a 2% fee on managed assets. In many cases, such arrangements are accompanied by a fee waiver arrangement in which the private-equity or hedge-fund manager exchanges all or a portion of its not-yet-earned management fee for an interest in the fund’s future profits.

The tax planning objective of such arrangements is to allow the manager to trade current fee income — which would be treated as high-taxed ordinary income and be subject to federal employment taxes — for an interest in future capital gains collected by the fund. These future capital gains would be taxed at lower rates.

The proposed regulations would use a facts-and-circumstances approach to determine if such an arrangement should be treated as a disguised payment for services, rather than as a distribution of partnership profits. The proposed regulations list six non-exclusive factors that may indicate that an arrangement constitutes in whole or in part a disguised payment for services. These proposed rule changes would become effective when and if they’re issued in the form of final regulations.

Navigating the Rules

The tax rules for partnerships and multi-member LLCs are complicated. And they change frequently due to new tax legislation and new or updated IRS guidance. This article summarizes some key partnership taxation developments that have occurred in recent months. Consult your tax adviser if you have questions or want additional information.

Some lucrative federal income tax credits for certain energy-efficient home improvements were extended recently. The extensions were part of the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), which became law on December 18, 2015. Here’s what you need to know to cash in on these tax breaks.

Credit for Energy-Efficient Home Improvements and Equipment

In recent years, individuals could claim a tax credit of up to $500 for qualified energy-saving improvements made to a principal residence in the United States. This credit expired at the end of 2014, but the PATH Act extended it for 2015 and 2016.

The credit equals 10% of certain qualified expenditures plus 100% of certain other qualified expenditures, subject to a maximum overall credit of $500. There are no income restrictions on taking this credit, and it can be used against the alternative minimum tax (AMT). Expenditures for vacation homes and foreign residences are ineligible, however.

For the following improvements to a U.S. principal residence, the maximum credit equals 10% of qualified expenditures up to the overall $500 credit cap, reduced by any credits claimed in earlier years:

Insulation systems that reduce heat loss or gain,
Metal and asphalt roofs with heat-reduction components that meet Energy Star requirements, and
Exterior windows (including skylights) and doors that meet Energy Star requirements. These expenditures are subject to a separate $200 credit cap.

For the following items of energy-saving equipment installed in a U.S. principal residence, the maximum credit equals 100% of qualified expenditures up to the overall $500 credit cap, again reduced by any credits claimed in earlier years:

Qualified central air conditioners; electric heat pumps; electric heat pump water heaters; water heaters that run on natural gas, propane, or oil; and biomass fuel stoves used for heating or hot water. These items are subject to a separate $300 credit cap.

Qualified furnaces and hot water boilers that run on natural gas, propane, or oil. These items are subject to a separate $150 credit cap.

Qualified main air circulating fans used in natural gas, propane and oil furnaces. These items are subject to a separate $50 credit cap.

This credit will expire again at the end of this year, unless Congress extends it again.

Important note. Because the $500 credit cap is reduced by any credits claimed in earlier years, many people who previously claimed the credit will be ineligible for any further credits in 2015 and 2016.

Credit for Residential Solar Electricity-Generating and Water-Heating Equipment

Individual taxpayers can collect a generous federal income tax credit for expenditures for qualifying solar electricity-generating and water-heating equipment. This credit was scheduled to expire at the end of 2016, but it’s been extended to cover qualifying expenditures made through 2021.

For property placed in service by the end of 2019, the credit equals 30% of qualifying expenditures. For property placed in service in 2020 and 2021, the credit rate is scheduled to be reduced to 26% and 22%, respectively.

Important note. Because qualifying systems are expensive, this credit can be significant. There are no upper limits on the credit or phaseout rules for people with higher income levels. In addition, the credit is allowed against the AMT. If your credit is so large that you can’t use all of it on your current-year return, you can carry forward any unused credit to future tax years.

In general, 30% of the costs for the following types of equipment count as eligible expenditures for the credit:

Qualified solar water-heating equipment,
Qualified solar electricity-generating equipment,
Qualified wind energy equipment, and
Qualified geothermal heat pump equipment.

Qualified equipment must be installed and used in a U.S. residence, which can be a vacation home.

You can also take the credit for qualified fuel cell electricity-generating equipment for a U.S. principal residence. Vacation homes are ineligible for the fuel cell credit. Also, the maximum annual fuel cell credit is limited to $500 for each 0.5 kilowatt hour of fuel cell capacity added during that year.

This credit can’t, however, be claimed for equipment used to heat swimming pools or hot tubs. Special rules apply to expenditures for residential co-op and condominium buildings.

Important note. Keep receipts, contracts and other documentation to prove exactly how much you spend on eligible costs, including any extra labor costs for site preparation, assembly, installation, piping or wiring.

Both Credits Require Manufacturer Certifications

To claim either of these residential energy credits, you must obtain a certification from the manufacturer that the product qualifies. The certification may be on the product packaging or the manufacturer’s website. Keep this certification with your tax records. You don’t need to attach it to your return, but the return must include a completed Form 5695, “Residential Energy Credits.”

For more information about these “green” tax breaks, contact your tax adviser.

With the prevalence of automated bill payment, many busy consumers don’t bother to review their monthly bank or credit card statements anymore. Or they may review only those charges above a certain dollar threshold. But a recent indictment by the Federal Trade Commission highlights how important it is to review every line item on your statements, even the small ones.

In March, a Nevada grand jury indicted a British man living in Las Vegas, Nevada, on 39 counts of wire fraud, aggravated identity theft and money laundering for withdrawing money from victims’ bank accounts without authorization. He used the ill-gotten gains to purchase five airplanes, a Land Rover, a Dodge Charger, multiple tractors, five all-terrain vehicles and even a fire truck.

Here’s how this scam allegedly worked. According to the indictment, from 2008 through 2013, the fraudster operated a third-party payment processing company that specialized in creating remotely created checks (RCCs). Also known as demand drafts, RCCs are checks created by third-party payees, rather than the account holders. In place of a signature, an RCC contains a typed statement claiming that the check was authorized by the account holder. On behalf of its merchant clients, the company created and deposited RCCs drawn on the consumers’ bank accounts.

These legitimate transactions provided access to thousands of accounts. To gain access to additional accounts, the perpetrator purchased “lead lists” that contained detailed personal and financial data of thousands more consumers.

In 2013, he established a phony online business that purported to help consumers find online payday loans. Then he allegedly used the payday loan company to create and deposit more than 750,000 RCCs totaling more than $22 million. Most of the victims never visited the phony payday loan company’s website. Instead, the fraudster made unauthorized charges using the personal data obtained from the payment processing company and lead lists.

About half of the fraudulent RCCs were returned by the account holders’ banks — often because the consumer noticed an unauthorized charge for $30 on his or her bank statement and disputed it. But the victims never noticed the charges and, therefore, didn’t dispute them. When the perpetrator ran out of new accounts to charge, he repeated the scam against accounts he had already charged.

The bottom line? Take a couple of minutes to review your bank and credit card statements every month. If you’ve gone “paperless” but you’re not the type of person who will remember to log in to check your account online, contact your bank or credit card company and request to receive old-fashioned paper copies again.

Yeo & Yeo CPAs & Business Consultants, a leading Michigan accounting firm, announces plans to move its corporate headquarters. The move will include relocation of affiliates Yeo & Yeo Technology, Affiliated Medical Billing and Yeo & Yeo Financial Services.

The accounting firm and its affiliates will move from 3023 Davenport Avenue in Saginaw and relocate four miles north to 5300 Bay Road, the site of Davenport University’s former Saginaw campus. Recently, Davenport University merged the Saginaw campus into the Midland campus as part of its long-term strategic plan.

“The building is in immaculate condition,” said Thomas Hollerback, president and CEO. “It’s apparent that Davenport University took pride in maintaining the property, and that was a factor in the decision. For over 40 years, we set high standards for maintaining our current buildings and grounds, for both the community and our employees. We will make every effort to ensure that a future buyer shares the same value,” Hollerback says.

The firm’s growth prompted the move. “We are simply out of space at our current location that we have called home since 1975,” says Hollerback.

Yeo & Yeo’s current location includes two buildings and basement, comprises 30,000 square feet occupied by over 120 employees. “At peak times of the year we are short 14 parking spaces. The First Church of the Nazarene located across Davenport Avenue has been a great neighbor and allowed us to park there as needed,” says Hollerback.

Expansion has been ongoing for Yeo & Yeo. In 2000, the firm invested in an 11,000-square-foot addition to accommodate growth. In 2006, Yeo & Yeo CPAs purchased the 4,500-square-foot building next door at 3037 Davenport which Affiliated Medical Billing moved into. For over a year the firm’s principals have been assessing options for expanding the current location to accommodate the need for workspace and parking, while ideally bringing the affiliates together under one roof. “We determined that relocation will meet our long-term needs and be more cost-effective than expanding our current site,” states Hollerback.

The building at 5300 Bay Road boasts 28,000 square feet and the firm plans to add another 12,000 square feet to fulfil the firm’s strategic plan for future growth. “The extra space will give us all the ability to add staff so that we can continue to provide our clients with outstanding service,” says Saginaw managing principal, David Schaeffer.

The expansion and remodeling are expected to be complete in early 2017. “The new location will provide a fresh, new work atmosphere with enhanced operational efficiencies and excellent growth potential,”says Hollerback.

Yeo & Yeo employs nearly 220 professionals and has nine offices throughout Michigan. During the last three years, Yeo & Yeo’s Ann Arbor accounting firm and Lansing accounting firm offices also relocated within their communities to accommodate growth and offer a contemporary work environment for employees.

The major U.S. card companies — including Visa, MasterCard, Discover and American Express — voluntarily imposed a shift of liability for counterfeit “card present” transactions that went into effect for most merchants on October 1, 2015. (Gas stations with automated fuel dispensers have until October 1, 2017, before their liability on counterfeit cards will shift.)

As a result of this liability shift, brick-and-mortar stores are expected to upgrade their card readers and processing systems to accept chip cards, also known as Europay, MasterCard and Visa (EMV) cards. If a store fails to upgrade and accepts an in-store payment with a chip card using a magnetic-only card reader, the store — not the card issuer — is generally responsible for replacing any fraud losses.

CardHub, a credit card comparison website, recently followed up on the status of EMV compliance in the United States with its “2016 EMV Adoption Survey.” It revealed that 42% of U.S. retailers still haven’t upgraded the terminals in any of their stores. What’s more, the adoption rate is no better for merchants who’ve been hacked in the past. The study found that, among U.S. retailers who’ve experienced a data breach in the last five years, 43% haven’t upgraded their card readers.

Although upgrading may be costly, especially for small banks and retailers, EMV technology provides greater protection for card issuers, merchants and consumers. By using a card without a chip or shopping at stores that aren’t EMV-compliant, you’re putting your accounts at greater risk of fraud. Here’s why.

Magnetic Strips vs. Chips

How do chip cards help fight payment card fraud? A chip card contains a tiny metallic square that’s actually a minicomputer. Chip cards generate a unique encrypted code for each transaction, so they’re more secure than magnetic cards when read by an EMV-compliant processing device. For now, most U.S. chip cards call for dual authorization with card holder signatures, unless the card previously required a personal identification number (PIN). Eventually, the United States may transition to chip-and-PIN cards, which would add a layer of fraud protection.

Conversely, magnetic cards store static information, similar to old-fashioned music cassette tapes, making them easy targets for hackers. If a thief steals data from a magnetic credit card, he or she can copy the unchanging data onto a cloned card and use it to make purchases or withdraw cash.

Card issuers in Canada and several European, Asian and Latin American countries have already seen payment card fraud rates drop significantly after they switched from magnetic cards to chip cards. In addition, most foreign chip card readers already require PINs.

Affected Transactions

In the past, card issuers — including banks, credit unions and other financial institutions that issue debit or credit cards — generally accepted all liability for counterfeit payment card transactions. But on October 1, 2015, the liability for counterfeit in-store payment card transactions generally shifted to the party (either the issuer or merchant) that doesn’t support EMV.

The liability shift doesn’t change the responsibility for online purchases, in-store transactions conducted using lost or stolen cards, or in-store transactions conducted using cards that only offer magnetic strips. Payment card issuers will continue to be liable for payment fraud that occurs with these types of transactions.

Consumer Perceptions of Chip Cards

Many consumers remain indifferent or uncertain about the benefits that chip cards offer. CardHub’s survey revealed that:

- 41% of consumers haven’t received (or don’t know if they’ve received) a chip-enabled card, and

56% of consumers don’t care if a merchant’s equipment is chip-enabled.

It’s easy to tell if you’re using EMV technology. Chip cards have a tiny metallic square on the front. Most chip cards will also have a magnetic strip on the back, at least for now. These may be used if the merchant’s card reader isn’t chip-enabled or the chip reader (or card) malfunctions.

You know a store has installed chip-enabled terminals if the checkout clerk asks you to “dip” your card into the bottom of the reader, rather than “swipe” the magnetic strip. You also might notice that chip card payments take about 10 seconds longer to process than magnetic strip card payments. This gives the chip card’s minicomputer time to communicate with the merchant’s terminal.

Protect Your Accounts

Although consumers aren’t directly affected by this shift of liability, they’ll benefit from more secure credit and debit cards. Criminals steal billions of dollars through payment card fraud each year. When fraud strikes, it’s a huge inconvenience to cardholders.

Victims might, for example, need to dispute fraudulent charges on their monthly card statements, cancel their existing cards and wait for new cards to arrive. They should also switch all automated bill payments and online shopping accounts to the new card numbers and expiration dates.

Fortunately, chip card technology can help reduce your chances of becoming the next payment card fraud victim. But you only get the added layer of protection if you use chip cards and shop at stores that have updated their equipment and processing systems. Contact your financial or legal advisors for more information.

When a deal is pending, the best negotiators know that the goal isn’t to scoop up everything and leave the other side with little or nothing. The real goal is generally to exchange items of value so that both sides leave satisfied they have protected their basic interests and made a deal that benefits their companies.

Like all worthwhile endeavors, success depends on preparation. You must know what to concede, when to compromise, and how to handle concessions. Here are a dozen steps to help you achieve success at the negotiating table:

1. Define what a win looks like to you. For a transaction to make sense for your company, you obviously need certain terms to be met. Before the meeting, do some homework to figure out at what point the deal stops making sense. For example, you might want a price of $55,000 and three days to deliver the product. But after crunching the numbers, you find that the lowest terms you can agree to without losing money are $50,000 and two-day delivery.
2. Establish ground rules. In many cases, it’s a good idea to set some ground rules about the negotiation process, especially if there is a culture or language barrier, or you think the other person may be less than honest.
3. Determine value. Think in terms of basic interests on both sides. Decide ahead of time what is of value to you and what you can afford to give up. Try to determine the same thing on the other side. For example, you go into a sales meeting and find the other party can use some of your company’s stock that you consider obsolete (and which you are paying to insure and store). Offering it at a deep discount could further their interests and in the long run, save you money by getting it out of your inventory.
4. Hold back. Don’t make the first move. You don’t know what the other party’s aspirations are and you may give away far more than you need to. And when the other party requests a concession, don’t agree immediately. That could give the appearance that you were asking too much, you know it, and you aren’t prepared to defend it.
5. Make small concessions. You can establish that your first offer is valid by keeping concessions small. That also suggests there is little wiggle room. Plus, if you make a big concession, the other party may conclude you were trying to take advantage of him or her from the start.
6. Don’t give up something without getting something. The key to effective negotiations is to build trust and communication with an above board give-and-take process. When the other party requests a concession, respond with: “What will you offer in return?” or “will you do this for me?” Don’t give a concession without getting one. Ask for something of equal or greater value. One-sided concessions encourage the other party to keep asking for more.
7. Remember, small concessions add up. Beware of incrementalism. In other words, you may make a bunch of small concessions, but you later realize that you’ve given away a great deal.
8. Give reasons for making concessions. Explain that, in light of the new information provided, you are willing to give up X in exchange for Y. Example: “Your components are more expensive than our current supplier, but since you’ve offered free local delivery, it’s clear we can save significant freight charges. If you put this guarantee in writing, I’ll sign with you now.”
9. Don’t overreach. Once you’ve gotten a concession, don’t try to change the terms to get more on that particular issue, or you risk losing goodwill.
10. Focus on what you will do. Try to avoid saying “no” outright. Instead, keep the process positive by saying something like, “I will do this, if you will do that.”
11. Make sure you actually want concessions. Be careful what you ask for and offer. You may toss out an outrageous suggestion in the belief the other party will never go for it. But what if they do? One good example is a salary negotiation between a staff member and the boss. The employee believes herself to be indispensable and says that she’ll quit if she doesn’t get the raise she wants, only to have the employer thank her for her service and accept the offer.
12. Remember your bottom line. Make up your mind that if you can’t reach a suitable agreement, you’ll walk away. It’s not that different from buying a car. No matter how many extras the salesman throws in, if he won’t come down to the price you want, it’s a win/lose deal, with you on the losing end.

While engaging in negotiations, consider learning of the ways that Yeo & Yeo can partner with you for your consulting needs. Our real-life Michigan business consulting experiences provide you with specialized professionals that understand your business and industry challenges.

Maybe it’s a good thing that the April 15th federal tax deadline coincides with the urge to spring clean. It feels good to throw out some of the financial records stuffing your filing cabinets. But before you head for the dumpster, make sure you’re not disposing of records you may need. You don’t want to be caught empty-handed if an IRS auditor contacts you.

In general, you must keep records that support items shown on your individual tax return until the statute of limitations runs out — generally, three years from the due date of the return or the date you filed, whichever is later. That means that now you can generally throw out records for the 2012 tax year, for which you filed a return in 2013.

In most cases, the IRS can audit your return for three years. You can also file an amended return on Form 1040X during this time period if you missed a deduction, overlooked a credit or misreported income.

So, does that mean you’re safe from an audit after three years? Not necessarily. There are exceptions. For example:

If the IRS has reason to believe your income was understated by 25 percent or more, the statute of limitations for an audit increases to six years.
If there is suspicion of fraud or you don’t file a tax return at all, there is no time limit for the IRS.

How Long to Keep Documents

Like most issues involving the IRS or other government agencies, there’s no easy answer to that question. The IRS does not require you to keep records in any particular way. But here are some basic guidelines to follow for individuals:

Completed tax returns. Many tax advisers recommend that you hold onto copies of your finished tax returns forever. Why? So you can prove to the IRS that you actually filed. Even if you don’t keep the returns indefinitely, you should hang onto them for at least six years after they are due or filed, whichever is later.

Backup records. Any written evidence that supports figures on your tax return, such as receipts, expense logs, bank notices and sales records, should generally be kept for at least the three-year period.

Exceptions. There are some cases when taxpayers get more than the usual three years to file an amended return. You have up to seven years to take deductions for bad debts or worthless securities, so don’t toss out records that could result in refund claims for those items.

Real estate records. Keep these for as long as you own the property, plus three years after you dispose of it and report the transaction on your tax return. Throughout ownership, keep records of the purchase, as well as receipts for home improvements, relevant insurance claims, and documents relating to refinancing. These help prove your adjusted basis in the home, which is needed to figure the taxable gain at the time of sale, or to support calculations for rental property or home office deductions.

Securities. To accurately report taxable events involving stocks and bonds, you must maintain detailed records of purchases and sales. These records should include dates, quantities, prices, dividend reinvestment, and investment expenses, such as broker fees. Keep these records for as long as you own the investments, plus the statute of limitations on the relevant tax returns.

Individual Retirement Accounts (IRAs). The IRS requires you to keep copies of Forms 8606, 5498 and 1099-R until all the money is withdrawn from your IRA accounts. With the introduction of Roth IRAs, it’s more important than ever to hold onto all IRA records pertaining to contributions and withdrawals in case you’re ever questioned.

If an account is closed, treat IRA records with the same rules as securities. Don’t dispose of any ownership documentation until the statute of limitations expires.

Issues affecting more than one year. Records that support figures affecting multiple years, such as carryovers of charitable deductions, net operating loss carrybacks or carry forwards or casualty losses, need to be saved until the deductions no longer have effect, plus seven years, according to IRS instructions.

These general recordkeeping guidelines are for individual tax purposes. Insurance companies and creditors may have other requirements. Businesses have different requirements. Contact your advisers for more information.

Yeo & Yeo is pleased to announce that Kristi Krafft-Bellsky, CPA, has been promoted to Director of Quality Control.

Krafft-Bellsky is responsible for internal quality control throughout Yeo & Yeo’s nine offices. She oversees the development and implementation of policies and processes to comply with professional standards and regulatory requirements. She also assists in the standardization of work papers and financial statements across the firm to ensure technical compliance and efficient processes. Krafft-Bellsky, with the assistance of the Yeo & Yeo Quality Assurance Committee, will oversee the peer review process and conduct the internal inspections of files to guarantee that Yeo & Yeo continues to provide quality services for clients.

Krafft-Bellsky joined Yeo & Yeo in 2003, most recently holding the position of Senior Manager in the firm’s audit group. In 2013, she led the development of the firm’s award-winning LEAN Audit Process that continues to significantly benefit the firm, the professional staff and the firm’s clients. Krafft-Bellsky is a member of the firm’s Audit Services Group and Education Services Group.

Krafft-Bellsky is based in Yeo & Yeo’s Saginaw accounting firm office. She holds a Bachelor of Professional Accountancy and a Master of Science in Accountancy from Western Michigan University. In our community, Krafft-Bellsky is a member of the Frankenmuth Jaycees and treasurer of the Frankenmuth Community Foundation’s Legacy Ball Committee. She is a graduate of the 1000 Leaders and Leadership Saginaw programs.

We welcome you to connect with Kristi on LinkedIn.

If you opt to purchase one of these energy-efficient vehicles, you can qualify for a federal income tax credit in 2015 and 2016:

Fuel cell vehicles. You can claim a credit for a qualifying vehicle that’s propelled by chemically combining oxygen with hydrogen to create electricity. This credit expired at the end of 2014, but the PATH Act extended it to cover qualifying vehicles purchased in 2015 and 2016.

The base credit is $4,000 for vehicles weighing 8,500 pounds or less. Heavier vehicles can qualify for credits of up to $40,000. An additional credit of between $1,000 and $4,000 is available for cars and light trucks that meet specified fuel economy standards.

Two-wheeled, plug-in electric vehicles. You can claim a 10% credit for buying a qualifying electric-powered, two-wheeled vehicle that’s manufactured primarily for use on public roads and capable of going at least 45 miles per hour (in other words, an electric-powered motorcycle). The maximum credit is $2,500. This credit had previously expired, but it was restored by the PATH Act for qualifying vehicles acquired in 2015 and 2016.

The short answer is: nothing. You need to hold on to all of your 2015 tax records for now. But this is a great time to take a look at your records for previous tax years and determine what you can purge.

For a detailed business record retention schedule, see Yeo & Yeo’s retention guide.

The 3-year rule

At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss most records related to tax returns for 2012 and earlier years.

What to keep longer

You’ll need to hang on to certain records beyond the statute of limitations:

Keep tax returns themselves forever, so you can prove to the IRS that you actually filed. (There’s no statute of limitations for an audit if you didn’t file a return.)
For W-2 forms, consider holding them until you begin receiving Social Security benefits. Why? In case a question arises regarding your work record or earnings for a particular year.
For records related to real estate or investments, keep documents as long as you own the asset, plus three years after you sell it and report the sale on your tax return.

Just a starting point

This is only a sampling of retention guidelines for tax-related documents. If you have questions about other documents or tax record retention guidelines, please contact us.

Yes, the federal income tax filing deadline is slightly later than usual this year — April 18 — but it’s now nearly upon us. So, if you haven’t filed your return yet, you may be thinking about an extension.

Extension deadlines

Filing for an extension allows you to delay filing your return until the applicable extension deadline:

Individuals — October 17, 2016
Trusts and estates — September 15, 2016

Two considerations

While filing for an extension can provide relief from April 18 deadline stress, it’s important to consider the following:

If you expect to owe tax, keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by April 18.
If you expect a refund, remember that you’re simply extending the amount of time your money is in the government’s pockets rather than your own.

A tax-smart move?

Filing for an extension can still be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now. Please contact us if you need help or have questions about avoiding interest and penalties.

From mobile apps to the Internet, technology has transformed our lives. It facilitates financial transactions and the transmission of information. But it also brings risks. There are weekly news stories about sensitive personal data being hacked online and sold on the black market.

Thieves use personal data to access accounts, open new ones, complete fraudulent transactions, file phony tax returns and obtain access to personal contacts. In addition, many fraud scams are perpetrated through the Internet, often from foreign locations, which makes it harder for authorities to prosecute.

Risk Factors

Here are seven questions to help gauge whether you’re at risk for online fraud or identity theft:

1. Do you shop online or using mobile apps?

2. Do you pay bills online or with mobile payment apps?

3. Do you use Facebook, Instagram or other social media sites?

4. Do you use the same password or personal identification number (PIN) for multiple accounts?

5. Do you carry your Social Security card in your wallet?

6. Do you wait until the last minute to file your tax return?

7. Have you given up personal information — such as your birthday, phone number, postal or email address, or Social Security number — for entry into a sweepstakes contest or to receive a free gift card?

If you answered “yes” to any of these questions, you’re completely normal. But you’re also at risk for online fraud, and you should take precautionary measures to protect your identity and your accounts. This doesn’t mean you have to avoid using technology. You just need to be smarter about security.

Even if you answer “no” to all of these questions, you’re not safe from identity theft and fraud. Just about anyone’s personal information may be stolen from paper tax records, medical and death documents, loan applications, or their employer’s payroll files. Then the thief may go online to anonymously use your personal data for illicit gain. Either way, technology provides opportunities for creative thieves to commit fraud.

Simple Protection Efforts

You don’t have to be especially tech-savvy to thwart these scams. Simply putting your Social Security card in a secure location in your home, installing antivirus software on your personal computer, downloading the latest updates for the apps on your smart device and turning down free offers in exchange for disclosing personal information are steps in the right direction.

In addition, the Federal Trade Commission offers these recommendations to safeguard your personal and financial data from unauthorized hacking:

Be alert to impersonators. Don’t give out personal information — including names and addresses, account numbers or biometric data, such as eye color or height — over the Internet unless you initiated the contact or know the person or company you’re dealing with. If a company that claims to have an account with you sends an email asking for personal information, don’t click on links in the message 100c. Instead, type the company name into your Web browser, go to its site and contact them through customer service. Or call the customer service number listed on your account statement (not in the email) and ask whether the company really sent the request.
Safely dispose of technology equipment. Before you dispose of a computer, get rid of all the personal information it stores. Use a wipe utility program to overwrite the entire hard drive. Likewise, check your owner’s manual or the manufacturer’s website before throwing or giving away a mobile device. You want to make sure all of your personal information — including phone books, voicemails, Internet search history, photos and passwords — is permanently erased.
Encrypt your data. Guard online transactions with encryption software that scrambles information you send over the Internet. A “lock” icon on the status bar of your Internet browser means your information is safe when it’s transmitted. Look for the lock before you send personal or financial information online.
Keep passwords private and complex. Use strong passwords with your credit, bank and other accounts. Instead of using your mother’s maiden name or birth date, think of a special phrase and use the first letter of each word as your password. For example, “I want to go to Australia” could become “!W2go2Au.” Combine symbols, numbers, and upper and lower case letters. Use long passwords.
Limit your social networking footprint. If you post too much information about yourself and your family on social media sites, an identity thief can find details about your life and then use them to answer “challenge” questions on your accounts — or to access your money and personal information. Consider limiting access to your networking or profile page to a small group of people.

Tax Scams

The IRS also warns taxpayers about tax fraud scams. Tax-related identity theft typically occurs when someone uses stolen personal information to file a tax return and claim a fraudulent refund. Often, victims are unaware that their data has been stolen until they receive letters from the IRS stating that returns had already been filed using their Social Security numbers.

Always file early in the tax filing season — before an identity thief beats you to it. Also, if you receive a notice from the IRS, respond immediately to the name and number printed on the notice or letter. If you believe someone may have used your Social Security number fraudulently, you’ll need to fill out IRS Form 14039, “Identity Theft Affidavit.”

Call for Help

Dishonest individuals are continually finding clever new ways to exploit technology for their personal gain. If you feel you have fallen victim of identity theft or fraud, Yeo & Yeo CPAs Fraud and Forensic accountants can be valuable resources to help safeguard your data and investigate losses when fraud strikes.

The Office of Retirement Services (ORS) recently issued a 14-page document to update school districts (including academies and intermediate school districts) on the federal tax treatment of certain contributions made to the Michigan Public School Employees Retirement System (MPSERS) Healthcare Trust. This document was in response to the recent rulings made by the Internal Revenue Service (IRS) against certain protective claims for refunds filed by districts related to such contributions. However, be aware that the IRS has not issued an inclusive determination as to the federal tax treatment of the retiree healthcare contributions provided under the Michigan Public Act 300 of 2012.

The document also states that the ORS will submit a Private Letter Ruling (PLR) request. The request will petition for the IRS to set aside the rulings recently made as discussed above for two reasons:

1. The 3% mandatory contributions that were made under the MPSERS retiree healthcare plan and deposited into the MPSERS Healthcare Trust pursuant to Michigan state law are treated as employer contributions and are excludable from employees’ gross income.

2. Such contributions are not wages in the sense that they would be subject to FICA taxes, FUTA taxes or income tax withholdings.

Below is a link to the document in its entirety:

Overview and Analysis Supporting Favorable Tax Treatment

As we receive more information about the PLR or other updates on this situation, we will communicate it. If you are not subscribed to our Education Advisor, sign-up HERE to receive updates on important education updates. As always, if you have questions please reach out one of Yeo & Yeo’s Education CPAs.

Functional expense allocation can be challenging for nonprofits. Expenses must be divided among various functions, according to the purpose for which the costs are incurred.

What are the differences between the types of functional expense classifications — program services, supporting services, management and general expenses, and expenses incurred for fundraising?
Which expense allocation method should be used — direct or indirect?
Does expense allocation change for a federal grant?

Yeo & Yeo is pleased to offer a whitepaper, Functional Expense Allocation for Nonprofits, that explains functional classifications and other issues to consider in allocating expenses for your organization.

Beyond meeting compliance requirements, there are very good reasons to care about the functional classification of expenses, as they help tell the story of a nonprofit. If you have a question, reach out Yeo & Yeo’s Non-Profit experienced professionals.