FASB delays new revenue recognition standard by one year
In a move that had been in the works for a while, the Financial Accounting Standards Board (FASB) officially voted to delay its new revenue recognition standard by one year.
Financial statement preparers had complained that there was not enough time to implement some of the changes required by the new standards. Challenges cited by the Journal of Accountancy article linked above include the delayed issuance of the standard (it had been delayed several times before being issued in May 2014), the timing of the proposed changes, a lack of available IT solutions, and difficulty implementing internal controls amid the uncertainty.
Public companies as well as some employee benefit plans and not-for-profit organizations now must use the new revenue recognition rules for annual periods beginning on or after December 15, 2017. For a company reporting on the calendar year, this means 2018 will be the first year for which this is effective. All other entities must apply the new guidance one year later.
We’ve had our eyes on this issue throughout its evolution and will continue to keep you posted. If you have any questions about how this new standard might affect you, give us a call to see how we can help.
Gather donation records while you can still find them!
Since June 30th is the end of the fiscal year for many non-profits, you probably got a lot of mail and e-mail about donating to these organizations over the last month or so. If you took the opportunity to donate to some of your favorite causes over the past few weeks, now is a great time to get all of your receipts and paperwork organized, while it’s fresh and easy to find. After the new year, instead of scrambling to find documentation, it’ll all be filed away and you’ll have one less thing to worry about come tax time. (Many of the headaches we see simply arise from lost or missing paperwork, so trust us on this one!)
For more tips on donating to non-profits and how they relate to your taxes, see our blog post from earlier this year.
Many taxpayers with foreign assets face June deadlines
The IRS is reminding taxpayers with foreign assets that they may be subject to a pair of June deadlines.
Reporting of foreign assets and income has been a particular focus of the IRS over the past few years, and we urge any taxpayers with foreign assets and/or income to double check that they have met the requirements.
The Foreign Account Tax Compliance Act (FATCA) became law in 2010 and targets non-compliance by U.S. taxpayers with foreign accounts. Subject to this law, taxpayers with foreign assets over certain thresholds will have to file Form 8938 by June 15.
FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed by June 30 with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-FilingSystem website.
Head over to the IRS article for more information, and please don’t hesitate to give us a call with any questions.
Keep your tax records safe in the event of a disaster
With hurricane season starting this week, the IRS is reminding taxpayers to keep their tax records safe and giving tips on how to do it. Though Charlotte generally doesn’t bear the brunt of hurricanes, we think these tips are very important for all taxpayers, as there are a variety of incidents that could cause the loss of your financial and tax records.
The tips are fairly straightforward; most taxpayers can get the process done in an afternoon and protect themselves against some unnecessary headaches in the event of a disaster.
Head over to the IRS website for the article. And as always, feel free to give us a call to see how we can help!
Common pitfalls for small businesses
Nobody likes to talk about failure, but any entrepreneur knows it’s the elephant in the room. Starting your own business is an inherently risky venture, but startups need to address those risks as aggressively as possible. Jared Hecht at Inc. and Rhonda Abrams for Gannett each have lists of seven things entrepreneurs needs to look out for. The lists read very differently, but we noticed two strong similarities:
First, have a plan. Or better yet, multiple plans. Startups need to make sure that contingencies are thought out in advance to give a maximum chance of success. Of course, the most important one is the businesses plan. It can be a time consuming process but is critical to ensure the company has needed focus and direction. Another important one is a marketing plan. As Mr. Hecht succinctly puts it, “no matter how great your idea might be, no one can buy your product if they don’t know it exists.” But this doesn’t just include advertising; the sales and customer services processes shouldn’t be done on the fly either. Another good one to have is a cash flow plan. Often, startups, especially service-based ones, struggle with cash flow despite having plenty of sales because clients are slow to pay but the business has not yet built up its cash reserves.
Second, always be willing to ask for help. Ms. Abrams strongly recommends that a startup never hesitate to seek legal advice: “Often, a few hundred dollars spent on a lawyer at the beginning of a business or an important deal can save you thousands of dollars and loads of headaches later on.” Both also note that one way or another, you need to be willing to listen to customers and other employees rather than relying solely on your own desires for your product or service. After all, it is the customer that has to like your offering enough to pay money for it.
Of course, we would add to these lists that it’s important to get professional help with your finances. Payroll, bookkeeping, tax compliance, and financial statement preparation are all areas that can distract a small business from its core purpose, so if you need help in any of these areas, give us a call and find out how we can help!
Getting creative with funding your small business
Over the past few weeks, we’ve come across several articles talking about some less common but potentially useful ways which small businesses can obtain funding. In an environment where traditional small business loans are getting harder to come by, small business owners should know that there are a lot more options than visiting your local bank branch.
First, online lending is slowly but surely gaining favor for small loans. Among the factors cited in its growth are banks’ hesitancy to loan to small businesses and small business owners showing distaste for the often drawn out loan application process. Advantages of online lending include a faster application process and increased willingness to lend to small borrowers. Both articles note that the lack of regulation among these types of lenders can be both good and bad, as it lowers costs but also means there’s little oversight. It’s also important to note that, while some of these lenders offer products similar to traditional loans, there are a wide variety of business models, such as Kabbage, which allows businesses to borrow against their outstanding invoices. Read more at New York Times and Fortune.
Next up is Kickstarter. A lot of us already know about the virtues of crowdfunding (here’s a good primer in case you’re unfamiliar), but sites like Kickstarter are generally thought to be tools for very early stage companies trying to get their first product off the ground. However, the Wall Street Journal reports that companies who have had successful Kickstarter or Indiegogo campaigns are even more likely to be successful with each subsequent round. In addition to gaining the necessary funds, one entrepreneur argues that an even more powerful aspect of repeat crowdfunding is it allows companies to build a fan base in increasingly crowded retail markets.
Finally, Adam Aronson writes for Entrepreneur that more businesses should consider family offices for their funding needs. Family offices operate as private companies that manage investments for high net worth families. As Mr. Aronson notes, there are over 3,000 family offices in the United States and they generally have at least $100 million to invest. He also notes some of the advantages of obtaining financing from family offices, including great networking connections, increased patience, and a higher willingness to serve as mentors.
No matter which route you choose, always know we’re here to help with tax planning, financial statement preparation, and any other needs you have along the way!
Important Supreme Court Decision for 401(k) sponsors
Yesterday, the Supreme Court ruled on Tibble v. Edison International, and the result is something that all plan sponsors should take note of.
Several employees of Edison sued the public utility holding company because they believed that, as plan sponsor, the company had not acted in their best interests by selecting several mutual funds that were open to the public instead of institutional funds, which were identical except for charging lower fees. The Yahoo article linked below notes that a 1% increase in annual fees would reduce an average worker’s retirement savings by around $70,000 over a 40-year career.
The Court ruled unanimously in favor of the workers. Justice Stephen Breyer wrote in the opinion, “The continuing duty to review investments includes a duty to remove imprudent investments”
It’s important to note that this is a much higher fiduciary standard than plan sponsors have historically been held to. In short, plan sponsors need to actively monitor the investments in their plan to ensure they are the best options for the participants.
Link to articles: Yahoo!, WSJ
Reminder: nonprofit taxes due May 15th
A quick reminder that tax-exempt organizations who use the calendar year as their tax year must file the appropriate Form 990 or an extension by May 15th.
For more details, see http://www.irs.gov/uac/Newsroom/Many-Tax-Exempt-Organizations-Must-File-with-IRS-by-May-15
Last minute reminders…
With April 15th just a couple days away, we want to remind everyone that taxpayers can receive a six month extension to file their taxes. As always, we remind you that it is not an extension for payment as your 2014 tax liability must be paid by April 15th; however, the extra six months can eliminate the panic of getting together all the necessary forms and documents needed for filing your tax return.
Along the same lines, we remind you that you may still be able to make an IRA contribution deductible on your 2014 taxes. See this article for more information.
Good Records Key to Claiming Charitable Deductions
As the countdown to April 15th hits the home stretch, the IRS has published a series of articles guiding taxpayers through some of the trickier filing issues. One of our favorites discusses charitable giving and the importance of maintaining good records.
Among the key takeaways:
- Make sure the entity you’re giving to is a qualified organization. Keep in mind that an organization being a nonprofit doesn’t necessarily mean that a gift will be deductible. The IRS’s Select Check tool is a great resource for determining whether the organization you’re thinking about donating to is eligible to receive tax-deductible donations.
- Keep in mind donors must have a written acknowledgement of any gift over $250. So when you receive a letter from a charity acknowledging your gift, it’s not just a receipt – make sure you put it in the proverbial (or often literal) shoe box for tax time!
- Rules may differ depending on the substance of the donation. Check out the article for tips on donations of cash, vehicles, clothing, and others.
- Finally, keep in mind the timing requirements. A gift must have been made in 2014 to be deducted on the 2014 tax return; so if you pledged money but didn’t write the check or charge the card, it isn’t deductible.
Head on over to the IRS article linked above for more details.
And as always, know that we’re always here to help with any tax-time questions about donations (or anything else)!