1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.
2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
3. You may have to pay the AMT if your taxable income for regular tax purposes, plus any adjustments and preference items that apply to you, are more than the AMT exemption amount.
4. The AMT exemption amounts are set by law for each filing status.
5. For tax year 2011, Congress raised the AMT exemption amounts to the following levels
• $74,450 for a married couple filing a joint return and qualifying widows and widowers;
• $48,450 for singles and heads of household;
• $37,225 for a married person filing separately.
6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,800 for 2011.

Use the AMT Assistant at www.irs.gov to determine whether you may be subject to the AMT. You can find more information about the Alternative Minimum Tax and how it affects you by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at www.irs.gov. You can also order the form by calling 800-TAX-FORM (800-829-3676).

Links:
AMT Assistant: http://www.irs.gov/businesses/small/article/0,,id=150703,00.html

Form 6251, Alternative Minimum Tax: http://www.irs.gov/pub/irs-pdf/f6251.pdf

Instructions for Form 6251: http://www.irs.gov/instructions/i6251/ch01.html

MAP has helped 160,000 leaders in over 13,000 organizations create sustainable results. The MAP Vital Factors System has achieved these results through its integration of strategic focus, accountability coaching and leadership development. MAP’s book, “Vital Factors, The Secret to Transforming Your Business – And Your Life,” tells the story of how MAP clients overcame challenges to achieve success.

View webinar: http://www.mapconsulting.com/articles1-264/MAPRecordedWebinar5SimpleStrategiestoEffectiveTimeManagement

How are the audit needs of a governmental agency different than those of a private company?

California governmental agencies have many unique auditing and financial reporting requirements. The audits must meet separate requirements of the American Institute of CPAs, the federal government and the State of California. Also, financial reporting rules for governments are issued by the Governmental Accounting Standards Board (GASB), as opposed to the Financial Accounting Standards Board (FASB), which regulates private companies.

How frequently are governmental audits performed?

Governmental audits are performed on an annual basis on the agency’s fiscal year end, which in most instances is June 30.

Do these audits help public entities gain the public’s trust? Do they offer protection to the employees of the public agency?

They do help public entities gain the public’s trust. However, they do not offer protection to employees of the public agency. Our audit opinions only provide assurance regarding the accuracy of the financial statements, and that assurance is only given with respect to amounts that are “material” to the financial statement. Although the opinions provide the public with general assurance regarding the financial condition of the agency, they do not provide protection to individual employees regarding their performance or conduct.

Can auditors offer suggestions to the public agency as to how to improve its operation and otherwise better serve the public?

In connection with audits, our firm often issues a “management letter,” calling internal control weaknesses to the attention of the client. These letters sometimes include suggestions for improvements. Also, our firm performs numerous special consulting projects for government agencies, such as operational and performance reviews.

What are WNDE’s government tax seminars, who attends and what topics are covered?

We’ve been doing the seminars, usually in December, for the past 20 years. We meet in hotels and similar venues throughout Southern California. The program addresses current federal and California tax developments affecting local governmental agencies, including cities, counties, water districts, special districts and government-related joint power authorities and nonprofit corporations.

Participants include a wide variety of government employees, including CPAs, attorneys, finance officers, accountants, human resource personnel, IT professionals and persons responsible for government payrolls. The seminar qualifies for five hours of government continuing education credit with the California State Board of Accountancy.
In connection with each annual seminar, attendees are provided with a copy of the firm’s “Government Tax Manual.” This is a comprehensive 250-page manual setting forth current developments in tax laws, including:

• Recent tax legislation affecting government entities,
• How the IRS is currently handling examinations of government agencies,
• How health care bills affect government entities, and
• The taxation of fringe benefits provided to government employees, such as insurance plans, accident and health plans and pension plans.

The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.

Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:

• Qualifying businesses calculate the small business health care credit on Form 8941, Credit for Small Employer Health Insurance Premiums, and claim it as part of the general business credit on Form 3800, General Business Credit, which they would include with their tax return.
• Tax-exempt organizations can use Form 8941 to calculate the credit and then claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, Line 44f.
• Businesses that couldn’t use the credit in 2011 may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

For tax years 2010 to 2013, the maximum credit for eligible small business employers is 35 percent of premiums paid and for eligible tax-exempt employers the maximum credit is 25 percent of premiums paid. Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.

Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.

YouTube Video:
http://www.youtube.com/watch?v=tHqvtPYHfVk

Topics to be discussed include:

• The impact of “Health care Reform” on businesses’ cost structure and their employees,
• New innovations to help reduce companies’ health care costs,
• Things that drive claims costs and how businesses can reduce these costs,
• Emerging trends inside health care delivery in Southern California,
• Effective communication strategies to increase value and relevancy of benefits,
• Enhancing the effectiveness of benefits administration with proven labor-reducing strategies.

There is no cost to attend; a continental breakfast will be served. Registration required; contact Scott Jones, (714) 795-5467 or events@wndecpa.com.

Baru remarked, “We’ve all known people who have battled cancer, including members of our White Nelson Diehl Evans family. We want to raise awareness of the need to support those suffering from cancer, as well as to remind people of the need to continue to search for a cure for the disease.”

Baru is trying to raise funds to battle cancer among children through the St. Baldrick’s Foundation. He noted that among private funding sources, the Foundation raises more for childhood cancer research grants than any other organization. Baru said, “So when I ask for your support, I’m really asking you to support these kids on behalf of all those who’ve struggled with the disease. Thank you!”

For information about supporting the work of the Foundation, please visit: http://www.stbaldricks.org/participants/cancersupporters.
And, many male members of the WNDE team are planning to grow moustaches in November, or “Movember” (visit http://us.movember.com/), to raise money to fight prostate cancer and other cancers that affect men.

How often should a non-profit organization do an external audit?  How important is size in determining this frequency?

In the State of California, the Nonprofit Integrity Act of 2004 (with an effective date January 1, 2005) requires that charitable corporations, unincorporated associations and trusts (“non-profits”) must file with the Attorney General of Charitable Trusts their articles of incorporation or other documents governing the organization’s operations within 30 days after initial receipt of property.  These organizations are required by the Act to prepare annual financial statements audited by an independent certified public accountant if they have gross revenues of $2 million or more. The audited financial statements must be made available for inspection by the Attorney General and the public no later than nine months after the close of the fiscal year covered by the financial statement.  The $2 million-threshold excludes grants received from governmental entities if the nonprofit must provide an accounting of how it used the grant funds. 

The federal government requires that nonprofit organizations spending $500,000 or more in federal contract funds in a fiscal year obtain a single audit report to ensure that they comply with federal grant management procedures.  This is in addition to the financial statement audit. 

Start-up non-profit organizations may find it difficult to obtain funding (grants, contracts and contributions) because the donor(s) would like to see audited financial statements and the most recently filed Form 990.  Unfortunately, most of the time the organization can’t afford an audit due to lack of funding or they have only filed the Form 990-N (otherwise referred to as the “postcard”) or Form 990-EZ which both provide limited information. 

Nonprofit organizations must constantly demonstrate where they receive money from, where those funds go and what percentage is used for charitable work. While no official requirements for a non-profit audit may exist for those organizations under the $2 million threshold, most organizations require audits in their bylaws. The annual audit is an essential component for closing the fiscal year and showing that the nonprofit spent the donated money according to the mission of the organization.

What are the benefits of regular external audits?  What problems can be avoided with regular external audits?

Regular external audits provide reassurance to current donors and prospective donors that funds are being spent appropriately.  Additionally, they can help protect those in management and those charged with governance (the board of directors) from unnecessary charges of carelessness or misappropriation in handling funds. Audits may help identify areas of internal control weaknesses, send a favorable message and build trust and confidence among the financial supporters of the organization, encourage good habits of fiscal responsibility and strengthen financial reporting for future periods.

Is the IRS auditing non-profit organizations more frequently now?  How can regular external audits help a non-profit avoid such audits?

Yes the IRS is auditing more frequently now, and state and local governments which contribute to non-profits are auditing more often as well. Having an external auditor review a non-profit’s Form 990 can help avoid such audits, because these forms have become more complicated to complete and the external auditor understands what the government auditor is looking for.

When you audit non-profits, what are some common problems you find?  How effective have you been at providing solutions?

One common problem I see is a lack of segregation of duties due to the size of the organization’s financial staff. A non-profit’s main purpose is its mission; the financial side is usually somewhere further down on the list of priorities.  There is often a lack of knowledge of Generally Accepted Accounting Principles (GAAP) and/or reporting requirements.  In many cases I’ve been able to assist organizations in identifying the areas that need improvement and provide suggestions to implement new policies and procedures.  I’ve found that most appreciate the guidance.

What should a non-profit organization look for in selecting an accounting firm to perform an external audit?

They should choose a firm with a lot of experience dealing with non-profit organizations.

How many non-profit clients does White Nelson Diehl Evans serve?  What is the range of size of these organizations, and what are some of the categories into which they fall?

Approximately 10% of our business is non-profits. Their size ranges from the start-up organization at $1 to $70 million in net assets.  Their missions are in areas such as the development and support of boys and girls to better themselves, child education, child development, feeding the hungry (children, elderly, homeless), clothing the needy, environmental protection and private foundations supporting local communities and the arts.

“A formal mentoring program is important because individuals can see the tangible benefits and are assigned a specific individual who is available to assist in their stages of development,” said Greg Coleman, White Nelson Diehl Evans LLP partner. “The day-to-day informal mentoring that goes on between firm members is also critical to the success of the mentees.”

WNDE’s mentorship program assigns a manager and a partner to all interns, junior and senior-level staff members. The program provides assistance to all staff in their professional development and gives each staff member someone they can turn to and can be an advocate for them. Mentors are responsible for their respective mentee’s biannual evaluations, weekly chargeability and monthly efficiencies. Mentors also serve as a resource for guidance on technical issues, make sure mentees are aware of and follow the firm’s compliance issues, and monitor the mentee’s progress toward firm-designated goals.

“Employees usually stay with a firm because they have opportunities to grow and advance, have values similar to the firm’s values, like and respect their co-workers and leaders, feel valued and are proud to be part of an organization,” said Greg. “These feelings are fostered by relationships with other co-workers and most importantly, with the mentor.”
Greg believes management should view the mentor program as a way to improve and grow the firm for everyone. So, while time constraints exist, the firm stresses that mentors meet with their mentees at least quarterly to properly manage and steer the employee’s development.

Aaron Willis, audit manager, is a formal mentor to three fellow employees and is also involved in new employee orientation and training. He remarked, “The mentor program helps perpetuate the family-like culture we’ve tried to maintain at the firm. It also gives the mentee someone to talk to who was in their shoes not too long ago.”

While other accounting firms have mentor programs, many are not as structured or “hands-on” as the program at WNDE, Aaron said. Additionally, the mentor assigned may be someone in human resources not doing the same kind of work as the mentee.

Along with developing the professional skills of a CPA, Greg added that mentors can also help mentees develop marketing skills and a marketing mindset.

“Marketing is an important factor in development of staff in the firm and the importance of maintaining a marketing mindset and of practicing marketing skills should be communicated even at the lowest levels,” he said. “The mentor should also consider taking the mentee to marketing events or referral meetings to give them a true experience in how marketing works.”

1. You must itemize You deduct qualifying medical and dental expenses if you itemize on Form 1040, Schedule A.
2. Deduction is limited You can deduct total medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You figure this on Form 1040, Schedule A.
3. Expenses must have been paid in 2011 You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. You’ll need to have good receipts or records to substantiate your expenses.
4. You can’t deduct reimbursed expenses Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
5. Whose expenses qualify You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.
6. Types of expenses that qualify You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.
7. Transportation costs may qualify You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.
8. Tax-favored saving for medical expenses Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

For additional information, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links

Publication 502, Medical and Dental Expenses
http://www.irs.gov/pub/irs-pdf/p502.pdf

Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
http://www.irs.gov/pub/irs-pdf/p969.pdf

Medical and Dental Expenses
http://www.youtube.com/watch?v=KtNgIVXzUAc

Podcast
http://www.irs.gov/pub/newsroom/medical_and_dental_expenses_mixdown.mp3