Organizing, filing, and retaining old records is a burden for many businesses, not to mention individuals. As we move into a more “paperless” society, how do we determine what warrants taking up valuable office and storage space and what does not?
Records should be preserved only as long as they serve a useful purpose or until all legal requirements are met. To keep files manageable, it is a good idea to develop a schedule so that at the end of a specified retention period, certain records are destroyed.
At Stockman Kast Ryan + Co., we have developed a Records Retention Schedule we think you will find helpful. Although it doesn’t cover every possible record, it does cover the most common ones. As always, please feel free to ask us should you have specific questions or concerns.
SKR Tax Record Retention Schedule (Click Here)
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What’s New for 2014 Payroll- Related Taxes
Employees may notice changes in their first paychecks of 2014 due to some updated federal and state tax requirements. To help you understand these changes and help you to explain them to your employees, we've included what's staying the same and what's changing below. Our Accounting Services Department is happy to be of assistance if you have any additional questions.
Social Security and Medicare Tax
The taxable limit for social security has increased to $117,000.00. The tax rate has stayed the same at 6.2% each for employee and employer. The Medicare tax rate is 1.45% each for employee and employer, and is unchanged for 2014. The additional Medicare rate of.9% on wages over $200,000 (single) or $250,000 (joint) is also unchanged and is taxable for the employee only.
Federal Income Tax
The 2014 withholding tables and the withholding allowance have changed. Please refer to Internal Revenue Service Publication 15, Section 16 for the updated tables HERE.
Federal Unemployment Rate
The FUTA tax rate remains unchanged at 0.6% on each employee’s earnings up to $7,000.00.
Colorado State Unemployment Taxable Limit
SUTA taxable limit has increased to $11,700.00 per employee.
2014 Deferred Compensation/Pension Plan Limits:
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TYPE OF PLAN
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EMPLOYEE CONTRIBUTION LIMIT
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EMPLOYEE CATCH UP*
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401(k)
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$17,500.00
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$5,500.00
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SIMPLE 401(k)
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$12,000.00
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$2,500.00
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Roth 401(k)
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$17,500.00
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$5,500.00
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Roth SIMPLE 401(k)
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$12,000.00
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$2,500.00
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SIMPLE IRA
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$12,000.00
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$2,500.00
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403(b)
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$17,500.00
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$5,500.00
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Roth 403(b)
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$17,500.00
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$5,500.00
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408(k) (SARSEP)
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$17,500.00
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$5,500.00
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457
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$17,500.00
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$5,500.00
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*Employee Catch-up: Employees age 50 and above.
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SKR+Co Alert: Capitalization policy requires action NOW! Plus year-end tax strategies, charitable giving, and new mileage rates!
Take action now! Final tangible property ("repair") regulations require written policy by January 1, 2014
As we shared in an October Tax Alert and in our recent tax seminar, the IRS has issued final regulations which govern the capitalization of materials and supplies, amounts paid to acquire or produce tangible property, and expenditures relating to the betterment, adaptation, and restoration of tangible property. One part of the regulations – the De Minimus Expensing Rule – requires taxpayers to have a written policy in place at the beginning of the taxable year to be able to expense amounts paid for:
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Property costing less than $5,000 per item/invoice, if there is an audited financial statement, or
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Property costing less than $500 per item/invoice and with a useful life of 12 months or less, if there is not an audited financial statement.
To help you take advantage of the new rules, we recommend you prepare a written policy before January 1, 2014. A sample written policy from the AICPA can be accessed HERE.
Note: We recommend you use this policy in place of the one handed out at the tax seminar as more information has become available.
To read the full article sent October 23, 2013 on the final regulations, Click Here.
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High income taxpayers: Plan now to avoid 2013 tax surprises
 Year-end calculations uncover some unpleasant surprises for many high income earners. Many are realizing they may owe much more by April 15 because they have been paying quarterly estimated taxes based on their liability for 2012 (based on the IRS safe-harbor rule). Some of these taxpayers are now finding themselves facing tax rates in excess of 50 percent because of the higher tax rates passed by Congress this year.
This article discusses why taxpayers may want to implement strategies before Dec. 31 to limit the tax bite on earnings, market gains and stakes in businesses. Read the full article here.
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Well-planned charitable giving can lessen the blow of higher taxes this year
It’s that time of year – time to consider donations to charity. As a result of a healthy stock market and a harsher tax environment for many individuals, many taxpayers have more incentive to make or increase charitable donations this year.
This article explains how you can lessen the blow of higher taxes with proper planning. Read the full article here.
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Newsbits
EITF issues rule on affiliate personnel services
The Financial Accounting Standards Board’s Emerging Issues Task Force (EITF) has issued a new rule that addresses the proper accounting for services received from personnel of an affiliate for which the affiliate doesn’t seek compensation (EITF Issue 12-B).
Currently, the recipient organization only recognizes contributed services from an affiliate if the services either create or enhance nonfinancial assets, or require specialized skills and would typically need to be purchased if they hadn’t been donated. Such contributed services are recognized at fair value.
Under the new standard, a nonprofit generally should recognize personnel services that are performed by an affiliate’s employees at the affiliate’s cost of such services, rather than at fair value. The cost components would depend on the nature and type of service provided, but, at a minimum, costs should include all direct personnel costs (for example, compensation and payroll-related fringe benefits) incurred by the affiliate. The guidance will be effective for fiscal years beginning after June 15, 2014.
Who gives big gifts?
A new study sponsored by international consultants CCS, through its William B. Hanrahan Fellowship at the Lilly Family School of Philanthropy at Indiana University, has found that the majority of charitable contributions of $1 million or more come from local donors. About 60% come from donors from the same state or geographic region as the recipient’s and about half of all publicly announced gifts of this size (47% of the total number of gifts and 52% of the total dollar amount) come from donors living in the same state.
Health nonprofits; arts, culture and humanities organizations; higher education institutions; foundations; and government agencies received more than half of their million-dollar-plus gifts from donors in the same state.
Nonprofits may want to focus their efforts on cultivating relationships with donors invested in their local communities — and who have the financial capacity to make significant gifts.
Coalition launches charitable deduction website
The Charitable Giving Coalition has launched a new website designed to provide user-friendly, accessible information about the vital role of charitable giving in U.S. communities. Formed in 2009, the coalition is dedicated to preserving the tax deduction for those who give to charities. The website (http://protectgiving.org) includes information about the policy debate surrounding the charitable deduction, the effect on the charitable sector, and the coalition and its membership, which includes organizations ranging from the American Red Cross to United Way Worldwide.
Managing staff
How to treat the real gems of your organization
Has your nonprofit frozen wages or awarded minimum pay increases over the last few years while asking employees to take on new responsibilities? Are they being asked to contribute more to your benefit plan, or take a benefits cut?
Such organizational moves often are necessary during tough economic times. That said, don’t lose sight of the importance of your staff, from hiring and training them to rewarding them for their performance, and providing motivation to stay.
Recognize your greatest wealth
When asked to list their organization’s assets, nonprofit leaders are likely to name investments, facilities, real estate, cash and other tangible assets. Too often, personnel are left off the list.
But without a knowledgeable and committed staff, you stand little chance of delivering program services or raising enough money to fund them. And when you consider the cost of hiring, training and mentoring staff, not to mention the losses your nonprofit incurs when an experienced employee leaves, it’s easy to see why you should assign a high value to your people.
Add to staff wisely
Finding and keeping good staff starts with smart hiring. Just as you wouldn’t buy a mutual fund without researching its performance and strategy, don’t hire staffers without thoroughly vetting them for potential rewards and risks.
Experience, education, skills and employer recommendations are merely a starting place. Good hiring requires employers and job candidates to honestly assess their respective objectives. Don’t hire someone simply because you’re desperate to fill an empty position. Shaky starts rarely lead to long-term success. Similarly, don’t court a candidate who seems likely to jump ship when a “better” offer comes along — no matter how impressive his or her resumé.
Instill “buy-in”
When a new employee comes aboard, ensure he or she receives comprehensive training — not only related to job responsibilities, but also about your not-for-profit’s culture and ethics. Staffers need to buy in to your mission and support the programs you’ve established.
Also ensure that employees understand your evaluation and compensation system — and feel like full participants. Often, they leave a job claiming their employment expectations weren’t met and the employers are left scratching their heads about what went wrong. Staffers must be able to voice perceived obstacles to their successful long-term employment without fear of reprisal. If you want to keep them, listen and try to find ways to help them succeed.
Be creative with nonmonetary rewards
Although financial compensation is generally the best way to reward and retain people, there are other ways you can let employees know you value them — without busting your budget. For example, consider tangible rewards other than money. You could write a personal “thank you” note and enclose a small gift card when a staff member achieves something special. Or you could reward that person with an extra vacation or personal day. Another idea: Offer the employee more flexible hours, such as earlier starting and leaving times or the option to telecommute.
And don’t forget the value of praise and recognition. Acknowledge employees for a job well done at staff meetings or in your nonprofit’s newsletter. Or invite “star” employees to be introduced at a board meeting, or to represent your nonprofit at an industry conference. All of these actions reflect your confidence in those individuals and indicate their importance to the organization.
Value them anyway
Your nonprofit may be unable to compensate employees quite as well as its for-profit counterparts. But, if your focus is on valuing and growing your assets — that is, your employees — all you need is a little creativity in order to reward them in many other ways.
Start with a clear picture of its roles and responsibilities
Public companies have been required to have an audit committee for about a decade now (due to the Sarbanes-Oxley Act of 2002), and many nonprofits have started their own such committees during that time. The result? Some organizations have learned the hard way that good intentions aren’t enough to ensure an effective audit committee — both the nonprofit and committee members must fully understand the committee’s role and responsibilities.
Understanding the mission
An audit committee should operate as the arm of the board of directors that assures proper financial management. As such, it’s an integral part of good governance, making it relevant for nonprofits of all sizes. After all, poor governance and accountability can cost any organization support, financial and otherwise.
The committee’s job largely comes down to oversight, which is usually focused on financial reporting, external and internal audit functions, compliance with legal and regulatory requirements and the internal controls over these areas. An effective audit committee can lead to improved financial practices and reporting, reduced fraud and enhanced internal and external audits.
Overseeing financial reporting
The audit committee should take a much broader view, overseeing the conduct and integrity of financial reporting, including establishing and implementing accounting policies and internal controls to promote good financial stewardship. The goal is to protect the nonprofit’s assets, strengthen the reliability and accuracy of financial reporting, and reduce the risk of fraud.
On a practical level, financial reporting oversight translates to, among other things:
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Reviewing Forms 990 and reporting to regulatory agencies,
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Looking for red flags in financial statements that might signal improper revenue recognition or other kinds of fraud (for example, unexplained fluctuations in revenues or expenses),
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Reviewing audit results, the nonprofit’s responses and follow-up actions, and
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Evaluating the appropriateness of getting a second opinion on auditing issues.
Ultimately, the audit committee should ensure that all financial reports are accurate and transparently portray the organization’s performance.
Managing risk
The committee must understand the nonprofit’s overall risk profile (as determined by a comprehensive risk assessment). The risk profile considers, among other things, investment practices, disaster recovery plans, insurance coverage, and compliance with laws, regulations and donor and grantor requirements. It also looks at internal policies and procedures. The organization’s risks are evaluated in light of its “appetite for risk.” The committee should assess internal controls over those risks and, if necessary, see that remedial measures are effectively implemented.
Interacting with auditors
The audit committee is responsible for hiring, compensating and overseeing external auditors and is therefore considered the auditors’ client. It should have regular communications with the auditors, including meetings to discuss a workplan before the audit and to review any findings before they’re presented to the board.
Maintaining independence
Besides the roles and responsibilities described above, the committee must maintain its independence. That means audit committee members can’t accept any consulting, advisory or other compensatory fee from the organization.
Independence from management also is critical. Committee members shouldn’t have been an officer or employee of the nonprofit in the prior three years, or the immediate family member of such a person.
The American Institute of Certified Public Accountants recommends that some audit committee members also be members of the board of directors. But some states limit the number of audit committee members who also are on the finance committee.
Better safe than sorry
Audit committees may seem like just one more layer of bureaucracy, but they’re rapidly becoming a nonprofit “best practice.” Your CPA can help you establish a new committee or make sure that your existing committee is operating as it should be.
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SKR+Co Alert: IRS Warns of scams this time of year
Please be aware of potential scams and what to look out for so you don't become a victim. This month, the IRS has warned of two scams in particular.
Phone Scam
The first is a phone scam that targets people across the nation. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.
“This scam has hit taxpayers in nearly every state in the country,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail, not phone or email.
Other characteristics of this scam include:
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Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
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Scammers may be able to recite the last four digits of a victim’s Social Security Number.
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Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
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Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
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Victims hear background noise of other calls being conducted to mimic a call site.
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After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
If you get a phone call from someone claiming to be from the IRS, here’s what you should do:
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If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.
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If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
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If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.
Disaster-related Charitable Donation Scam
The second scam the IRS warns of this month is a disaster-related charitable donation scam. Whenever there is a major disaster, there seem to be people wanting to make a profit from it. It is common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Such fraudulent schemes may involve contact by telephone, social media, email or in-person solicitations. The IRS recently issued an alert about possible scams taking place in the wake of Typhoon Haiyan, known as Yolanda in the Philippines.
To see tips for avoiding this type of scam artist, Click Here.
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SKR+Co Alert: Year end tax planning, tax seminar, and more!
Expiring tax breaks for businesses may merit action now
Although tax legislation signed into law this past January made a wide variety of tax breaks permanent, it extended several valuable breaks for businesses only through Dec. 31, 2013. It’s possible that some, or even all, of them could be extended again. But with the battle in Washington over tax reform, it’s difficult to predict what will happen with expiring breaks.
So taxpayers may want to take steps now to lock in any breaks that can benefit their businesses while these breaks are still available. But they shouldn’t ignore traditional year-end strategies for their businesses — or themselves.
This article provides an overview of depreciation-related tax breaks and various business credits set to expire this year, as well as tried-and-true strategies for businesses and some key planning concerns for individuals.
Read the Full Article Here.
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Are you complying with the new .9% additional Medicare tax?
As 2013 comes to an close, employers, employees and self-employed individuals should make sure they are complying with the new 0.9 percent additional Medicare tax. The law was effective at the beginning of this year, but the full weight of it is not fully felt until an employee's wages reach a threshold level. Now that we are in the fourth quarter of the year, employees who didn't meet the threshold earlier in 2013 may meet it now.
This article explains the withholding and what steps you may need to take.
Read the Full Article Here.
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New cost of living adjustments for 2014 recently released
On Oct. 31, the IRS released most cost-of-living adjustments for 2014. With inflation remaining relatively low, there are many amounts that will stay the same as they were for 2013, and those that do change increase only modestly. Nevertheless, as you consider 2013 year end tax planning strategies, it’s helpful to know what these amounts will be for 2014 so you can take them into account in your planning.
This article provides an overview of important 2014 amounts related to individual income taxes, alternative minimum tax, education- and child-related tax breaks, retirement plans, and gift and estate taxes.
Read the Full Article Here.
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SKR+Co Follow-up: Clarification on who needs to send notice of health care options to employees
We recently sent an alert to you regarding the October 1st deadline for providing notification to employees of their healthcare options. We received questions from some of you asking whether this requirement applied to your business, so we will clarify this to the best of our ability.
Is your business required to send the notice?
The notice requirement must be met by employers that are required to comply with the Fair Labor Standards Act (FLSA). In general, the FLSA applies to *employers with one or more employees who are engaged in, or produce goods for, interstate commerce. By this definition a case could be made that just about any business meets this requirement, regardless of sales volume.
For that reason, it is our recommendation that all employers should provide the notice to their employees by Tuesday, October 1st. Please also note that after October 1, notice must be given to new employees within two weeks of their hire dates.
For detailed information on this requirement, Click Here.
Is there a standard notice I can use?
Yes. In fact there are Colorado versions and Department of Labor has also issued a pair of model notices you can use (or you could create your own as long as it contains required content).
One notice is for for employers that offer health benefits and one is for employers that do not – so be sure and select the right one. Please see the side bar to the right for links to these forms and more information on the notices.
How should employers send the notice?
It can be sent by first-class mail and can also be provided via e-mail, but only if employees access e-mail as an “integral part” of their duties and can access the messages easily.The notice must “be provided in writing in a manner calculated to be understood by the average employee,” according to the Department of Labor.
*The FLSA also specifically covers the following: hospitals; institutions primarily engaged in the care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies.
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For more detailed information specific to Colorado, go to http://www.connectforhealthco.com
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SKR+Co Alert: Innovative vehicle credit, summertime tax tips, and treating losses from wildfires
How to treat losses from Colorado Wildfires
By Trinity Bradley-Anderson, Senior Tax Manager
 If you are a survivor of the High Park, Waldo Canyon, Black Forest or Royal Gorge Wildfire, you may be wondering how your losses are treated for tax purposes: whether they are deductible, how much, and what is the process.
A Major Disaster Declaration was issued for both the Black Forest and Royal Gorge Wildfires by the President on July 26 of this year. (High Park and Waldo Canyon Fires were declared on June 28, 2012.) With this declaration come some benefits as far as how losses are treated. According to the IRS, "If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year."
We have put together Frequently Asked Tax Questions on the Impact of Colorado Wildfires to assist you. Click here to read and download a copy.
The IRS provides helpful information regarding casualty losses due to disaster on their website, as well: Casualty, Disaster, and Theft Losses – Including Federally Declared Disaster Areas
We realize that you may need help sifting through the information, so please contact us if you have questions or need assistance.
Disaster Declarations and their related numbers:
Colorado Black Forest Wildfire (DR-4134)
Colorado Royal Gorge Wildfire (DR-4133)
Colorado High Park and Waldo Canyon Wildfires (DR-4067)
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Identity theft is on the rise: IRS criminal investigations continue
Internal Revenue Service interim leader, Danny Werfel, told a congressional committee on August 2nd that the IRS opened 1,100 criminal investigations of tax fraud by June 30 of this year, exceeding the 2012 total with three months remaining in the fiscal year. The agency has doubled the number of employees working on tax fraud cases to 3,000. "Refund fraud caused by identity theft is one of the biggest challenges facing the IRS today," Werfel told the committee.
Because this issue continues to grow, we wanted to remind you of steps you can take to protect your identity and not become a victim of identity theft. Click here to see the IRS Taxpayer Guide to Identity Theft.
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We offer a wide variety of QuickBooks and Bookkeeping Services through our Accounting Services Department. Services include assistance with bookkeeping, payroll and sales tax returns, establishing accounting systems and internal controls, and various financial projects, as well as providing part-time controller or chief financial officer services and other on-site accounting support. 
Next Tax Seminar: 
