6 Tips for Effective Virtual Fundraisers

The way we do business certainly changed in many ways during 2020 and 2021, and nonprofit fundraisers are no exception. Most in-person fundraisers have been either canceled entirely or moved to a virtual platform. While it remains unclear what the future holds, virtual fundraisers could be here to stay – at least in some capacity – for the foreseeable future.

If your organization plans to conduct virtual fundraisers, here are few things to consider:

Stay on Top of Technology

Using technology effectively is possibly the most important aspect to having a successful event. It is imperative to ensure that any video streaming services are functioning correctly, audio is loud and crisp, a quality auction platform for handling bids is chosen (if applicable) that accommodates high resolution pictures, and that the attendee experience is seamless.

Make it Easy to Attend and Donate

It’s essential to realize and consider that elderly individuals, who are often the nonprofit’s biggest supporters, are not always technology-savvy. Additionally, some people are put off by website signups, downloads, etc. Some may use their phone to attend, while others will use tablets or laptops. Consider every aspect where you can make the experience easy to participate in and simple for donors to give.

Market Your Event to Ensure High Participation

At least a few times every year, I hear that a client’s fundraiser passed by with donors saying, “I would have attended had I known about it.” It may sound like a no-brainer – but make sure to send reminders so the event does not fall off anyone’s radar.

Get Creative – Engage Your Audience

Virtual fundraisers can take many forms. Trivia nights, auctions, galas, dinners, cocktail hours, beer tasting, museum tours, races, movie nights, performances, game nights, lectures, crafting sessions, and concerts are all options that have been used. Consider your target audience and get creative with your fundraiser format and ways to engage the audience.

Consider Hand-Deliveries for a Personal Touch

While events on a large scale are certainly riskier in the current environment, appropriate precautions can be taken with making hand-deliveries of auction items, personal messages, or items needed to experience your event. These personal touches surely go a long way with donors and allow the organization to have an element of in-person engagement.

Don’t Skip the Program Message

For many of your event attendees, this may be the only time during the year to connect with them to show real-life examples of the organization’s impact on the community. Take advantage of this opportunity with a client speaker, story, or video to paint a powerful picture of what a difference your organization makes!

A virtual event has several advantages over an in-person event, such as reduced costs (and higher net profit), fewer collections in the form of cash (and increased collection of funds through more secure means), fewer logistical issues, more convenience for event attendees, and fewer barriers to attending – which includes supporters being able to attend who live outside of the nonprofit’s immediate geographical area. However, some possible disadvantages could be reduced participation or engagement and technological difficulties.

If you plan to take a fundraiser virtual, make sure to pay attention to the above considerations, and you’ll be well on your way to having a successful event!

The COVID-19 pandemic is still adversely affecting many businesses and not-for-profit organizations, but the effects vary, depending on the nature of operations and geographic location. Has your organization factored the effects of the pandemic into its financial statements? You might not have considered this question since last year if your organization prepares statements that comply with U.S. Generally Accepted Accounting Principles only at year end.

As we head into audit season for 2021, it’s time to evaluate whether your financial situation has gotten better — or worse — this year. Here are 10 financial statement areas to home in on:

1. Revenue recognition. Assess how changes in customer preferences, contract modifications, discounts, refund concessions, and changes in credit policies or payment terms impact the top line of the income statement. Also consider related collectability of accounts receivable.

2. Government grants. You may account for these grants as revenue or donor-restricted contributions. Government funding programs may have eligibility, documentation, expense tracking and other requirements (such as government audits) that you may need to address.

3. Estimates and fair values. These items are typically based on budgeting and forecasting of revenue, costs and cash flows. Uncertainty may increase the discount rates used in making estimates and decrease the fair values of certain balance sheet items.

4. Investments. Market changes caused by the pandemic may negatively affect the fair values of investments and financial instruments that qualify for hedge accounting.

5. Inventory. It’s possible that certain market conditions — including inflation, reductions in production and supply chain disruptions — may affect the value of raw materials, work-in-progress and finished goods inventory. Consider the need for write-offs due to obsolescence.

In addition, travel and work restrictions may delay, restrict or prevent year-end physical inventory counts. Your external auditors may have to observe counts remotely, which, in turn, may require additional testing procedures during audit fieldwork.

6. Property, plant and equipment. Evaluate changes in useful lives and related deprecation due to changes in business plans. There may also be potential impairment of long-lived assets and leased assets.

7. Goodwill and other intangible assets. Because of COVID-19 triggering events, these items may require impairment testing and write-offs may be needed.

8. Deferred tax assets. Consider the realizability of these assets in light of current year losses and uncertainty about future events, including the impact of possible federal tax law changes.

9. Accrued liabilities. You may need to book additional liabilities this year for employee terminations, changes in benefits and payroll tax payment deferrals. Also consider whether existing contingency accruals are still adequate.

10. Long-term debt. You may have debt classification issues for existing loans if your organization fails to meet its debt covenants. Financial difficulties may result in debt modification or extinguishment. Also evaluate the compliance requirements of the Paycheck Protection Program (PPP) loans and the probability of forgiveness.

This list is a useful starting point for discussions about how the pandemic has affected financial results in 2021. If you have questions about how to report the effects, contact us for guidance. Your preparedness will help facilitate audit fieldwork and minimize adjustments to your in-house financial reports.

Everyone loves a story. It’s why movies are still big business and many of us spend hours on the couch binge-watching our favorite television shows. What’s important to keep in mind — and to remind your sales team — is that effective storytelling can also drive sales.

This doesn’t mean devising fanciful, fictional tales to entice customers and prospects into buying. Rather, it involves learning the customer or prospect’s story, putting it into words, and then demonstrating how your company’s products or services can add a happy chapter to the tale. Think of it as a three-act play:

Act I: Set the scene. Building rapport is key in sales. Find out from your sales manager(s) how much time sales staffers are spending with customers and prospects. Ensure they’re not rushing through initial contact. Salespeople should take the time to provide a concise overview of your business, telling its story and emphasizing its capabilities.

Act II: Build the plot. Salespeople should generally ask a series of prepared questions that prompt responses outlining the customer or prospect’s needs and goals. The potential buyer should do most of the talking. The more that salespeople listen, the better chance they’ll have in identifying and filling out the plot of the customer’s story and, one hopes, making the sale.

At this point, the sales staffer also wants to uncover any objections the customer or prospect might have about doing business with your company. These “subplots” can often go overlooked and ultimately ruin the ending of the story for you.

Act III: Resolve the problem. The final scene should be a climactic one. The salesperson needs to summarize the customer or prospect’s story — identifying the key needs revealed by the questions asked. Then, the sales staffer must present a viable solution to meeting those needs and emphasize your company’s ability to efficiently fulfill the products ordered or provide the necessary service(s).

When executed properly, the three acts above should increase the odds for an encore (or a sequel, as the case may be). Buyers who know that your business understands their story will be more likely to become return customers.

Although using storytelling as a sales tool may seem simplistic, it’s a tool that needs sharpening from time to time. We can help you evaluate your sales process from a financial perspective so you can implement changes as necessary.

Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have a business in federally declared disaster areas.

Friday, October 15

If a calendar-year C corporation that filed an automatic six-month extension:
- File a 2020 income tax return (Form 1120) and pay any tax, interest and penalties due.
- Make contributions for 2020 to certain employer-sponsored retirement plans.

Monday, November 1

Report income tax withholding and FICA taxes for third quarter 2021 (Form 941) and pay any tax due. (See exception below under “November 10.”)

Wednesday, November 10

Report income tax withholding and FICA taxes for third quarter 2021 (Form 941), if you deposited on time (and in full) all of the associated taxes due.

Wednesday, December 15

If a calendar-year C corporation, pay the fourth installment of 2021 estimated income taxes.

Contact us if you’d like more information about the filing requirements and to ensure you’re meeting all applicable deadlines.

Timely financial reporting is key to making informed business decisions. Managers need to know what’s in the pipeline to respond promptly and decisively. Unfortunately, it typically takes several weeks to prepare financial statements under U.S. Generally Accepted Accounting Principles (GAAP). And many companies only produce GAAP financials at the end of the quarter or year. In the meantime, managers may turn their attention to simple “flash” reports.

Made to order

There are no standards to follow when preparing flash reports. But they typically take less than an hour to prepare and rarely exceed one sheet of paper. The goal is to provide management with a snapshot of key financial figures, such as cash balances, accounts receivable aging, collections and payroll, on a weekly basis. Some metrics might even be tracked daily — including sales, shipments and deposits. This is especially critical during seasonal peaks or when a company has recently restructured.

Customization is key. Each company’s flash reports contain different information. For instance, billable hours might be more relevant to a law firm, and machine utilization rates more relevant to a manufacturer.

Flash reports home in on what items matter most and how to draw management’s attention to them. Consider a restaurant, for example. Weekly revenues might be broken down by day of the week or between alcohol and food sales. Restaurateurs also keep close tabs on labor, food and liquor costs, as well as gross margins.

Use with caution

Comparative flash reports identify trends and exceptions that may need corrective action. For example, you might compare the current numbers to the previous week, the same week in the previous year or budgeted amounts.

When a company is starting up, aggressively expanding or struggling, lenders and investors may request copies of flash reports — especially if management has previously failed to meet projections for growth and profitability. But sharing this information can be perilous if stakeholders don’t understand that flash reports are designed for internal purposes only.

Flash reports provide a rough measure of performance and are seldom 100% accurate. Adjustments are often made when preparing GAAP financials. In addition, it’s normal for cash to ebb and flow throughout the month, depending on billing cycles.

Be proactive, not reactive

Managers who rely on stale financial information may be blindsided by unexpected threats and miss out on time-sensitive opportunities. Flash reports, if you understand their limitations, can help bridge the timing gap between daily operations and receipt of GAAP financial statements. Contact us to help you design a flash reporting format that meets your business’s current needs.

For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.

A brief history

The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.

With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms and a streamlined application process.

The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.

Latest enhancements

The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses, but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)

First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.

In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.

Application details

If you believe your small business could qualify and benefit from these newly enhanced EIDLs, first identify how much money you need and how soon you need it. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.

The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later in case funds run out.

Help with the process

For further details about the new and improved COVID-related EIDL program, go to sba.gov/eidl. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans and, if so, assist with completing the application process.

For the eighth consecutive year, Yeo & Yeo has been selected as one of Michigan’s Best and Brightest in Wellness. The program highlights companies, schools, and organizations that promote a culture of wellness, as well as those that plan, implement and evaluate efforts in employee wellness to make their business and their community a healthier place to live and work.

“This award affirms our commitment to the health and wellness of our employees,” said Thomas E. Hollerback, President & CEO of Yeo & Yeo. “We are proud to support and encourage employees looking to live a healthier lifestyle at home and in the workplace.”

Yeo & Yeo supports wellness for its employees by paying a large portion of health care premiums, helping to keep costs low for employees. The firm has a high percentage of participation in its wellness plan and health care premium reduction incentive. The firm facilitates convenient onsite health screenings for health care participants at each of its office locations, offers onsite flu shots at no cost, and provides an Employee Assistance Program that offers confidential guidance and resources designed to support work‐life balance. Yeo & Yeo also offers an Ergonomic Standing Desk option for employees for a healthier work environment.

Criteria for selection included wellness programs and policies, culture and awareness, leadership, participation and incentives, communication and measurement, among others.

Yeo & Yeo and the other winning companies will be honored at the Best and Brightest Virtual Awards Celebration on November 2.

In today’s data-driven world, business owners are constantly urged to track everything. And for good reason — having accurate, timely information displayed in an easy-to-understand format can allow you to spot trends, avoid risk and take advantage of opportunities.

This includes your company’s website. Although social media drives so much of the conversation now when it comes to communicating with customers and prospects, many people still visit websites to gather knowledge, build trust and place orders.

So, how do you know whether your site is doing its job — that is, drawing visitors, holding their attention, and satisfying their curiosities and needs? A variety of metrics hold the answers. Here are a few of the most widely tracked:

Page views. This metric is a good place to start, partly because it’s among the oldest ways to track whether a website is widely viewed or largely ignored. A page view occurs when a visitor loads the HTML file that represents a given page on your website. You want to track:

How many pages each visitor views,
How long each “unique visitor” (see below) remains on the page and your website, and
Whether the visitor does anything other than peruse, such as submit a form or buy something.

Unique visitors. You may have encountered this term before. It’s indeed an important one. The unique visitor metric identifies everyone who comes to your website, counting each visitor only once regardless of how many times someone visits.

Think of it like friendly neighbors stopping by your home. If Artie from next door stops by twice and Betty from down the street drops in three times, that’s two unique visitors and five total visits. Tracking your unique visitors over time is important because it lets you know whether your website’s viewing audience is growing, shrinking or staying the same.

Bounce rate. At one time or another, you may have heard someone say, “All right, I’m going to bounce.” It means the person is going to depart from their current surroundings and go elsewhere. When a visitor quickly decides to bounce from (that is, leave) your website, typically in a matter of seconds and without performing any meaningful action, your bounce rate rises.

This is not a good thing. A high bounce rate could mean your website is too similar in name or URL to another company’s or organization’s. Although this may drive up page views, it will more than likely aggravate the buying public and reflect poorly on your company. An elevated bounce rate could also mean your site’s design is confusing or aesthetically displeasing.

To quantify bounce rate, unique visitors and page views — as well as many other useful metrics — look to your website’s analytics software. Your website provider should be able to help you set up a dashboard of which ones you want to track. Contact our firm for help using these metrics to determine whether your website is contributing to revenue gains and providing a reasonable return on investment.

Studies have found that more people are engaging in online gambling and sports betting since the pandemic began. And there are still more traditional ways to gamble and play the lottery. If you’re lucky enough to win, be aware that tax consequences go along with your good fortune.

Review the tax rules

Whether you win online, at a casino, a bingo hall, a fantasy sports event or elsewhere, you must report 100% of your winnings as taxable income. They’re reported on the “Other income” line of your 1040 tax return. To measure your winnings on a particular wager, use the net gain. For example, if a $30 bet at the racetrack turns into a $110 win, you’ve won $80, not $110.

You must separately keep track of losses. They’re deductible, but only as itemized deductions. Therefore, if you don’t itemize and take the standard deduction, you can’t deduct gambling losses. In addition, gambling losses are only deductible up to the amount of gambling winnings. Therefore, you can use losses to “wipe out” gambling income but you can’t show a gambling tax loss.

Maintain good records of your losses during the year. Keep a diary in which you indicate the date, place, amount and type of loss, as well as the names of anyone who was with you. Save all documentation, such as checks or credit slips.

Hitting a lottery jackpot

The odds of winning the lottery are slim. But if you don’t follow the tax rules after winning, the chances of hearing from the IRS are much higher.

Lottery winnings are taxable. This is the case for cash prizes and for the fair market value of any noncash prizes, such as a car or vacation. Depending on your other income and the amount of your winnings, your federal tax rate may be as high as 37%. You may also be subject to state income tax.

You report lottery winnings as income in the year, or years, you actually receive them. In the case of noncash prizes, this would be the year the prize is received. With cash, if you take the winnings in annual installments, you only report each year’s installment as income for that year.

If you win more than $5,000 in the lottery or certain types of gambling, 24% must be withheld for federal tax purposes. You’ll receive a Form W-2G from the payer showing the amount paid to you and the federal tax withheld. (The payer also sends this information to the IRS.) If state tax withholding is withheld, that amount may also be shown on Form W-2G.

Since the federal tax rate can currently be up to 37%, which is well above the 24% withheld, the withholding may not be enough to cover your federal tax bill. Therefore, you may have to make estimated tax payments — and you may be assessed a penalty if you fail to do so. In addition, you may be required to make state and local estimated tax payments.

Talk with us

If you’re fortunate enough to win a sizable amount of money, there are other issues to consider, including estate planning. This article only covers the basic tax rules. Different rules apply to people who qualify as professional gamblers. Contact us with questions. We can help you minimize taxes and stay in compliance with all requirements.

Low interest rates and other factors have caused global merger and acquisition (M&A) activity to reach new highs in 2021, according to Refinitiv, a provider of financial data. It reports that 2021 is set to be the biggest in M&A history, with the United States accounting for $2.14 trillion worth of transactions already this year. If you’re considering buying or selling a business — or you’re in the process of an M&A transaction — it’s important that both parties report it to the IRS and state agencies in the same way. Otherwise, you may increase your chances of being audited.

If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report to the IRS the purchase price allocations that both use. This is done by attaching IRS Form 8594, “Asset Acquisition Statement,” to each of their respective federal income tax returns for the tax year that includes the transaction.

Here’s what must be reported

If you buy business assets in an M&A transaction, you must allocate the total purchase price to the specific assets that are acquired. The amount allocated to each asset then becomes its initial tax basis. For depreciable and amortizable assets, the initial tax basis of each asset determines the depreciation and amortization deductions for that asset after the acquisition. Depreciable and amortizable assets include:

Equipment,
Buildings and improvements,
Software,
Furniture, fixtures and
Intangibles (including customer lists, licenses, patents, copyrights and goodwill).

In addition to reporting the items above, you must also disclose on Form 8594 whether the parties entered into a noncompete agreement, management contract or similar agreement, as well as the monetary consideration paid under it.

What the IRS might examine

The IRS may inspect the forms that are filed to see if the buyer and the seller use different allocations. If the tax agency finds that different allocations are used, auditors may dig deeper and the examination could expand beyond the transaction. So, it’s best to ensure that both parties use the same allocations. Consider including this requirement in your asset purchase agreement at the time of the sale.

The tax implications of buying or selling a business are complex. Price allocations are important because they affect future tax benefits. Both the buyer and the seller need to report them to the IRS in an identical way to avoid unwanted attention. To lock in the best results after an acquisition, consult with us before finalizing any transaction.

Timely financial data is key to making informed business decisions. Unfortunately, it’s common for managers to struggle with their companies’ accounting systems to get the information they need, when they need it. Often, it takes multiple, confusing steps to enter and extract data specific to customers and/or projects.

Businesses and accounting software solutions evolve over time. So, what worked for your company years ago may not be the optimal solution today. For example, you might prefer a different solution that’s more user-friendly, more sophisticated or customized for your industry niche. Here are four factors — beyond just cost — to consider when evaluating your current accounting system.

1. Remote access

These days, remote access — from the field or from home to facilitate social distancing — remains a priority. Accessing your accounting system remotely allows team members to see real-time project data from anywhere. It also allows direct, daily reporting of key financial information, such as sales figures, labor hours, equipment usage and cash on hand. Managers can then compare this information against budgeted amounts to catch potential problems and adjust as needed.

2. Integration

Modern accounting software can facilitate seamless information sharing with other platforms and existing applications. For instance, your accounting solution should support timecard entry and project management software. It also should be compatible with customer and supplier networks. Likewise, if you outsource payroll to a third party, you should be able to integrate with the provider’s system so it can automatically import pertinent information in a timely manner with minimal manual input.

3. Vendor support

A quality accounting system comes with top-notch customer support, including training and a help desk to solve problems. To assess your current level of support, ask your vendor representative whether you’re maximizing the functionality of your accounting software. The rep should be able to tell you what’s working and what’s not. If the vendor doesn’t respond or provides minimal feedback, it may be time to switch providers.

4. Team buy-in

Changes in technology affect people throughout your organization, so the entire team (or at least key members thereof) should have input on the decision. Gather feedback from the team on which features are “must haves” and which ones are “just wants.” Then work with IT and financial specialists to narrow down the list of prospective vendors to three to five solutions to research in-depth and test drive.

Once you’ve selected a system, it’s important to overcome any fear or confusion about the prospective software. This involves promptly announcing the plans to upgrade the accounting system, giving a rundown of the company’s objectives for doing so and keeping staff updated on the effort’s progress. Once the new system is in place, training is the final piece to the puzzle. More complex systems generally have a learning curve that can be reduced with formal instruction by the vendor.

We can help

If you’re dissatisfied with your current accounting system, contact us. We can do a complete assessment on the effectiveness of your system and how you’re using it. Then we can help you identify other cost-effective solutions that may better fit your operational needs.

Yeo & Yeo CPAs & Business Consultants, a leading Michigan accounting firm, has been named one of Metropolitan Detroit’s Best and Brightest Companies to Work For for the tenth consecutive year.

“2021 has been another challenging year for many Michigan businesses, and I am proud of Yeo & Yeo and the employees who continue to give back to the community and support one another professionally and personally. It is our employees who make Yeo & Yeo a great place to work,” said Thomas O’Sullivan, managing principal of the Ann Arbor office.

Yeo & Yeo offers more than 200 employees rewarding careers in the accounting industry. Yeo & Yeo develops future leaders through its award-winning CPA certification bonus program, in-house training department, professional development training and formal mentoring while sustaining work-life balance.

“This recognition is a testament to our dedicated employees and the culture we have built. I’m happy to see employees reporting that they are engaged and enriched through their work,” said Tammy Moncrief, managing principal of the Auburn Hills office.

The annual competition recognizes organizations that display a commitment to excellence in their human resource practices and employee enrichment. Companies in counties as far north as Midland, Bay and Saginaw, as far west as Clinton, Ingham and Jackson, and those in the entire Thumb and Metropolitan Detroit regions were eligible to participate.

Yeo & Yeo and the other winning companies will be honored at the Best and Brightest Digital Awards Celebration on November 2.

Given the escalating cost of health care, there may be a more cost-effective way to pay for it. For eligible individuals, a Health Savings Account (HSA) offers a tax-favorable way to set aside funds (or have an employer do so) to meet future medical needs. Here are the main tax benefits:

Contributions made to an HSA are deductible, within limits,
Earnings on the funds in the HSA aren’t taxed,
Contributions your employer makes aren’t taxed to you, and
Distributions from the HSA to cover qualified medical expenses aren’t taxed.

Who’s eligible?

To be eligible for an HSA, you must be covered by a “high deductible health plan.” For 2021, a high deductible health plan is one with an annual deductible of at least $1,400 for self-only coverage, or at least $2,800 for family coverage. For self-only coverage, the 2021 limit on deductible contributions is $3,600. For family coverage, the 2021 limit on deductible contributions is $7,200. Additionally, annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits can’t exceed $7,000 for self-only coverage or $14,000 for family coverage.

An individual (and the individual’s covered spouse) who has reached age 55 before the close of the year (and is an eligible HSA contributor) may make additional “catch-up” contributions for 2021 of up to $1,000.

HSAs may be established by, or on behalf of, any eligible individual.

Deduction limits

You can deduct contributions to an HSA for the year up to the total of your monthly limitations for the months you were eligible. For 2021, the monthly limitation on deductible contributions for a person with self-only coverage is 1/12 of $3,600. For an individual with family coverage, the monthly limitation on deductible contributions is 1/12 of $7,200. Thus, deductible contributions aren’t limited by the amount of the annual deductible under the high deductible health plan.

Also, taxpayers who are eligible individuals during the last month of the tax year are treated as having been eligible individuals for the entire year for purposes of computing the annual HSA contribution.

However, if an individual is enrolled in Medicare, he or she is no longer eligible under the HSA rules and contributions to an HSA can no longer be made.

On a once-only basis, taxpayers can withdraw funds from an IRA, and transfer them tax-free to an HSA. The amount transferred can be up to the maximum deductible HSA contribution for the type of coverage (individual or family) in effect at the transfer time. The amount transferred is excluded from gross income and isn’t subject to the 10% early withdrawal penalty.

Distributions

HSA Distributions to cover an eligible individual’s qualified medical expenses, or those of his spouse or dependents, aren’t taxed. Qualified medical expenses for these purposes generally mean those that would qualify for the medical expense itemized deduction. If funds are withdrawn from the HSA for other reasons, the withdrawal is taxable. Additionally, an extra 20% tax will apply to the withdrawal, unless it’s made after reaching age 65 or in the event of death or disability.

As you can see, HSAs offer a very flexible option for providing health care coverage, but the rules are somewhat complex. Contact us if you have questions.

If you use an automobile in your trade or business, you may wonder how depreciation tax deductions are determined. The rules are complicated, and special limitations that apply to vehicles classified as passenger autos (which include many pickups and SUVs) can result in it taking longer than expected to fully depreciate a vehicle.

Cents-per-mile vs. actual expenses

First, note that separate depreciation calculations for a passenger auto only come into play if you choose to use the actual expense method to calculate deductions. If, instead, you use the standard mileage rate (56 cents per business mile driven for 2021), a depreciation allowance is built into the rate.

If you use the actual expense method to determine your allowable deductions for a passenger auto, you must make a separate depreciation calculation for each year until the vehicle is fully depreciated. According to the general rule, you calculate depreciation over a six-year span as follows: Year 1, 20% of the cost; Year 2, 32%; Year 3, 19.2%; Years 4 and 5, 11.52%; and Year 6, 5.76%. If a vehicle is used 50% or less for business purposes, you must use the straight-line method to calculate depreciation deductions instead of the percentages listed above.

For a passenger auto that costs more than the applicable amount for the year the vehicle is placed in service, you’re limited to specified annual depreciation ceilings. These are indexed for inflation and may change annually.

For a passenger auto placed in service in 2021 that cost more than $59,000, the Year 1 depreciation ceiling is $18,200 if you choose to deduct $8,000 of first-year bonus depreciation. The annual ceilings for later years are: Year 2, $16,400; Year 3, $9,800; and for all later years, $5,860 until the vehicle is fully depreciated.
For a passenger auto placed in service in 2021 that cost more than $51,000, the Year 1 depreciation ceiling is $10,200 if you don’t choose to deduct $8,000 of first-year bonus depreciation. The annual ceilings for later years are: Year 2, $16,400; Year 3, $9,800; and for all later years, $5,860 until the vehicle is fully depreciated.
These ceilings are proportionately reduced for any nonbusiness use. And if a vehicle is used 50% or less for business purposes, you must use the straight-line method to calculate depreciation deductions.

Heavy SUVs, pickups, and vans

Much more favorable depreciation rules apply to heavy SUVs, pickups, and vans used over 50% for business, because they’re treated as transportation equipment for depreciation purposes. This means a vehicle with a gross vehicle weight rating (GVWR) above 6,000 pounds. Quite a few SUVs and pickups pass this test. You can usually find the GVWR on a label on the inside edge of the driver-side door.

After-tax cost is what counts

What’s the impact of these depreciation limits on your business vehicle decisions? They change the after-tax cost of passenger autos used for business. That is, the true cost of a business asset is reduced by the tax savings from related depreciation deductions. To the extent depreciation deductions are reduced, and thereby deferred to future years, the value of the related tax savings is also reduced due to time-value-of-money considerations, and the true cost of the asset is therefore that much higher.

The rules are different if you lease an expensive passenger auto used for business. Contact us if you have questions or want more information.

Related-party transactions and financial connections are a normal part of operating a business. But these arrangements have gotten a bad rap because dishonest people sometimes use them to disguise poor performance or dishonest activities. So, identifying related parties and evaluating your interactions with them are important parts of the external audit process — especially in today’s volatile market conditions.

Accounting definition

In an accounting context, the term “related parties” refers to “any party that controls or can significantly influence the management or operating policies of the company to the extent that the company may be prevented from fully pursuing its own interests.” Examples of related parties include:

Affiliates and subsidiaries,
Investees accounted for by the equity method,
Trusts for the benefit of employees,
Principal owners, officers, directors and managers, and
Immediate family members of owners, directors or managers.

Focal points

The auditing standards on related parties target three critical areas:

Related-party transactions,
Significant unusual transactions that are outside the company’s normal course of business or that otherwise appear to be unusual due to their timing, size or nature, and
Other financial relationships with the company’s owners, directors, officers and managers.

Auditors strive for an in-depth understanding of every related-party financial relationship and transaction, including their nature, terms and business purpose (or lack thereof). Examples of information that may be gathered during the audit that could reveal undisclosed related parties include information contained on a company’s website, tax filings, corporate life insurance policies, contracts and organizational charts.

Certain types of questionable transactions — such as contracts for below-market goods or services, bill-and-hold arrangements, uncollateralized loans and subsequent repurchase of goods sold — also might signal that a company is engaged in unusual or undisclosed related-party transactions.

Eye on compensation

Executive compensation is a key example of a related-party arrangement that’s subject to heightened scrutiny from auditors. Executives can potentially influence financial reporting and may feel incentives or pressures to meet financial targets. The auditing standards require in-depth inquiry about executive compensation, including performance-based bonuses and stock options.

Auditors also test the accuracy and completeness of management’s reporting for and disclosures of these transactions. But they’re not required to make any recommendations or determinations regarding the reasonableness of compensation arrangements.

Full transparency

Investors, lenders and other stakeholders appreciate companies that present related-party relationships and transactions, openly and completely. You can help facilitate the audit process by being up-front with your auditors about all related-party transactions, even if you don’t think they’re required to be disclosed or consolidated on the company’s financial statements. Contact us for more information about transactions and financial connections that may fall under the related-party accounting rules.

Article Updated September 17, 2021

In Notice 2021-46, the IRS recently issued additional guidance on the COBRA premium assistance provisions of the American Rescue Plan Act (ARPA).

Under the ARPA, a 100% COBRA premium subsidy and additional COBRA enrollment rights are available to certain assistance eligible individuals (AEIs) during the period beginning on April 1, 2021, and ending on September 30, 2021 (the Subsidy Period).

Subsidy Termination. Importantly, the ARPA required employers to notify each “assistance eligible individual” (employees who lost group coverage due to reduced hours or involuntary termination and who elect coverage) no more than 45 days, but no less than 15 days, before his or her subsidy termination date that their subsidized coverage is about to end. For most individuals still receiving subsidized coverage, this means they must be notified of the September 30 termination date no later than September 15, 2021. No notice is required, however, to those individuals whose premium assistance expires due to their eligibility for another group health plan or Medicare.

The expiration notice must specify that (1) premium assistance for the individual is about to expire, (2) the date of the expiration, and (3) that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan, Medicaid, or the Health Insurance Marketplace. The U.S. Department of Labor (the “DOL”) published guidance and a model form employers may utilize in providing notice of the expiration of ARPA’s premium subsidy. This model notice form can be obtained or viewed on the DOL’s website, please visit:

https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/cobra/premium-subsidy/notice-of-premium-assistance-expiration-premium.pdf

If your business is required to offer COBRA coverage, it’s important to mind the details of the subsidies and a related tax credit. Here are some highlights of the additional guidance:

Extended coverage periods. An AEI whose original qualifying event was a reduction of hours or involuntary termination is generally eligible for the subsidy to the extent the extended COBRA coverage falls within the Subsidy Period. The AEI must be entitled to the extended coverage because of a:

Disability determination,
Second qualifying event, or
Extension under a state mini-COBRA law.

This is true even if the AEI didn’t notify the plan of the intent to elect extended COBRA coverage before the start of the Subsidy Period — for example, because of the Outbreak Period deadline extensions.

End of Subsidy Period. The subsidy ends when an AEI becomes eligible for coverage under any other disqualifying group health plan coverage or Medicare — even if the other coverage doesn’t include the same benefits provided by the previously elected COBRA coverage.

For example, though Medicare generally doesn’t provide vision or dental coverage, the subsidy for an AEI’s dental-only or vision-only COBRA coverage ends if the AEI becomes eligible for Medicare.

Comparable state continuation coverage. A state program that provides continuation coverage comparable to federal COBRA qualifies AEIs for the subsidy even if the state program covers only a subset of state residents (such as employees of a state or local government unit).

Claiming the credit. Under most circumstances, an AEI’s current or former common-law employer (depending on whether the AEI had a reduction of hours or an involuntary termination) is the entity that’s eligible to claim the tax credit for providing the subsidy. If a plan (other than a multiemployer plan) covers employees of two or more controlled group members, each common-law employer in the group is entitled to claim the credit with respect to its current or former employees.

Guidance on claiming the credit is also provided for Multiple Employer Welfare Arrangements, state employers, entities undergoing business reorganizations, plans that are subject to both federal COBRA and state mini-COBRA, and plans offered through a Small Business Health Options Program.

The ARPA’s COBRA provisions have been in effect for a while now, so your company likely already has procedures in place to provide the subsidy to AEIs and claim the corresponding tax credit. Nevertheless, this guidance offers helpful clarifications. Contact our firm for more information.

Homeowners and businesses across the country have experienced weather-related disasters in recent months. From hurricanes, tornadoes and other severe storms to the wildfires again raging in the West, natural disasters have led to significant losses for a wide swath of taxpayers. If you’re among them, you may qualify for a federal income tax deduction, as well as other relief from the IRS.

Eligibility for the casualty loss deduction

Casualty losses can result from the damage, destruction or loss of property due to any sudden, unexpected or unusual event. Examples include floods, hurricanes, tornadoes, fires, earthquakes and volcanic eruptions. Normal wear and tear or progressive deterioration of property doesn’t constitute a deductible casualty loss. For example, drought generally doesn’t qualify.

The availability of the tax deduction for casualty losses varies depending on whether the losses relate to personal-use or business-use items. Generally, you can deduct casualty losses related to your home, household items and personal vehicles if they’re caused by a federally declared disaster — meaning a disaster that occurred in an area that the U.S. president declares eligible for federal assistance. Casualty losses related to business or income-producing property (for example, rental property) can be deducted regardless of whether they occur in a federally declared disaster area.

Casualty losses are deductible in the year of the loss, usually the year of the casualty event. If your loss stemmed from a federally declared disaster, you can opt to treat it as having occurred in the previous year. You may receive your refund more quickly if you amend the previous year’s return than if you wait until you file your return for the casualty year.

The role of reimbursements

If your casualty loss is covered by insurance, you must reduce the loss by the amount of any reimbursement or expected reimbursement. (You also must reduce the loss by any salvage value). Reimbursement also could lead to capital gains tax liability.

When the amount you receive from insurance or other reimbursements (less any expense you incurred to obtain reimbursement, such as the cost of an appraisal) exceeds the cost or adjusted basis of the property, you have a capital gain. You’ll need to include that gain as income unless you’re eligible to postpone reporting the gain.

You may be able to postpone the reporting obligation if you purchase property that’s similar in service or use to the destroyed property within the specified replacement period. You also can postpone if you buy a controlling interest (at least 80%) in a corporation owning similar property or if you spend the reimbursement to restore the property.

Alternatively, you can offset casualty gains with casualty losses not attributable to a federally declared disaster. This is the only way you can deduct personal-use property casualty losses incurred in areas not declared disaster areas.

The loss amount vs. the deduction

For personal-use property, or business-use or income-producing property that isn’t completely destroyed, your casualty loss is the lesser of:

The adjusted basis of the property immediately before the loss (generally, your original cost, plus improvements and less depreciation), or
The drop in fair market value (FMV) of the property as a result of the casualty (that is, the difference between the FMV immediately before and immediately after the casualty).

For business-use or income-producing property that’s completely destroyed, the amount of the loss is the adjusted basis less any salvage value and reimbursements.

If a single casualty involves more than one piece of property, you must figure the loss on each separately. You then combine these losses to determine the casualty loss.

An exception applies to personal-use real property, such as a home. The entire property (including improvements such as landscaping) is treated as one item. The loss is the smaller of the decline in FMV of the entire property and the entire property’s adjusted basis.

Other limits may apply to the amount of the loss you may deduct, too. For personal-use property, you must reduce each casualty loss by $100 (after you’ve subtracted any salvage value and reimbursement).

If you suffer more than one casualty loss during the tax year, you must reduce each loss by $100 and report each on a separate IRS form. If two or more taxpayers have losses from the same casualty, the $100 rule applies separately to each taxpayer.

But that’s not all. For personal-use property, you also must reduce your total casualty losses by 10% of your adjusted gross income, after you’ve applied the $100 rule. As a result, smaller personal-use casualty losses often provide little or no tax benefit.

The requisite records

Documentation is critical to claim a casualty loss deduction. You’ll need to be able to show:

That you were the owner of the property or, if you leased it, that you were contractually liable to the owner for the damage,
The type of casualty and when it occurred,
That the loss was a direct result of the casualty, and
Whether a claim for reimbursement with a reasonable expectation of recovery exists.

You also must be able to establish your adjusted basis, reimbursements and, for personal-use property, pre- and post-casualty FMVs.

Additional relief

The IRS has granted tax relief this year to victims of numerous natural disasters, including “affected taxpayers” in Alabama, California, Kentucky, Louisiana, Michigan, Mississippi, New Jersey, New York, Oklahoma, Pennsylvania, Tennessee and Texas. The relief typically extends filing and other deadlines. (For detailed information for your state visit: https://bit.ly/3nzF2ui.)

Note that you can be an affected taxpayer even if you don’t live in a federally declared disaster area. You’re considered affected if records you need to meet a filing or payment deadline postponed during the applicable relief period are located in a covered disaster area. For example, if you don’t live in a disaster area, but your tax preparer does and is unable to pay or file on your behalf, you likely qualify for filing and payment relief.

A team effort

If you’ve incurred casualty losses this year, tax relief could mitigate some of the financial pain. We can help you maximize your tax benefits and ensure compliance with any extensions.

Article Updated September 15, 2021

Any healthcare provider that received at least $10,000 from the Provider Relief Fund during the first half of 2020 must report on the use of those funds by September 30, 2021.

However, in response to the challenges providers are facing and given the COVID surges and natural disasters around the country, a 60-day grace period is in place (October 1 – November 30, 2021). This period allows providers to come into compliance with their PRF reporting requirements should they fail to meet the September 30, 2021 deadline.

While you will be out of compliance if you do not submit your report by September 30, 2021, recoupment or other enforcement actions will not be initiated during the 60-day grace period (October 1 – November 30, 2021).
Providers who are able are strongly encouraged to complete their report in the PRF Reporting Portal by September 30, 2021.
Providers should return unused funds as soon as possible after submitting their report. All unused funds must be returned no later than 30 days after the end of the grace period (December 30, 2021).

This grace period only pertains to the Reporting Period 1 report submission deadline. There is no change to the Period of Availability for the use of PRF payments.

Reporting portal

To facilitate these reports, the U.S. Department of Health and Human Services (HHS) opened its reporting portal on July 1.

If a Provider Relief Fund recipient has not yet registered for a portal account, the recipient must do so before reporting. To do this, visit prfreporting.hrsa.gov and click “Register.” Yeo & Yeo encourages anyone who has not yet registered to do so as soon as possible. To assist recipients with registering, HRSA updated its Registration User Guide. In addition, the Reporting Worksheet will help you gather the information before you start the reporting process on the website.

Payment Received Period (For Payments Exceeding $10,000 in Aggregate)	Deadline to Use Funds	Reporting Time Period
Period 1: April 10 to June 30, 2020	June 30, 2021	July 1 to Sept. 30, 2021 (Grace period: Oct. 1 – Nov. 30, 2021)
Period 2: July 1 to Dec. 31, 2020	Dec. 31, 2021	Jan. 1 to March 31, 2022
Period 3: Jan. 1 to June 30, 2021	June 30, 2022	July 1 to Sept. 30, 2022
Period 4: July 1 to Dec. 31, 2021	Dec. 31, 2022	Jan. 1 to March 31, 2023

Returning unused funds

Providers that have remaining Provider Relief Fund money that they did not spend on allowable expenses or losses by the deadline must return the unused funds to HHS within 30 calendar days after the end of the applicable reporting period. For Reporting Period 1, unused funds must be returned no later than 30 days after the grace period (December 30, 2021).

To return any unused funds, use the Return Unused PRF Funds Portal. Instructions for returning unused funds are available here.

Please contact your Yeo & Yeo professional if you need assistance with PRF reporting.

The U.S. economy has been nothing short of a roller-coaster ride for the past year and a half. Some industries have had to overcome seemingly insurmountable challenges, while others have seen remarkable growth opportunities arise.

If your business is doing well enough for you to consider adding a location, both congratulations and caution are in order. “Fortune favors the bold,” goes the old saying. However, strained cash flow and staffing issues can severely disfavor the underprepared.

Ask the right questions

Among the most fundamental questions to ask is: Will we be able to duplicate the success of our current location? If your first location is doing well, it’s likely because you’ve put in place the people and processes that keep the business running smoothly. It’s also because you’ve developed a culture that resonates with your customers. You need to feel confident you can do the same at subsequent locations.

Another important question is: How might expansion affect business at both locations? Opening a second location prompts a consideration that didn’t exist with your first: how the two establishments will interact. Placing the two operations near each other can make it easier to manage both, but it also can lead to one operation cannibalizing the other. Ideally, the two locations will have strong, independent markets.

Run the numbers

You’ll need to consider the financial aspects carefully. Look at how you’re going to fund the expansion. Ideally, the first location will generate enough revenue so that it can both sustain itself and help fund the second. But you may still need to take on debt, and it’s not uncommon for construction costs and timelines to exceed initial projections.

You might want to include some extra dollars in your budget for delays or surprises. If you must starve your first location of capital to fund the second, you’ll risk the success of both.

Account for the tax ramifications as well. If you own the real estate, property taxes on two locations will affect your cash flow and bottom line. You may be able to cut your tax bill with various tax incentives, such as by locating the second location in an Enterprise Zone. But the location will first and foremost need to make sense from a business perspective. There may be other tax issues as well — particularly if you’re crossing state lines.

Assess the risk

For some businesses, expanding to a new location may be the single most impactful way to drive growth and build the bottom line. However, it’s also among the riskiest endeavors any company can take on. We’d be happy to help you assess the feasibility of opening a new location, including creating financial projections that will provide insights into whether the move is a reasonable risk.