There’s never a shortage of misconceptions about taxes and tax refunds.
With the 2018 filing season in full swing, the IRS offers basic tips to help clear up some common misbeliefs. For example: Many people believe that all refunds will be delayed, but 9 out of 10 refunds will be delivered within 21 days. Also, 80% of filers will get their refunds faster using e-file and direct deposit. And the IRS won’t call, email or text you about your refund. (These are signs of a scam.) For more common misbeliefs about taxes, visit http://bit.ly/2EqRmXy or contact us at 207-873-1603. We’re happy to help!
The number of taxpayers who itemize deductions on their federal tax return — and, thus, are eligible to deduct charitable contributions — is estimated by the Tax Policy Center to drop from 37% in 2017 to 16% in 2018. That’s because the recently passed Tax Cuts and Jobs Act (TCJA) substantially raises the standard deduction. Many not-for-profit organizations are understandably worried about how this change will affect donations. But this isn’t the only TCJA provision that affects nonprofits.
Donors have fewer incentives
In addition to reducing smaller-scale giving by shrinking the pool of people who itemize, the TCJA might discourage major contributions. The law doubles the estate tax exemption to $10 million (indexed for inflation) through 2025. Some wealthy individuals who make major gifts to shrink their taxable estates won’t need to donate as much to reduce or eliminate their potential estate tax.
UBIT takes a bigger bite
The new law mandates that nonprofits calculate their unrelated business taxable income (UBTI) separately for each unrelated business. As a result, they can’t use a deduction from one unrelated business to offset income from another unrelated business for the same tax year. However, they can generally use one year’s losses on an unrelated business to reduce their taxes for that business in a different year. The TCJA also includes in UBTI expenses used to provide certain transportation-related and other benefits. So, the unrelated business income tax (UBIT) a nonprofit must pay could go up.
High compensation risks new tax
Nonprofits with highly compensated executives may now potentially face a 21% excise tax. The tax applies to the sum of any compensation (including most benefits) in excess of $1 million paid to a covered employee plus certain large payments made to that employee when he or she leaves the organization, known as “parachute” payments. The excise tax applies to the amount of the parachute payment less the average annual compensation.
Bond interest exemption revoked
The TCJA repeals the tax-exempt treatment for interest paid on tax-exempt bonds issued to repay another bond in advance. An advance repayment bond is used to pay principal, interest or redemption price on an earlier bond prior to its redemption date.
Note that other rules and limits may apply. We can provide you with a detailed picture of the new tax law and explain how it’s likely to affect your organization. Contact our professional staff at Perry, Fitts, Boulette & Fitton CPAs by calling 207-873-1603 or visit us at www.pfbf.com.
If You Want It To Grow, Water It.
Sweet summertime. It is the season where beaches are overflowing with sunbathers, BBQs are filling the air, flowers are blooming, and most of us have forgotten about the long, cold winter. It is also the time of year for accounting firms to reel in new clients and grow their business. Continue reading Summer… The Best Time for Gardening, Boating, and Business.
This is what you’re reading… A blog. An easy way to get your voice heard among an online crowd. Why wouldn’t you want to build your business by capturing an audience’s attention with your thoughts, ideas, and opinions about various topics? It’s a no brainer. Continue reading To Blog or Not to Blog? That is the question.
Using social media is just one of many ways to show off your “goods.” Do you keep in contact with friends and family though Facebook? Why not do the same with your client base? Develop a company Facebook Page, join LinkedIn, and Twitter. I often describe LinkedIn as the Facebook for business. Instead of discussing your personal life with your connections, share valuable business information, opinions, and thoughts with your followers. Continue reading Are you LinkedIn?
Communication: the key to a successful relationship. Think about this for a second. What kinds of things keep you interested in carrying on a conversation? Is it the person? Is it the dialogue? What stops you from pursuing the conversation might be a bigger question? We often disengage with people when it’s “all about us.” Continue reading It’s Not All About You…
We’ve all heard of marketing, but do we know exactly what it is and how to do it? For accountants, some would like to erase the word from their memory bank. Most accountants are not “marketers” and why would they be or learn how? That isn’t what they went to school for and most would like to stick to the “old-fashion” way of building their client base by referrals. Continue reading The Swear Word for Accountants: Marketing…