How the CARES Act affects Charitable Donations and Their Tax Implications

Charitable donations

2020 has been a tough year and COVID-19 has affected all individuals. Earlier this year the US government stepped in with the passing of the Coronavirus Aid, Relief & Economic Security (CARES) Act. The aim of the Act was to stabilize the US economy and offer relief to businesses and individuals adversely affected by the Coronavirus. The Act includes a provision that encourages taxpayers to increase their charitable giving during the pandemic.  How does the CARES Act affect charitable donations and tax implications for you? We have all the info you need!

Charitable Donations and Tax 

Standard deductions 

If you take the standard deduction in 2020, you can deduct up to $300 of charitable contributions to an eligible organization of your choice. Below are the standard deductions for 2020:

  • Single: $12,400
  • Head of household: $18,650
  • Married jointly filing: $24,800
  • Married filing separately: $12,400

For those who are over 65 and/or blind, this amount can increase by $1,300 per taxpayer. 

Itemized deductions

For itemized deductions, the adjusted gross income (AGI) for cash contributions was increased with the CARES act and affects individual donors. The limit has been increased from 60% to 100% for 2020 only. This means that any cash contributions you make can be deducted up to 100% of your AGI. 

Corporate giving 

The AGI limit for corporate donors was increased from 10%, meaning that corporations can now deduct up to 25% of taxable income for 2020 only. 

Conditions to qualify for tax benefits 

To qualify as a tax deduction, corporate taxpayers and individuals need to follow the guidelines below: 

Conditions that do not qualify include:

  • Property contributions
  • Marketable securities
  • Real assets
  • Corporate foundations
  • Private non-operating foundations
  • Family foundations
  • Charitable contributions made into a donor-advised fund

Do not forget, to qualify for the latest deduction limits of 100% for itemizing individual taxpayers and 25% for corporations, all charitable contributions must be made during 2020. Our team of expert accountants at Georgen Scarborough serves individuals, corporate businesses, and families with charitable donations and their tax implications. 

If you are focused on your charitable goals, we hope our guide helps you understand how the CARES Act affects charitable donation. 

Reasons to Choose Georgen Scarborough

Georgen Scarborough Associates takes the time to help you achieve your personalized financial goals. Some of the services we offer include:

  • Electronic filing (e-filing) for all tax returns
  • Income tax planning
  • Estimated tax preparation
  • Equipment depreciation, pension, 401K, and other tax services

For more information on government and tax implications, contact us today!

Best Practices for Tax Preparation for Small Business

Small business tax

It is not easy to run a small business! You have to ensure that you follow all regulations as well as satisfy all small business tax requirements. This can be particularly stressing during tax season and at the end of the financial year. Good business practice is important to manage and grow your business. Good practices can lead to more income if you want to sell your business in the long term or if you need to secure financial assistance. We have a checklist to ensure your tax preparation for your small business goes smoothly.  

Ensure your financial records are up-to-date 

It’s important to ensure all of your financial  records are kept up-to-date so that you reduce stress on yourself and your staff at the end of the financial year. Ask for regular reports and statements of all activity that occurs in your business. These include all tasks and their due dates, financial statements which include profit and loss statements and balance sheets. These financial statements will also help the quality of your business by helping you evaluate where your business needs improvement so that you implement the necessary changes. 

Monitor your payroll

It doesn’t matter what system you use for payroll, as long as it is done correctly and timely, preferably by a professional. You need to ensure that your payroll is up-to-date as the IRS requires filings every quarter. It also gives your business a good credit record which is advantageous to you in the long term with potential investors or banks. 

Properly classify your business 

Is your small business a Limited Liability Company (LLC), Corporation or Sole Proprietorship? Each classification has different regulations and tax requirements. Ensuring that your business falls under the correct category, and is classified by this, can save your business from paying extra on taxes. A good accountant can help you out with classifying your business and saving you the money you deserve. 

Sort out any personal affairs 

This is where the importance of adequate record keeping matters the most! Make sure any personal affairs are taken care of and that you are not leaving out deductions before filing for taxes. This will help you to avoid putting yourself at risk for an audit at the end of the financial year. It may be difficult for you or your staff to keep track of deductions throughout the year, especially if you have falling behind. This stresses the importance of an accountant to help you track your finances and to make your business life so much simpler. 

Hire the best accountant 

When it comes down to your small business tax preparation, you need to be sure that your forms are accurately filled. An expert accountant can help you to track your income and expenditure throughout the year so that your small business is prepared when tax season arrives. This reduces stress and time on you and your staff, as well as fulfilling your business’s statutory requirements. A good accountant should be one that specifically listens to you and your business needs, makes use of the best accounting software and has expert knowledge on the latest regulatory tax requirements. 

Georgen Scarborough Associates makes your small business tax preparation easier 

Good business practice ensures that your small business is a success and that everything runs smoothly when it comes to tax season, without legal implications. You are going to need a professional accountant to guarantee your business is a success and that your tax preparation is promptly taken care of. 

Our expert accountants at Georgen Scarborough Associates give each client the personal attention they deserve by providing quality service. We provide tax preparation for small businesses, help with your financial statements and audits, payroll services and analysis for your business. There is nothing we can’t handle! 

Using the latest technology and best accounting software for your small business tax, we can keep track of your financial position, properly classify your business and balance your accounts. This will help your small business to save money, prevent any legal issues from arising, and evaluate any weak points in your small business that needs improving. We do not just help you with your accounts, we help you to grow a legacy! 

For more information on tax preparation and practices for small business, contact us today! 

How a government contractor qualifies their accounting systems with Defense Contract Audit Service

Accounting systems

A government contract can be a welcome source of income for your company, but it also comes with a few stringent regulations and auditing requirements that need to be adhered to. The biggest of these is DCAA Compliance–and you may need the assistance of a reputable accounting company for this. Being able to successfully complete a DCAA audit helps to ensure not only the legality of your business but also that you get additional government contracts in the future. 

What is a DCAA compliant accounting system?

Being DCAA compliant means that your company has the systems and procedures in place to comply with the DCAA audit process. You won’t get any formal certifications for this, instead, the DCAA audits will check if your company meets the Cost Accounting Standards, Federal Acquisition Regulations, and various other government policies and rules. There are no specific accounting systems that are formally approved by the DCAA, so saying that an accounting system is DCAA compliant simply means that they meet the requirements of various audits.

Here are 3 things every government contractor needs to know about DCAA compliance.

  1. The whole company needs to follow the same standards whether they are working on a government contract or not. This compliance pertains to every single employee and includes daily time entries, accurate project-level time allocations and a clear record of both unpaid and paid time. 
  2. Accurate time and labour tracking are key,  so software tools that can record and classify information precisely can help in this regard. Nearly 75% of DCAA compliance requirements are related to time tracking.
  3.  In the past, DCAA compliance was graded, and government contractors could fall short in a few areas but still be deemed compliant as long as they addressed the issues where they fell short. These days, however, it’s either a PASS or a FAIL. You will not be given time to address any issues and you simply won’t make the cut if your systems are not up to scratch.

DCAA compliance is not always easy to acquire and maintain but using the right accounting software coupled with frequent employee training will help qualify your accounting process with the DCAA’s stringent standards.

For further assistance with accounting services and queries to get your organization’s accounting systems DCAA compliant, get in touch with us via our website. Here at Georgen Scarborough Associates, we are always happy to share our expertise. 

Guide to non-profit accounting

non-profit accounting

When you started your non-profit organization your zeal for ‘the cause’ may have outweighed the headaches associated with administrative and bookkeeping tasks that are crucial for your organization to function optimally. Many executive directors and board members are not trained accountants and may not know where to begin with sorting out their finances and budgets. Non-profit accounting is also very different from for-profit accounting, but if you set the following 6 basic structures in place, it will be a great start to running your non-profit accounting system successfully.

6 basics for non-profit accounting

  • Find a good non-profit accounting/bookkeeping solution
  • Get an accounting solution that can do fund accounting 
  • Find a method to create and analyze financial statements
  • You will need a way to record in-kind donations 
  • Open a separate bank account for your non-profit
  • Start with bank reconciliation and set up some budgets

Bookkeeping for non-profits

You will need to appoint a treasurer or financial officer to keep track of your organization’s financial records. Your treasurer will need a good bookkeeping system and invest in some non-profit friendly accounting software. Here at Georgen Scarborough we use Quickbooks Non-Profit Edition. This will make your treasurers’ life that much easier in keeping track of your organization’s finances.

Budgets

A budget is vital to make sure that your non-profit is on the right track financially. Budgets usually cover one fiscal year and have 2 main categories: Expected income and expected expenses. Creating a budget is easy if you keep in mind the following 4 steps:

  • Set goals – assess what you want your non-profit to achieve in the year ahead
  • Develop doable estimates for how much money it will cost to realistically achieve these goals
  • Estimate your income sources for the year
  • Alter budget to align expectations with reality

Your non-profit friendly accounting software should ultimately allow you to track how your income and spending for the year align with your annual budget goals.

Whether you are a new non-profit organization or not, let Georgen Scarborough Associates take the headache out of administrative tasks. For more information on accounting services for your non-profit get in touch with accounting company George Scarborough Associates today.

How Financial Statements help you plan for 2021

financial statements

Creating financial statements can seem tedious and complicated, but preparing these documents is a vital part of planning for the year ahead. Financial statements make up a large part of the projections and planning for your business’s future and can give you strategic guidance on crucial changes to make to ensure sustained success. 

How financial statements can help you plan for the year ahead 

While you are preparing your financial statements, you will become more aware of the status of your business’ finances, the progress you are making towards your goals, and will give you a clear view of any issues you might face down the road. 

Financial status overview 

Keeping close tabs on the financial status of your business is a must. The financial statements offer a summary of your business’s financial position. They can provide you with the information you need to help you set goals and understand where you might need to change your budget. If you regularly work through your financial statements, you will pick up any issues at an early stage, and you can make small changes before the finances go off the rails. 

Relating business goals into specific business targets 

The financial status overview is a powerful tool to help you create specific targets that will drive your business strategy towards achieving the goals you have set out for any given year. The adage goes that failing to plan means planning to fail, and it holds true in a business context. 

Measured targets will help to keep your business on track and will provide employees with structured outcomes to work towards. By creating specific targets, you can practically set out a roadmap that will lead your business to its goals, instead of making decisions on the fly without proper planning to back up actions. Through specific targets, you will be able to create a sustainable pace for the business while leaving room for direction changes necessitated by external factors that influence the business strategy. 

Measuring progress

Your financial statements contribute to most planning and strategic decisions and can help you measure the progress within your set of goals. If you have carefully set out specific business targets, the progress measurement process will be easier to manage. The business’s financial statements can give you a higher-level overview of the progress, even if you do not measure specific targets. When comparing the financial statements across several years, you can track how the business is progressing towards its goals on a year-by-year basis, giving you valuable insights into the overall development of the company. 

Identifying potential issues 

When you study the financial statements for the previous years, you can compare the financial situation to your business forecast to see if you might run into problems relating to cash flow and inventory, among others. It is especially important to use your financial statements when planning the goals you want to achieve in the business to identify shortfalls and plan out budgets to cover the activities you plan to undertake for the following year. 

If you need assistance from our accounting service experts on your financial statements, taxes, and other financial planning activities, contact Georgen Scarborough Associates, PC, for more information. 

Five Accounting Tips for Startups

Accounting tips

Business accounting does not have to be a daunting process with these practical and straightforward accounting tips. At Georgen Scarborough Associates, PC, we have helped small businesses to get their financial statements, tax preparation, and payroll off to the best start. Here are our top accounting tips for startups:

Top accounting tips for managing a startup  

There are countless resources online with tips and plans for getting your start up’s accounting in order. Not all of these tips have been created by accounting service experts, and the wrong advice can cost you time and money and get you into a lot of trouble with the law. Here are the tips you need to keep your books in tip-top shape.

Keep business and personal finances separate

You might be tempted to put everything together in the same account and treat your business accounting like your personal accounting. Mixing the two is a quick way to create a lot of trouble in the long run. We recommend opening a dedicated business account from day one. The little bit of extra effort, in the beginning, will help you to keep everything in order and will save you a lot of frustration as your business grows.

Record expenses, income, and payments meticulously

Now that you have a dedicated business account, it will be much easier to keep a thorough record of income, expenses, and payments you make for the business. If you deal with a lot of physical paperwork, you should invest in a filing system to keep your records organized and safe. We recommend that you read up on record keeping requirements in your industry and area so that you don’t unknowingly expose sensitive information to unauthorized parties. 

Stay on top of financial matters

If your records are in order, it will be a reasonably simple task to stay on top of your finances. Remember to stay updated on regulations, legal requirements, and developments that might impact your business accounting. For business owners, this requirement is especially critical when it comes to taxes and payroll matters that affect employees.

Use professional software tools

Modern digital accounting tools can make the accounting process incredibly simple for startups. We recommend using a cloud-based accounting tool that will help you organize your accounting process and access your information anywhere. We recommend that you research a few different options and reach out to an accounting service expert before investing in a paid plan for your business. 

Hire an expert

Suppose you are unclear about your business accounting, or you don’t want to spend your time managing your accounting. In that case, we recommend reaching out to one of our accounting service experts. We have the knowledge, experience, and resources to assist you with all your business accounting needs. Our professional staff members provide a variety of services for your startup, from payroll to taxes. 

For more accounting tips or help with your startup accounting, contact Georgen Scarborough Associates, PC, in Virginia for more information. 

Four ways to improve your financial statements

Financial Statement

Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance, and liquidity of a company. The financial statements are used by investors, market analysts, and creditors to evaluate a company’s financial health and earnings potential.

How to enhance the usefulness of your financial statements

  1. Consider the format of your financial statements. This tiny detail can make a tremendous difference. Providing investors with easy-to-read financial information in the financial statements is essential to achieving your objective of capable, confident, and well-informed investors.
  2. Make sure to include an operating and non-operating presentation. It is important to consider the effects of both operating and non-operating components of the income statement. Due to the material nature of non-operating items, they are typically reported separately from operating items in a company’s financial statements.
  3. Review peer organizations’ financial statements for best practices. A review of other organizations’ financial statements is a great place to start when updating your own.
  4. Modify your footnotes. Financial statements are easier to read and understand when you identify what information is relevant to your investors, prioritize it appropriately, and present it in a clear and simple manner. In some cases, this includes additional information that is useful for investors and, in other cases, removing information that is immaterial.

Financial statements are intended to provide investors with information that is useful for making investment decisions. These statements need to be updated annually and should be prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Contact Georgen Scarborough Associates today for information on how we can help you with your financial statements. 

Business accounting strategies for bank reconciliation

Bank reconciliation

Bank reconciliation is what happens when your business needs to prove or document its account balance. It is the comparison of your monthly bank statement to your internal accounting records. Sometimes these balances do not match and the business needs to identify the reasons for the discrepancy and reconcile the differences.

How to deal with discrepancies when doing bank reconciliation 

There are three reasons why your bank statement and accounting records might disagree. 

  1. Omission. This refers to transactions that appear on the bank statement, but have not been recorded in the accounting records. Such as a customer payment that has bounced, interest received, bank charges and bounced checks. The difference needs to be eliminated by adjusting the company’s accounting records before the preparation of bank reconciliation.
  2. Timing differences. This refers to transactions that are recorded in the bank statement and the accounting records in different periods. For example, an outstanding check which you send to your supplier, but it doesn’t get cashed until the following month. Another timing difference is a “deposit in transit” which is used to categorize monies that have been received but have not yet cleared the bank. Keep track of timing differences that may otherwise cause difficulty in reconciling the company’s cash balance on its financial statements to its monthly bank statements.
  3. Errors. The last reason is accounting errors such as missing receipts, making an entry twice, entering the incorrect number, and neglecting to add interest earned. The best way to correct errors in accounting is to add a correcting entry. A correcting entry is a journal entry used to correct a previous mistake.

For assistance with your bank reconciliation, contact Georgen Scarborough today. Georgen Scarborough is a full-service accounting firm that can customize a suite of accounting and financial management services, such as bank reconciliation, tailored to your needs.

The effects of business restructuring on your financial statements

business restructuring

The economic global impact of the COVID-19 pandemic has been disastrous. It has caused a slowdown in global trade, disruption in supply chains, and changed tourism flows. Over three million Americans filed for unemployment benefits as COVID-19-induced layoffs increased around the US. The full repercussion of COVID-19 and the subsequent lockdown may only be properly understood once all this has passed. 

The impact by industry varies as every finance function has to consider the unique aspects of the company’s financial statements along with their ability to produce quality financial reports with workforces that may be distributed and disconnected due to health and safety considerations.

A company may choose to restructure as a means of preparing for a sale, buyout, merger, change in overall goals, or transfer to a relative. 

Renegotiating financial contracts helps businesses that are short of cash in two ways. First, it allows them to realign the financial and contractual burden associated with their financial obligations so that it matches their current values and cash flows. Second, it facilitates the addition of new capital into the business.

What costs are involved when restructuring your company?

Restructuring Cost refers to the one-off expenses which are incurred by the company in the process of reorganizing its business operations with the purpose of the overall improvement of the long-term profitability and working efficiency of the company and are treated as the non-operating expenses in the financial statements.

The following restructuring costs are considered when calculating restructuring charges:

  • Furloughing of employees 
  • Closure of existing manufacturing plants
  • Shifting of company assets 
  • Writing off or sale of assets
  • Purchasing of new equipment
  • Diversifying business into a new market

To learn more about business restructuring contact Georgen Scarborough to schedule your consultation.

Help from an accountant when filing for bankruptcy

bankruptcy

Bankruptcy can happen to anyone and is not necessarily due to financial irresponsibility. It is often due to job loss, divorce, illness, to name a few. Many people worry that bankruptcy will be a permanent or long-term setback, which is not the case. Your credit score can change in just two to three years after your discharge (most people are discharged after 9 months; however, the bankruptcy will show on your credit history report for 6 years after that date). Bankruptcy

Bankruptcy provides a financial fresh start by eliminating debt that you may have struggled for years to repay. A Certified Public Accountant can help you with areas that your attorney may not be sure about, such as: determining eligibility and discharge, knowing exactly when you should file, procure an offer in compromise, and represent you to the IRS.

What documents do you need when filing for bankruptcy?

Chapter 7 and Chapter 13 bankruptcy are the two most common programs you can use to reduce or eliminate your debt. The documents are the same for both, with slight variations. Make sure to check the guidelines provided by your state and your bankruptcy trustee. You will also be required to present the following documents:

  • Tax returns
  • Income documentation
  • Proof of real estate fair market value and mortgage statements
  • Vehicle registration, proof of value and insurance
  • Retirement and bank account statements
  • Identification
  • Other documents (child support, alimony, etc.)

By law, you are also required to complete a credit counseling class and obtain a certificate before you can file for bankruptcy. 

Bankruptcy is a serious decision and we do not want you to have any surprises along the way. Contact Georgen Scarborough Associates today should you have any questions regarding bankruptcy.