Charitable donations tax deduction limit 2021

Charitable donations tax deduction limit 2021

The charitable donations tax deduction limit for 2021 contains provisions that enable businesses to help those in need. It also helps by claiming certain deductions against their tax bills. The CARES Act, together with the stimulus package signed into law at the end of 2020, makes several provisions in regard to charitable tax incentives. Are you planning your income, expenditures, and taxes for this year?  You should take careful note of the CARES Act and its stipulations. This will keep you informed of charitable donations tax deduction limits for 2021.  

How much can you deduct from charitable donations for 2021?

The CARES Act and the stimulus package allow for deductions of up to 100% of your adjusted gross income (AGI). This applies to cash contributions made in 2021. If you are itemizing your charitable donations, you can receive this deduction.

Also, the CARES Act allows for other deductions if you are not itemizing your cash contributions. It allows for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. This provision is extended into 2021 for taxpayers filing separately. Plus, it increases the deduction to $600 for taxpayers filing jointly. 

Contributions to Donor-advised Funds

No changes have been made to existing deductions for contributions made to a donor-advised fund sponsor like Fidelity Charitable. So, you can still deduct up to 60% AGI in cash. Or, you can deduct up to 30% AGI in appreciated assets contributed to a donor-advised fund. Also unchanged are rules around Qualified Charitable Distributions (QCD). Surprisingly, these allow seniors over 70½ years of age to donate up to $100,000 in IRA assets directly to charity annually. Meanwhile, these donations of IRA assets would not count toward the distribution of taxable income.

Need help managing your charitable donations for 2021?

The assistance of an experienced certified public account (CPA) can help you manage your taxes, including the charitable donations tax deduction limit for 2021. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need help with your taxes.

Year-end transactions to boost your tax refund

year-end transactions to boost your tax refund

As the end of the tax year approaches, it is probably time to start thinking about year-end transactions to boost your tax refund. Of course, it is a good idea to manage your income and expenditures throughout the year in such a way as to ensure the best possible tax breaks. However, when you come towards the transition from one year to another, it is important to time your transactions carefully so as to lower your tax bill. Here are some tax refund tips to help you. 

Lower your tax bill with careful timing

It is possible to minimize taxes year-to-year by making certain payments at just the right time. It is important to know when to make payments to increase expenses and tax deductions and push receipts to create income at the end of the tax year. As a rule of thumb, you want to move income into a year of lower taxes and move expenses into a year of higher taxes. 

Timing payments at year-end

The usual strategy for a small business is to lower the current year’s taxes by deferring income and prepaying expenses. However, this may not be the right path for everybody. If you are going to be in a higher tax bracket for the following year, then it might make sense to take the opposite approach. 

Expenses that can lower your tax bill 

If you are looking for some readily available ways to decrease your tax liability for the current year, you can consider making some or all of the following expenditures, which you can deduct against your income taxes.

  • Deductible gifts and donations
  • Purchase assets – you can deduct against the depreciation on these assets
  • Pre-pay some of the next year’s expenses. That way, you can deduct the expense for the current tax year.

You can also delay income to next year so that you are not liable to be taxed on it in the current tax year. This does not mean receiving a check and then only cashing it next year – you have still received that payment. The way to delay income is to hold off on sending bills to clients until the start of the next tax year.

The assistance of an experienced certified public account (CPA) can help you lower your tax liability easily and legally. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need tips on year-end transactions to boost your tax refund.

What should be included in a non-profit annual report?

What is included in a non-profit annual report?

Compelling annual reports from non-profits can highlight the journey, mission, impact, and goals achieved during the year. It is usually sent to the donor base as well as stakeholders. Annual reports give stakeholders and donors information on what the non-profit has been doing in the last year. This increases the non-profit’s levels of accountability, transparency, and trustworthiness. Georgen Scarborough, experts in tax and financial consulting services, can tell you here what should be included in a non-profit’s annual report.

More and more non-profit organizations are going paperless with digital annual reports while some older, more traditional ones still prefer hard copies that can be felt and held by their donors. However, the two main questions to ask yourself before embarking upon the development of an annual report are:

  1.     Who is the audience you are targeting?
  2.     What information do you want to convey?

Georgen Scarborough recommends including the following to build a comprehensive, well-round annual report:

Mission and vision

Begin your annual report by structuring the values and purpose of your non-profit into a concise and clear statement. This is the non-profit’s mission statement. The missions statement provides supporters, donors and stakeholders with firsthand information on your objectives before delving into more comprehensive data.

Achievements

The main focus of the annual report should be on the accomplishments of the last 12 months. This includes the events, the number of volunteers engaged, breakdown of projects, and the like. Using statistics and visual representation of these figures can be a powerful way to showcase your achievements.

Financial statement

It is important to tell your donors and supporters how their money is being used for a good cause. Be transparent and honest about your organization’s finances, which can enhance trustworthiness too. A comprehensive representation of the organization’s expenses can encourage supporters to donate more, especially if they feel you have handled the donations responsibly and effectively.

Contributions

It is necessary to show your gratitude by highlighting the major contributors, supporters, board members, and hardworking staff members. These are who have helped accomplish all you have done in the last 12 months. You can also end the annual report with a list of donors, irrespective of how much they have contributed in cash or in-kind, to thank them.

For more information on how to create an effective and donor-centric annual report for your non-profit, contact Georgen Scarborough today.

Best strategies in tax reporting for nonprofits

Best strategies in tax reporting for nonprofits G&A Expense allocation

Tax reporting for nonprofits

Being a charitable non-profit does exempt the organization from paying income taxes. However, it is important to file an annual information return every year. Most charitable nonprofits have an obligation to file an annual information return with the IRS. Read on to find out the nitty-gritties from Georgen Scarborough on how to report taxes for nonprofits.

How nonprofits file tax returns

The type of tax return filed by a nonprofit organization depends on its size and type. Learn which Form 990 is applicable for your nonprofit below.

Form 990-N

This is the simplest tax return. Form 990-N applies to small nonprofits with gross receipts of less than $50,000. This form must be submitted by the 15th day of the fifth month following the organization’s tax year.

Form 990-EZ

Nonprofits can submit Form 990-EZ when they meet certain conditions. Firstly, they would have annual gross receipts of less than $200,000, and secondly, assets of less than $500,000. They must report on:

  1.     Revenues, expenses, and changes in net assets. (Part 1)
  2.     Simplified balance sheet (Part 2)
  3.     Statement of program accomplishments (Part 3)
  4.     List of officers, directors, employees, and stakeholders (Part 4)
  5.     Miscellaneous questions (Part 5)
  6.     Only to be filled if the non-profit is exempt under 501 (c) (3) (Part 6)

Form 990

If you are a nonprofit with annual gross receipts of more than $200,000 and assets of $500,000, then you would submit a Form 990. Simply enough, page one of this form is similar to Form 990-EZ. However, Form 990 requires detailed information about the organization as well as additional attachments. This Form is open to the public. So, the organization’s Board or senior-most personnel should review and approve the information.

Not required to file

Certain organizations receive tax-exempt status from the IRS. These include:

  • religious or church-affiliated organizations
  • specific political organizations, or
  • black lung benefit trusts.

These do not need to submit a Form 990.  However, if they are engaged in unrelated business activities, a Form 990-T is required annually.

If you are a charitable nonprofit organization, contact Georgen Scarborough for more information on tax reporting for nonprofits.

Making sense of the government’s contract cost accounting rules

Demystifying Government Contract Cost Accounting Rules-min

Government contract cost accounting rules apply to all companies contracted to do government work across all sectors. Some contractors find these rules difficult to understand. But, this does not have to be the case. We’ll demystify them for you! We’ll also help you understand why they exist and how to interpret them. In this blog, we’ll help you make sense of the government’s contract cost accounting rules.

The essentials of government contract cost accounting

The rules relating to government contract costs have two basic functions. First, to provide guidelines for cost allowability. And second, to set parameters for cost allocability. These terms may sound unfamiliar and unnecessarily complicated for some. So, let’s break them down to their simplest terms. Allowability refers to what costs the government will cover. And allocability refers to how much of these costs the government is prepared to bear. The government does not cover at all costs deemed unallowable. On the other hand, allowable costs will be covered only to the extent that the government is prepared to accept, i.e., what portion of these costs you are permitted to allocate as government expenses.

What this means at its most basic is that the government will cover only a certain portion of your project costs—i.e., only those deemed allowable. Of those, the government will pay only for a specific portion—that which is considered allocable. The problem is that the concepts of allocability and allowability tend to feature numerous grey areas and are seldom straightforward. While the concepts themselves are relatively easy to understand, the exact rules and quantitative guidelines pertaining to them can be nebulous at times, and also tend to change frequently. Unfortunately, this uncertainty and potential for confusion often come with the territory when it comes to government work. 

The best way to deal with these challenges is to seek the help of a certified public accountant. We have the knowledge and experience necessary to help you apply government contract costing rules to your projects, and the accounting practices to help you manage them to the greatest advantage. Contact Georgen Scarborough to see if we can assist you with your government contract cost accounting.

How Contractors Account for General and Administrative Expenses

How Contractors Account for General and Administrative Expenses-min

Government contractors deal with a range of general and administrative expenses or overhead costs. The term ‘overhead costs’ is a broad category. It’s not usually confined to a single project, but allocated and distributed across several projects. There are two types of costs in this regard: general & administrative (G&A) and indirect. How should a contractor go about allocating G&A expenses?

How to allocate G&A costs

You should consult a certified public accountant on your allocation of overhead costs. As these can be quite complex. Some of the matters to consider on how contractors account for general and administrative expenses are:

  • the real costs associated with completing a job
  • what costs can be considered as overhead costs
  • the best method for allocating G&A costs, and
  • the technology that the company uses.

Once answering these questions, you can allocate your costs in question in a number of ways. For example, label them as direct job costs or as direct labor costs (direct labor hours). The types of projects involved and the type of company determine the right method. For example, contractors whose work is less labor-intensive would do well to allocate their costs based on total direct job costs, rather than direct labor hours. In contrast, the pricing for more labor-intensive work depends on labor hours.

How to determine overhead rates

Determine overhead rates by using the chosen method of cost allocation. Calculate your rate as a percentage of revenue or a portion of revenue if your costs are allocated according to job cost. If you focus on labor costs, then calculate your rate as a percentage of those. You can also track actual costs in your general ledger (G/L). Then distribute them proportionally across your jobs.

Allocate your general and administrative expenses in a way that best suits your company, projects, and working methods with a certified public accountant. Contact Georgen Scarborough to make your financials more accurate and manageable.

3 Key Skills to Look for in an Accountant

1-3 Key Skills to Look for in an Accountant

Your accountant is going to know every little detail about your finances – a topic that is considered taboo in polite society! How on earth do you choose someone who you need to trust with your short and long-term goals, your legacy, your compliance with tax legislation, your business’s financial performance, and more?

Being in this business has taught us that there are three major skills a great accountant has:

1. CPAs Know the Accounting Basics

This seems too obvious to state, but the accountant must know the basic principles of the profession. A great example is the matching principle. This principle states that the related revenues and expenses must be matched in the same period to link the costs of an asset or revenue to its benefits.

Another is the convention of conservatism, or doctrine of prudence. This is a policy of anticipating possible future losses but not future gains. It states that when choosing between two solutions, the accountant should select the one that will be least likely to overstate assets and income.

2. CPAs Know Tax Regulations Backwards and Forwards

There’s no quicker way for a business to fall on hard times than to run afoul of tax regulations. Tax laws differ from state to state and so it is critical that your accountant is entirely familiar with the tax legislation that is in effect where your business is registered and derives most of its income.

Not only will this keep you out of trouble, but it could also be to your company’s benefit as there may be credits and other advantages of which you are unaware. A good accountant will have a thorough knowledge of the best business practices for your field to ensure tax optimization.

Certified public accountants are as well-versed in tax regulations and loopholes for individuals’ needs.

3. CPAs Provide Customer Service

The old stereotype of an accountant has long ceased to exist in real life. Gone are the days of colorless old men entering numbers into huge books with their sharp pencils. The world of accounting has become exciting and has attracted bright and interesting professionals.

Your accountant needs to interface with the Board of your business and understand the work that you do as well as the people that you are. They also need to understand your goals and the legacy you would like to leave. The financial side of your life should be a joy and not a grudge.

Certified Public Accountants

Discover what superior accounting professionals can do for your business. Contact Georgen Scarborough Associates, PC to help you navigate your personal and business finances.

Financial Statements: Evaluating Key Performance Indicators for Business Health

  • 07 Sep 2021
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1-Financial Statements Evaluating Key Performance Indicators for Business Health

Financial statements are records of business activities and a company’s financial performance. Government agencies, accountants, and firms at times audit them to ensure accuracy and for tax, financing, or investing purposes.

What Information Do Financial Statements Show?

Financial statements include:

  • Income statement
  • Cash flow statement
  • Balance Sheet

Because lay people, or potential investors, as well as accounting professionals, analyze your financial statements, it is imperative to design your statements in an easy-to-use and easily understandable manner. Overly complex systems can create misunderstandings that could have vast ramifications.

What are KPIs?

Key Performance Indicators (KPIs) are predetermined data trends. Track these regularly to evaluate the wellbeing of your business. KPIs provide quick, easily accessible, and comprehensible views of how your business is functioning. Not to mention, they help in predicting long-term performance.

KPIs that you keep watch on may be different from those of other businesses; after all, every situation is unique. Having said that, there are five basic data types you can use as KPIs for most businesses. Mold them to suit your purposes:

  1. Revenue: Yes, the obvious must be stated. Track revenue consistently to ensure that your income is steady. Revenue is used as a KPI to track trends such as when revenue dips and why.
  2. Direct Expenses: Track direct expenses in terms of quantity and trends. For example, it could be helpful to have big expenses coincide with times of increased revenue.
  3. Overhead (ongoing business cost): This does not necessarily link to expenses but remains stable most of the time.
  4. Gross Profit Margin is an important indicator of how well you are balancing income and output. Ideally, it should trend upward, but there are factors that upset the trends. This KPI helps you to adjust pricing when necessary.
  5. Net Profit Margin is your profit after all expenses are taken into account. Keeping an eye on this helps you to keep expenses in check.

Have your company’s financial statements taken care of by reliable professionals so that you can focus on running the business. Contact Georgen Scarborough Associates, PC to get your financial statements in order.

The financial intelligence gained with management accounting

1-The Financial Intelligence Gained with Management Accounting

Any business, big or small, benefits from management accounting. The largest benefit is the resultant financial intelligence that comes with it. Management accounting is not just about day-to-day reporting and tallying of numbers, but financial intelligence. The financial intelligence gained with management accounting allows businesses to forecast and make long-term business decisions for the maximization of profits.

Thus, as a business owner, management accounting offers data-driven reports that offer an insight into your strengths, weaknesses, and trends. Therefore, this can help make better decisions for the next fiscal year. Georgen Scarborough explains the benefits of management accounting and financial intelligence.

The financial intelligence gained with management accounting

With management accounting techniques, business owners and CEOs can analyze relevant costs. After which, sound financial decisions can be taken that are beneficial to the business. Financial intelligence offers the bigger picture. This discerns areas that are profitable and those that are weak. With this financial intelligence, business owners can make improvements and changes, accordingly.

How does management accounting help

Through weekly or daily management accounting, business owners can analyze their cash flow forecast. You can even predict problems before they take place. This kind of financial intelligence allows business owners to stay on top of their financial operations at all times.

Management accounting follows a scientific system to compare and evaluate business performance. Therefore, it can be utilized to control cash flow and to keep a check on the misuse of money.

Other benefits of management accounting include:

  • Conflict resolution between employees and the business
  • Improved project delivery, and
  • Effective decision-making.

Are you a business based in Virginia, Maryland, or the District of Columbia that is looking to increase its revenue? Then, try using management accounting. Contact Georgen Scarborough, experts in management and financial reporting, for more information on financial intelligence through management accounting today!

5 tips for a successful bookkeeping experience with your accountant

1-5 Tips For A Successful Bookkeeping Experience With Your Accountant

As a business owner, outsourcing your bookkeeping and accounting can be a stressful experience. But most times, it helps to know that those working at an outsourced accounting service are highly qualified. Their skills in business finance can make the process a little less daunting. More often than not, business owners benefit from seeking a successful bookkeeping experience with their accountant. However, it is not enough to hand over your books and expect priority service and enhanced collaboration. It is imperative that you work towards building a positive relationship with your outsourced bookkeeper for the most out of this association. Georgen Scarborough provides the following five tips for a successful bookkeeping experience with your accountant. Use them to maintain and enhance your outsourced bookkeeping relationship.

Define your needs for a successful bookkeeping experience

Before delving into an outsourced accounting service, it is essential to clearly define your business needs and expectations. Share your company goals, aspirations, and processes. This ensures you and your outsourced bookkeeper are in clear alignment to make the best possible business decisions.

It is also important to be truthful and transparent with the state of your overall finances and accounting. As keeping your outsourced bookkeeper in the dark can lead to losses and disastrous consequences in the long run. It may also be beneficial to hire or appoint an employee at your business to liaise with the outsourced bookkeeper. Then, you can know who would be the one to provide timely information when required.

Smoothing out processes with your accountant

Establish how the financial operations of your business are conducted. This depends greatly on the available resources and the expertise of the in-house team. Therefore, the duties and obligations of the outsourced accounting team must be clearly put down on paper and their performance must be reviewed every two years.

Other non-technical aspects that must be defined are communication and responsiveness of the virtual bookkeeping team. Establish a preferred mode of communication for quicker reaction times. This can be Skype, email, or other channels.

Finally, as a business owner, you must develop key performance indicators to measure the effectiveness and accuracy of the outsourced accounting team.

Seamless transfer of information

Transferring financial data through email can compromise security in a business environment. That is why Georgen Scarborough recommends using secure channels for quick and efficient transmission of sensitive documents. For an easy and effective paperless transfer of financial information, use QuickBooks.

Keep an eye on your financials

After handing over the financial operations of your business to an outsourced bookkeeping service, you, as a business owner or manager, cannot stand back and leave the responsibility to them. Review the financial and management reports at regular intervals to gain an insight into your financial and business performance. This can be an excellent method to avoid cash flow problems by ensuring all recorded numbers in the reports add up and there are no discrepancies.

Strategic decisions

Find an outsourced bookkeeping service using powerful accounting software. This helps you make data-driven business decisions. The idea of management accounting is being led by outsourced accounting services across the globe. Management accounting allows for financial intelligence. This intelligence gives you insights into how to improve cash flow and recognize weaknesses in your financial operations. This intelligent data allows you to maximize profits in the next fiscal year and identify financial issues.

In conclusion, sound financial management comes by collaborating with outsourced bookkeeping and accounting firms. For more information on outsourced bookkeeping and accounting, contact Georgen Scarborough, providers of quality Financial and Accounting Goverment Contractors assistance in Virginia, Maryland, and District of Columbia.