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Thursday, September 21st, 2017

Why you should boost your 401(k) contribution rate between now and year end

One important step to both reducing taxes and saving for retirement is to contribute to a tax-advantaged retirement plan. If your employer offers a 401(k) plan, contributing to that is likely your best first step.

If you’re not already contributing the maximum allowed, consider increasing your contribution rate between now and year end. Because of tax-deferred compounding (tax-free in the case of Roth accounts), boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement.

Traditional 401(k)

A traditional 401(k) offers many benefits:

  • Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
  • Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
  • Your employer may match some or all of your contributions pretax.

For 2017, you can contribute up to $18,000. So if your current contribution rate will leave you short of the limit, try to increase your contribution rate through the end of the year to get as close to that limit as you can afford. Keep in mind that your paycheck will be reduced by less than the dollar amount of the contribution, because the contributions are pre-tax so income tax isn’t withheld.

If you’ll be age 50 or older by December 31, you can also make “catch-up” contributions (up to $6,000 for 2017). So if you didn’t contribute much when you were younger, this may allow you to partially make up for lost time. Even if you did make significant contributions before age 50, catch-up contributions can still be beneficial, allowing you to further leverage the power of tax-deferred compounding.

Roth 401(k)

Employers can include a Roth option in their 401(k) plans. If your plan offers this, you can designate some or all of your contribution as Roth contributions. While such contributions don’t reduce your current MAGI, qualified distributions will be tax-free.

Roth 401(k) contributions may be especially beneficial for higher-income earners, because they don’t have the option to contribute to a Roth IRA. On the other hand, if you expect your tax rate to be lower in retirement, you may be better off sticking with traditional 401(k) contributions.

Finally, keep in mind that any employer matches to Roth 401(k) contributions will be pretax and go into your traditional 401(k) account.

How much and which type

Have questions about how much to contribute or the best mix between traditional and Roth contributions? Contact us. We’d be pleased to discuss the tax and retirement-saving considerations with you.

© 2017


Tuesday, September 19th, 2017

M&J Welcomes New Office in Columbia, SC!

Mauldin and Jenkins, LLC is thrilled to announce its merger with Derrick, Stubbs & Stith, LLP in Columbia, South Carolina! With nearly 100 years of success, Mauldin & Jenkins welcomes the opportunity to better reach its already growing clientele within South Carolina through this merger.

“We are proud to have the partners and employees of Derrick, Stubbs and Stith, LLP join our team,” stated Donny Luker, Managing Partner at Mauldin & Jenkins. “South Carolina is a great market, and we are excited to welcome the people and clients of such a long-time successful firm to the M&J group. For almost 100 years, Mauldin & Jenkins has been successfully serving clients throughout the Southeast and through the addition of a quality firm like DSS that tradition continues.”

Read more here!

 


Friday, September 15th, 2017

Donations and Prayers to those Impacted by Hurricane Harvey & Irma

In response to Hurricanes Harvey and Irma, the Birmingham office collected food, personal items, cleaning supplies, blankets/sheets, and other items to aid the victims in Texas and Florida.  These items were delivered along with other donations made by Birmingham area businesses and residents. We know those residents are incredibly appreciative for their generosity!


Wednesday, September 13th, 2017

Make sure your nonprofit’s SEO strategy keeps pace with the Web

When did you last Google your not-for-profit’s name or check to see if your website is among the top search results for relevant terms? Many organizations optimize their sites for search engines when they first launch and never revisit their search engine optimization (SEO) strategy. Unfortunately, this is a recipe for online obscurity.

Important trends

Search engines regularly change their search result metrics, and your nonprofit needs to keep up with such trends. Pay particular attention to the following issues:

KeywordsSearch engines rank Web pages, not entire websites, so you need to distribute relevant keywords throughout your headlines, content, titles and heading tags, and meta descriptions. You can check the popularity of certain keywords using Google Trends.

Mobile considerationsTo get the most mileage with search engines, your website content mustbemobile-friendly. In the past few years, Google has expanded its use of mobile-friendliness as a ranking factor and offers a Mobile-Friendly Test Tool that can show how the search engine analyzes your pages.

Social media promotionWhether you primarily use Facebook, Twitter, LinkedIn or other platforms, social media is instrumental in boosting the visibility of your nonprofit’s website and, indirectly, your SEO. Include links to your site in social media posts so the links are shared when readers repost your content. The number of links to a website is an important ranking factor, but links from other sources are rated more highly than links from your own postings.

LinksQuality matters when it comes to incoming links to your website. A few links from sources with strong reputations in the relevant areas will be ranked higher than dozens from less credible sources.

ContentSubstantive material, preferably not available elsewhere, draws high-value incoming links.

Beyond Google

Remember that Google isn’t the only search engine out there and that different engines, such as Bing and Yahoo, use different ranking algorithms. Also, other countries may favor home-grown search engines. So if you’re trying to reach an international audience, consider your targets’ preferences and tailor your site accordingly.

© 2017


Tuesday, September 12th, 2017

Save more for college through the tax advantages of a 529 savings plan

With kids back in school, it’s a good time for parents (and grandparents) to think about college funding. One option, which can be especially beneficial if the children in question still have many years until they’ll be starting their higher education, is a Section 529 plan.

Tax-deferred compounding

529 plans are generally state-sponsored, and the savings-plan option offers the opportunity to potentially build up a significant college nest egg because of tax-deferred compounding. So these plans can be particularly powerful if contributions begin when the child is quite young. Although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. In addition, some states offer tax incentives for contributing.

Distributions used to pay qualified expenses (such as tuition, mandatory fees, books, supplies, computer equipment, software, Internet service and, generally, room and board) are income-tax-free for federal purposes and typically for state purposes as well, thus making the tax deferral a permanent savings.

More pluses

529 plans offer other benefits as well:

  • They usually have high contribution limits.
  • There are no income-based phaseouts further limiting contributions.
  • There’s generally no beneficiary age limit for contributions or distributions.
  • You can control the account, even after the child is a legal adult.
  • You can make tax-free rollovers to another qualifying family member.

Finally, 529 plans provide estate planning benefits: A special break for 529 plans allows you to front-load five years’ worth of annual gift tax exclusions, which means you can make up to a $70,000 contribution (or $140,000 if you split the gift with your spouse) in 2017. In the case of grandparents, this also can avoid generation-skipping transfer taxes.

Minimal minuses

One negative of a 529 plan is that your investment options are limited. Another is that you can make changes to your options only twice a year or if you change the beneficiary.

But whenever you make a new contribution, you can choose a different option for that contribution, no matter how many times you contribute during the year. Also, you can make a tax-free rollover to another 529 plan for the same child every 12 months.

We’ve focused on 529 savings plans here; a prepaid tuition version of 529 plans is also available. If you’d like to learn more about either type of 529 plan, please contact us. We can also tell you about other tax-smart strategies for funding education expenses.

© 2017


Thursday, September 7th, 2017

Use a giving day to raise money — and awareness — for your nonprofit

What are you doing November 28? If that date doesn’t ring a bell, your not-for-profit probably hasn’t made plans to participate in National Giving Tuesday. But considering the opportunities associated with it, maybe it should.

What is it?

Giving Tuesday, or National Day of Giving, was created to encourage Americans to contribute to charity during the holiday season, similar to how they participate in commercial shopping events such as Black Friday and Cyber Monday. Like Cyber Monday, Giving Tuesday wouldn’t be possible without technology. Participants use social media to raise awareness about issues and how their nonprofits are responding to them. Raising money online is a central goal, but Giving Tuesday is also intended to educate potential supporters and encourage them to volunteer in their communities.

Since its establishment in 2012 by New York City’s 92nd Street Y, Giving Tuesday has grown into an enormously successful global event. It has more than 40,000 charitable, for-profit business and government participants, and in 2016 it raised more than $168 million in a 24-hour period.

Get involved

If you’re interested in participating, sign up at GivingTuesday.org. You must be registered as a 501(c)3 organization and you’ll need to provide a link to your own website or a third-party payment service that supporters can use to make donations. Donors can’t directly give money to your charity through the Giving Tuesday website. What the site does offer, however, are free marketing tools and advice on leveraging your social media presence and support base for maximum impact.

Your nonprofit’s participation in this designated day can be minimal or substantial, depending on your resources and greater objectives. If this is your first year, try a simple, focused goal. For example, use the day to remind supporters to make tax deductible gifts by year end. Or publicize the list of supplies your facility needs on an ongoing basis.

Start planning

If you hope to participate this November, start planning now. Or, consider participating in another 24-hour fundraiser. In addition to city-specific events held throughout the year, such as Pittsburgh’s Day of Giving and Seattle’s GiveBIG, there are more general options, such as Give Local America.

© 2017


Wednesday, September 6th, 2017

Watch out for potential tax pitfalls of donating real estate to charity

Charitable giving allows you to help an organization you care about and, in most cases, enjoy a valuable income tax deduction. If you’re considering a large gift, a noncash donation such as appreciated real estate can provide additional benefits. For example, if you’ve held the property for more than one year, you generally will be able to deduct its full fair market value and avoid any capital gains tax you’d owe if you sold the property. There are, however, potential tax pitfalls you must watch out for:

Donation to a private foundation. While real estate donations to a public charity generally can be deducted at the property’s fair market value, your deduction for such a donation to a private foundation is limited to the lower of fair market value or your cost basis in the property.

Property subject to a mortgage. In this case, you may recognize taxable income for all or a portion of the loan’s value. And charities might not accept mortgaged property because it may trigger unrelated business income tax. For these reasons, it’s a good idea to pay off the mortgage before you donate the property or ask the lender to accept another property as collateral for the loan.

Failure to properly substantiate your donation. This can result in loss of the deduction and overvaluation penalties. Generally, real estate donations require a qualified appraisal. You’ll also need to complete Form 8283, “Noncash Charitable Contributions,” have your appraiser sign it and file it with your federal tax return. If the property is valued at more than $500,000, you’ll generally need to include the appraisal report as well.

Sale of the property within three yearsThe charity must report the sale to the IRS, and if the price is substantially less than the amount you claimed as a tax deduction, the IRS may challenge your deduction. To avoid this result, be sure your initial appraisal is accurate and well documented.

Sale of the property to someone related to you. If the charity sells the property you donated to your relative (or to someone with whom you negotiated a potential sale), the IRS may argue that the sale was prearranged and tax you on any capital gain.

If you’re considering a real estate donation, plan carefully and contact us for help ensuring that you avoid these pitfalls.

© 2017


Wednesday, August 30th, 2017

Prepare financial statements that will impress your nonprofit’s stakeholders

Annual financial statements that have been audited by a professional auditor can help assure funders and lenders that your not-for-profit is financially sound. Here are three critical audit issues to understand when preparing financial statements:

1. The auditor’s role

Auditors are responsible for expressing an opinion on financial statements. Beyond that, they’re responsible for obtaining reasonable assurance that financial statements are free of material misstatements — be it from error or fraud.

Your nonprofit and its advisors, on the other hand, are responsible for developing estimates adopting sound accounting policies and establishing, maintaining and monitoring internal controls. Although your auditor may make suggestions about these items, it isn’t his or her responsibility to institute them or to ensure they’re working properly. While management is strictly responsible for decision making, your auditor is required to evaluate whether internal controls, accounting policies, and estimates are adequate to prevent or detect errors or fraud that could result in material misstatements of the financial statements.

2. The board’s role

Sometimes a nonprofit board of directors’ role is overlooked in annual financial statement preparation, and that’s a mistake. Keep in mind that your board generally has a strategic and oversight role in the process, which is part of its overall fiduciary duty. Your board isn’t responsible for completing the job. However, board members can be a good resource for certain technical matters, depending on their professional background.

3. Financial analysis

Annual financial statements are designed to help you manage your organization. Financial statement metrics — such as debt ratios, program vs. administrative expense ratios and restricted vs. unrestricted resources — can be calculated to indicate how your organization is doing.

One of the best ways to see the big financial picture is to compare your budget, year-end internally generated financial statements and statements generated during the annual audit. This task can be completed more easily if the format of your audited statements is similar to that of your internal financial statements and budgets.

When reviewing internal vs. audited statements, look for large differences in individual accounts resulting from audit correcting adjustments. These can indicate an internal accounting deficiency. You’ll also be able to spot any significant discrepancies between what was budgeted for the year and the actual outcome.

Audited results demonstrate professionalism and provide assurance that your results are free from errors and fraud. For help preparing financial statements, contact us.

© 2017


Tuesday, August 29th, 2017

The ABCs of the tax deduction for educator expenses

At back-to-school time, much of the focus is on the students returning to the classroom — and on their parents buying them school supplies, backpacks, clothes, etc., for the new school year. But let’s not forget about the teachers. It’s common for teachers to pay for some classroom supplies out of pocket, and the tax code provides a special break that makes it a little easier for these educators to deduct some of their expenses.

The miscellaneous itemized deduction

Generally, your employee expenses are deductible if they’re unreimbursed by your employer and ordinary and necessary to your business of being an employee. An expense is ordinary if it is common and accepted in your business. An expense is necessary if it is appropriate and helpful to your business.

These expenses must be claimed as a miscellaneous itemized deduction and are subject to a 2% of adjusted gross income (AGI) floor. This means you’ll enjoy a tax benefit only if all your deductions subject to the floor, combined, exceed 2% of your AGI. For many taxpayers, including teachers, this can be a difficult threshold to meet.

The educator expense deduction

Congress created the educator expense deduction to allow more teachers and other educators to receive a tax benefit from some of their unreimbursed out-of-pocket classroom expenses. The break was made permanent under the Protecting Americans from Tax Hikes (PATH) Act of 2015. Since 2016, the deduction has been annually indexed for inflation (though because of low inflation it hasn’t increased yet) and has included professional development expenses.

Qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $250 of qualified expenses. (If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses — but not more than $250 each.)

Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment (including related software and services), other equipment and supplementary materials that you use in the classroom. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics.

An added benefit

The educator expense deduction is an “above-the-line” deduction, which means you don’t have to itemize and it reduces your AGI, which has an added benefit: Because AGI-based limits affect a variety of tax breaks (such as the previously mentioned miscellaneous itemized deductions), lowering your AGI might help you maximize your tax breaks overall.

Contact us for more details about the educator expense deduction or tax breaks available for other work-related expenses.

© 2017


Tuesday, August 29th, 2017

Ice Cream and Business DO Mix!

Last Friday, M&J Birmingham held an ice cream social with our friends at Welch Hornsby in appreciation for the close working relationship they have developed. Looks yummy!