Understanding IRS Standard Mileage Rates
If you offer reimbursement to employees for their driving and business mileage, or track the use of vehicles in any way, then it is likely that the IRS mileage rate will likely pop in your mind every year. Each year, the rate changes. HR and business owners have already been juggling payroll deadlines, as well as compliance regulations and increasing costs. Keeping up with mileage rate adjustments may feel like a burden to keep track of. The problem is that the mileage adds up quickly. Fuel prices fluctuate. Maintenance of vehicles isn’t going to get cheaper. If mileage isn’t managed correctly, it could cause tax problems for employers as well as employees. This article will look at how to use the latest IRS Standard Mileage Rate, how it compares with previous years as well as what’s included and exempted, and who is eligible to use it and the impact it has on taxes. By the end, you’ll feel comfortable that you’re using the new IRS mileage rate properly and be aware of how it will affect your tax plan. What’s the IRS Standard Mileage Rate? The IRS mileage rate was designed to ease the process of accounting for vehicle-related expenses. Instead of filing receipts for each gallon of gasoline and oil change, or repair bill, it is possible to determine a per-mile deduction or reimbursement using the mileage standard rate. It’s a good method to record the expenses you incur when traveling for medical, business, charitable and moving reasons. In the case of many companies, this method is simpler to control and more reliable than keeping track of actual expenses for vehicles. It also establishes a uniform baseline, that is, IRS-approved benchmark for deductions and reimbursements. What is the IRS Standard Mileage Rate for 2026? For 2026, the Internal Revenue Service adjusted the standard mileage rates in order to reflect current cost data and inflation. Starting January 1, 2026 the average mileage rates will be: These rates are applicable to diesel, gasoline, hybrids, as well as fully electric vehicles. The rise in the business mileage rates reflects the rising fixed and variable vehicle costs, like depreciation, insurance, fuel and maintenance. Moving and medical rates, however, are based on the cost of variable items, which is the reason they vary from the business mileage. It’s important to remember that the use of the standard mile rate is an option. Taxpayers may choose to calculate the actual expense of their vehicle; however, once you have decided on one method, there are guidelines on when and how you can switch. What’s included In the Mileage Rate of 2026? This IRS Standard Mileage Rate has been created to make it easier to account for vehicle expenses to be used for medical, business, charitable, or moving purposes. This is what it covers: What is not included within the mileage rate? Although the standard mileage rate is comprehensive, but there are some costs that are not covered: Who is eligible to use the standard mileage rate? The standard mileage rate can be utilized by: What Does This Mean for My Taxes? For HR professionals and business owners, knowing the tax implications of these changes are crucial. Conclusion The IRS standard mileage rate is a reflection of the constant reality that operating a vehicle isn’t going to be cheaper, particularly for companies that depend on employee travel. Knowing the current mileage rate as well as what it covers and how it impacts taxes will help you remain on track and avoid a tax time surprise. If the mileage reimbursement and deduction rules seem confusing, that’s not unusual. They affect payroll, tax and policy-related decisions all at once. Reviewing your mileage policies now will help you avoid headaches and time later. Also, ensure that you’re using the IRS mileage rate in the correct way going forward. Contact Parr & Ibarra CPA in Keller, Texas for more details.
How Taxes Can Impact Your Merger or Acquisition
If you’re selling your business or purchasing another business, tax implications could have a huge impact on the success or failure of your transaction. If you’re contemplating the possibility of a merger or acquisition, you should be aware of the tax implications. Stock Sale or Asset Sale? From a tax perspective, a transaction could be classified as an asset sale or stock sale. When it is an asset sale, the buyer is buying only those assets belonging to a company. This could happen if the buyer wants only certain products or assets. It’s the only option for a business that can be a sole-proprietorship, or an individual-member limited liability corporation (LLC) which is considered as a sole proprietorship for tax reasons. If the targeted business is a corporation, partnership or LLC which is considered a partnership for tax purposes, the buyer may directly purchase the shares of the seller or another form or ownership stake. Whether the business that is being bought is a C corporation or a pass-through entity (that is, an S corporation, a partnership or, more generally an LLC) can make a huge difference in the taxation. The 21% flat federal corporate income tax under the Tax Cuts and Jobs Act (TCJA), which the One Big Beautiful Bill Act (OBBBA) did not change, makes the purchase of shares of a C corporation somewhat more appealing. Why? The company will pay less tax and generate more after-tax income. Furthermore, any gains built-in from the appreciation of corporate assets are taxed at a lower rate when they’re transferred to a buyer. The TCJA’s reduced individual federal tax rates, permanently imposed by the OBBBA can be a factor in making ownership interests in S corporations, partnerships, and LLCs more appealing than they used to be. This is due to the fact that the income that is passed-through generated by these organizations will be taxable according to the lower rates imposed by TCJA on the buyer’s personal tax returns. The buyer could also be eligible for qualified business income deduction under the TCJA and was permanently enacted through the OBBBA. In certain situations, the purchase of stock by a corporation may be regarded as an asset purchase when you make a Section 338 election. Buyer or Seller? Sellers typically prefer stock sales due to tax reasons and also for nontax reasons. One of their primary goals is to reduce the tax cost of selling. This is usually done by selling ownership rights in the company (corporate stock or interest in an LLC or partnership) in contrast to selling the company’s assets. If you sell your stock or any other ownership interest, that carries liabilities generally to the buyer. Any gains from selling are usually taxed as long-term capital gains (assuming that the ownership interest was kept for more than a year). However, buyers typically prefer to buy assets. The primary goal is to generate sufficient cash flow from the acquired company to pay for any debts incurred in the acquisition and to earn an appropriate return from investment. So, buyers need to reduce exposure to unidentified and undisclosed liabilities and reduce taxes once the deal is closed. A buyer may increase (step-up) their tax base of the assets purchased in order to reflect the cost of purchase. A step-up basis decreases the tax liability in the event that certain items, including inventory and receivables are sold or converted to cash. It also boosts depreciation and amortization deductions on qualifying assets. Remember that other elements like employee benefits, could create tax problems that are not expected when merging or buying an enterprise. How Parr & Ibarra can help Selling the company you’ve spent years creating or becoming a new business owner through the purchase of an existing business could be the most expensive financial decision you’ll ever take. We’ll help you assess the likely tax consequences prior to discussions to prevent unpleasant tax surprises once a contract is signed. Contact us today to begin.
How to Check the Status of Your IRS Refund: A Step-by-Step Guide
Waiting for your IRS tax refund can feel stressful, especially when you’re counting on that money for expenses, savings, or investments. The positive side is the IRS offers reliable tools to monitor your refund status in real-time. In this comprehensive guide,we go through and explain precisely how to check your IRS refund status step-by-step and what each status signifies and what you should do if the refund has been delayed. How Much Time Does It Take to Receive the IRS Refund? Before you check your refund status, it’s crucial to know the IRS timeframes: Delays could be due to issues with identification verification, documents that are not in the system or IRS process of review. What You Need to Know Before Verifying Your Refund Status To check the IRS tax refund status, keep these items in your possession: If you make a mistake, it could stop the system from finding your refund. Step-by-Step Instructions on how to Check the Status on your IRS tax refund’s status Online Step 1: Visit the IRS “Where’s My Tax Refund?” Tool Visit the official IRS refund tracker, which is known as “Where’s my refund?” This is the most efficient and accurate method to verify your refund. Step 2: Fill in Your Tax Information Give you your SSN and ITIN number, the filing status and the exact amount of your refund as it was filed. Select the tax year when you filed your return (for instance, Tax Year 2025 filed in 2026 or Tax Year 2024 filed in 2025). The proper tax year is crucial. Selecting the wrong tax year will stop the system from finding your tax refund Step 3: View Your Refund Status After submission, the system will show the following three options: For a detailed explanation and visual walkthrough, please click to watch the video, it provides additional insights and clarifies each step discussed. How to check your IRS Refund Status using the IRS2Go App The IRS also offers a mobile option: Steps: This tool provides exactly the same information as the tool online and makes it convenient for mobile users. Understanding IRS Refund Status Messages Return received: Your tax return is being processed. There is no action to take until your IRS calls you. Refund Approved: The refund is confirmed. Direct deposits usually show up within five days. Refund Sent: The IRS has issued your refund. Allow extra time for the delivery in case of a mailed check. Why is my refund from the IRS Delay? The most frequent reasons for delay in refunds can be attributed to: If the refund you received is delayed past the normal timeframe, it is suggested to have a professional review. When to contact an IRS or a CPA? It is recommended to seek assistance for: How Parr & Ibarra CPA Can Assist? At Parr & Ibarra CPA in Keller, Texas, we provide support for families, individuals and business owners in: Our aim is to ensure that the refund process is completed accurately and quickly, with no unnecessary stress. Final Thoughts Verifying the status of your IRS return status is easy as long as you follow the proper steps and know what each update signifies. While a lot of refunds are processed promptly but delays and difficulties are not unheard of. If they do happen it is important to have a trustworthy CPA on your side that can make an enormous difference.
401(k) Plan Fraud: What Employers Should Watch For
The 401(k) program is one of the best benefits that employers can provide, and is one of the most attractive targets for criminals. There are billions of dollars in retirement accounts of employees, and scammers are always seeking ways to swindle the plan’s administrators, sponsors and the participants. If your company is the sponsor of the 401(k) plan, you are subject to an obligation as a fiduciary as per the laws to act prudently and solely in participants’ interests. This includes protecting the assets of the plan and securing personal information. And being aware of new scams, knowing the security procedures of your plan provider and ensuring that your employees follow the highest standards. Review the Basic Security Measures Like many plan sponsors, you probably depend on an outside service provider to help administer your 401(k). Being aware of its security procedures and policies is vital. The majority of providers have cyberfraud insurance that covers plan participants, however there could be limitations if the provider finds you (the sponsor) or your participants played a role in an incident. Your plan’s documents might require your participants to follow the security guidelines recommended by your provider for checking their account details “frequently” and checking the correspondence “promptly.” Be sure everyone is aware of what these terms refer to. If you don’t have it yet, create a robust educational and communication plan that teaches new members about security measures to prevent fraud and refreshes them regularly. Fortify Cybersecurity In recent times, a variety of 401(k) program sponsors have faced legal action because they failed to protect the personal information of participants when their accounts were compromised. Every organization should have comprehensive and up-to-date cybersecurity. Be especially cautious when you keep plan data within your server. Two-factor authentication is a standard but it may not be sufficient. Many cybersecurity experts recommend using multifactor authentication, which is a combination of something that users know (a password) as well as something they own (a gadget or device) and something they are (a biometric identifier) to stop the ever-increasing sophistication of fraud strategies. As important, you should invest time and money in educating users to adhere to strict security guidelines when managing their accounts. Instruct them to: Make sure that participants are cautious when they’re approached by someone that claims to represent the law enforcement, government or the plan’s provider, or a financial institution. Instead of directly responding, the participant should make use of verified contact details to independently verify the legitimacy of any inquiry. More sophisticated schemes have involved criminals who pose as fraud experts or representatives of plans and soliciting participants to transfer money in “safer” accounts where the money will, naturally, disappear. Give participants a trusted number to dial and obtain official information about the plan or to confirm any suspicious messages. Secure Funds for Everyone’s Benefit Protecting the retirement savings of employees also means that they are in compliance with 401(k) contribution regulations. The U.S. Department of Labor requires that plan sponsors deposit contributions of participants as soon as they are segregated from their employer’s assets, and not later than the 15th business day in the following month. For smaller companies (those that have less than 100 employees) a safe harbor rule specifies that contributions made within seven business days of the pay date are deemed timely. This helps to ensure compliance, safeguards the members’ savings, and increases the trust in your retirement plan. Be Clear About Your Commitment The protection of the 401(k) plan from fraudulent activity is essential to fulfilling your fiduciary responsibility. But it’s also a chance to establish trust and boost the engagement of your employees. Secure plans encourage participation and show your commitment to participant’s financial wellbeing over the long term. Parr & Ibarra CPA firm in Keller, TX can assist you in evaluating the internal controls of your company for your 401(k) as well as across all other operations to discover weaknesses and enhance the security measures against fraud.
Expanded Eligibility for Tax-Advantaged ABLE Accounts in 2026
Did you know that there’s a tax-free option to pay for costs of someone with disabilities that’s comparable to saving for college costs by using a Section 529 program? Achieving a Better Life Experience (ABLE) accounts can assist in funding eligible disability expenses for a beneficiary. The SECURE 2.0 Act, signed into law in 2022, brought modifications that will enable more people to qualify to be eligible for ABLE accounts from the beginning of 2026 . The One Big Beautiful Bill Act (OBBBA) which was signed into law on the 4th of July, 2025 has made some improvements to them indefinitely. The Advantages ABLE accounts can be set up by those who qualify to provide for their own needs, by relatives to provide for their dependents or guardians to benefit the people for whom they’re responsible. Anybody can make a contribution to the ABLE account. The OBBBA will continue to allow ABLE account holders to take advantage of their Saver’s Credit for eligible contributions made to their personal ABLE accounts. For the tax years 2025 through 2026 the highest amount of Saver’s credit a qualified beneficiary can get is $1,000 per person subject to the applicable limit on income and contribution requirements. While contributions aren’t tax deductible, the funds in the account are growing in a tax-deferred manner. Distributions made to pay for eligible expenses are tax-free. If the distributions are for expenses that are not qualified, the amount is taxed in the same way as income and is subject to a penalty of 10%. The existence of an ABLE account isn’t likely to impact the beneficiary’s eligibility to the benefits provided by the government to which he is entitled. ABLE accounts do not have an impact upon Social Security Disability Insurance (SSDI) payments or Medicaid eligibility. But, ABLE Account balances that exceed $100,000 will count towards that Supplemental Security Income (SSI) program’s limit of $2,000 for resources. In the end, the user’s SSI benefits are suspended, but not terminated if the ABLE account balance is more than $102,000, provided there are no other measurable assets. In addition, any distributions made from an ABLE account that is used to cover housing costs are deemed income for SSI purposes and can decrease the amount of an individual’s SSI benefit. Expanded Eligibility Individuals who qualify have to be blind or disabled. In 2025 and previous years, the person must have been disabled prior to turning 26 years old. However, under SECURE 2.0 the age will increase to 46 starting from January 1, 2026. To be eligible, people typically must be eligible for entitlements under SSI as well as SSDI programs. Additionally, individuals may become eligible for benefits if a disability certificate is submitted to the IRS. Qualified Expenses In addition, the distributions of accounts such as an ABLE account can be tax-free when they are used to pay for expenses to maintain or enhance the health of the beneficiary, independence or improve the living conditions. These include: Employment support expenses are also eligible. The Process of Setting up an Account Like 529 plans, ABLE accounts are set up through state-sponsored plans and provide many choices. An ABLE account can be created by a state-sponsored program different from the one where the person lives, as states are permitted to accept out-of-state participants. The money from an ABLE account is able to be used to invest into a variety of investment options. Furthermore, the investment allocations of the account may be adjusted two times a year. Be aware that a person who is eligible could have only one ABLE account. In addition, there is a maximum annual contribution amount of $19,000 in 2025, and $20,000 in 2026. Contributions from a 529 plan could be transferred to the ABLE account without penalty or tax, as long as there is a valid reason for the transfer. ABLE account’s beneficiary is the identical as or a family member of the 529 plan beneficiary. The rollover contributions count towards your limit of the annual ABLE contributions limit. If the beneficiary is employed, they could be able to contribute a portion or the entire earnings to an ABLE account over the regular annual limit, if they don’t participate in a retirement plan that is sponsored by the employer. The additional contribution is limited by the poverty limit for a one-person household. A New Opportunity If you or a loved one in your family were blind or disabled after the age of 26 but prior to age 46, the expansion in ABLE account eligibility starting in 2026 will give you a chance to accumulate and save money with a tax advantaged basis. To find out more about the tax advantages as well as other planning financial options, consider getting in touch with Parr & Ibarra CPA firm in Keller, TX today.
Tax Alert: Important Updates on Charitable Contributions and Itemized Deductions
New legislation introduced in the reconciliation bill of this summer known as the “One Big Beautiful Bill Act” (OBBBA) will impose new restrictions on itemized deductions. Changes impact deductions allowed for charitable contributions as well as overall itemized deductions. The changes will affect you when you itemize deductions However, the changes offer some good news if you take a standard deduction. We recommend taking careful note of your long-term and year-end giving strategies. Individual Taxpayers: Impact on Contributions to Charities OBBBA introduces a limitation on the amount of charitable contributions. It imposes a restriction on the maximum itemized deduction allowed for charitable donations beginning with the tax year 2026. The itemized deduction for charitable contributions can only be claimed for contributions that exceed 0.5% of the individual’s Adjusted Gross Income (AGI) in the current tax year. Donations that are less than the 0.5% AGI ceiling will no longer be eligible for an itemized deduction. Positively, the maximum amount of the deduction allowed for charitable donations has been raised permanently up to 60% of taxpayer’s AGI. Prior to the OBBBA, it was set to fall to 50% beginning in 2026. However, the OBBBA forever keeps the 60% threshold. In addition, taxpayers who do not itemize can now take advantage of an above-the-line deduction of up to $1,000 for taxpayers who are single and $2,000 for couples who file jointly. The deduction will be in addition to what is already available. This modification will give those who are eligible for the standard deduction an additional benefit from their charitable contributions. The changes coming up give taxpayers the opportunity to decide the time of their charitable contributions. Two tax planning tools worth considering include Donor Advised Funds and charitable donation bunching. Donor-Advised Funds are accounts that allow taxpayers to disperse funds to charities in time, while also taking a complete deduction for the year they make a contribution into the funds. Charitable bunching is a method of combining multiple years of donations into a single tax year. Both strategies can be beneficial tax planning tools that can maximize the advantages of a tax payer’s charitable giving program. Individual Taxpayers: Effect on Itemized Deductions In addition to the restriction on charitable contribution deductions, the OBBBA introduces a new limit for overall itemized deductions. Beginning in the 2026 tax year, those who are in the 37% tax bracket will see a decrease in the allowed itemized deductions. Particularly the amount of these deductions will be decreased by the lesser of: (1) 2/37 of the total amount of otherwise allowable itemized deductions or (2) 2/37 of the amount that the taxable income (calculated prior to itemized deductions) exceeds the threshold of the 37% bracket. This rule decreases the tax benefits of itemized deductions to high-income taxpayers, meaning that those who are in 37% of the bracket get an amount similar to taxpayers who are in the 35% bracket. The overall itemized deduction limit is imposed following the limitation of individual itemized deductions, like state and local taxes (SALT) or charitable donations. Business Taxpayers: Impact on Charitable Donations For corporate taxpayers, the OBBBA has maintained the cap of a tax deduction allowable for charitable donations, that is currently 10% of tax-deductible income. However, beginning in the 2026 reporting year, a limitation of 1% of taxable income will be introduced for the deductible portion of charitable contributions. Contributions above the threshold of 10% and less than the limit of 1% cannot be deducted; however, they can be carried forward for a maximum of five years. We Offer Assistance The changes made by the OBBBA to the itemized deduction and charitable contribution rules represent a significant shift in tax planning, for both businesses and individuals. With the introduction of new floors and limitations, and increasing options for non-itemizers, this law encourages more deliberate giving as well as a strategic approach to timing of deductions. Before these changes take effect in the year 2026, taxpayers should be proactive in collaborating with their tax advisors to ensure they align their financial and charitable goals with the latest regulations, and to ensure that they get the most benefit from their contributions and remain in line with the ever-changing tax law. Contact your tax professional or the Parr and Ibarra’s tax team if you have questions or require assistance in understanding how the recently adopted legislation affects you or your business.
How to get an IRS Identity Protection PIN (IP PIN)
An identity theft incident in the tax industry can be a nightmare. Imagine filing your tax return and finding out that someone else already has to access your Social Security number. This is what your IRS Identity Protection PIN , also known in the form of an IP PIN, is available. The six-digit code is among the top security measures against identity theft related to taxes. It’s accessible to anyone who needs additional security. If you’ve not thought of having one before, this is what you have to know, including how to go about applying and the best methods to protect it. What is an IP PIN? An IP PIN can be described as a 6-digit number that is only known to you, and the IRS. It’s required when you fill out taxes in the United States in order to confirm that you’re a legitimate taxpayer associated with the Social Security number. Even if another person has access to your personal data, they won’t be able to file tax returns using your SSN without having the proper IP PIN. Who can get an IP PIN? When the program was first introduced, the IP PINs were offered only to victims of identity fraud. In the present, the IRS has expanded the program to anyone who can verify their identity, regardless of whether or not they’ve experienced problems previously. The reasons you may need one as follows: Victims of identity theft that are confirmed will automatically be issued an IP PIN every calendar year by the IRS without having to reapply. The most important information regarding IP PINs Before you choose to buy one, you should know the way in which the program functions: How to get an IP PIN This is the procedure: It is important to keep in mind that tax professionals are not able to solicit to obtain an IP PIN from their client. Every taxpayer has to apply for the PIN themselves. 1. Make use of the IRS online tool The quickest way to do this is via the Create an IP PIN page at IRS.gov. You’ll sign in using an existing IRS account or register an account if you do not have access. The system will assist you with identification verification and issue your IP PIN immediately. 2. If you are unable to verify their identity online If you don’t pass the online identity test however, you are still eligible to apply for a permit by submitting Form 15227, Application to an Identity Protection Personal ID number (IP PIN) and only if you earn less than $84,000 for an individual ($168,000 lesser for married couples who file jointly). The IRS will contact the applicant to confirm your identity and then will mail you your IP PIN. 3. Verification in person A different option would be to set up an appointment with one of the IRS Taxpayer Assistance Centre. You’ll need two proofs of ID, and after verification you’ll be issued your PIN IP via mail. Watch the video to learn how to obtain your IRS Identity Protection PIN (IP PIN) and keep your tax filing secure Best practices when using your IP PIN Once you’ve got your IP PIN it’s your responsibility to ensure it’s secure. Common questions about IP PINs Do I require an IP PIN in order to file? No. If you’re not a victim of identity theft relating to tax It’s not required. It greatly decreases the chance of someone else making a false tax return by using your personal data. What happens if I lose it? It is possible to retrieve it via the IRS Find an IP PIN Tool after confirming your identity. Can it hold up my refund? No. In fact, it can help to avoid delays due to fraudulent filings. However, using the wrong IP PIN may result in your return being rejected. Can my spouse and children be eligible for one? Yes, provided they are able to confirm their identity using the IRS process. Tax professionals should be encouraging clients to think about IP PINs Although tax professionals aren’t able to get IP PINs on behalf of their clients however, they are able to, and should provide clients with information about the advantages. This IP PIN program is among the most simple and efficient ways to prevent identity theft related to taxes prior to it happening. If you’ve had to deal with the trauma of losing their identity, it’s an important step in the right direction. Consider: Conclusion Securing the IRS Identity Protection PIN (IP PIN) is among the most simple and effective ways to protect your tax identity. With a unique six-digit number that only you and the IRS know will have access to an additional security layer against fraud in tax filings as well as unauthorized access gain to personal data. Whether you get the code online, via mail, or by assistance, the process is easy and worth the security it brings. We at Parr & Ibarra CPA Firm in Keller, Texas, are dedicated to help you manage every aspect of your tax obligations with confidence and clarity. If you require assistance to obtain your IP PIN, or have concerns regarding protecting your identity as a financial person, our team is available to help you through every step of the procedure.
What Kind of Records Should You Keep for Your Business?
Maintaining accurate and well-organized business records is an essential obligation for any business owner. A well-organized recordkeeping system helps you track the income and expenses , create accurate tax returns, help with the deductions or credits you receive, as well as comply with IRS guidelines. Although the IRS doesn’t require any specific method for keeping records however, they do require that your system clearly show the financial activities of your company and support the figures shown in your tax filings. Your business plays a crucial factor in determining the kind of records you have to keep. However, all businesses, regardless of size or industry, must keep records that accurately show income, expenses, assets, payroll, and other financial transactions. Choosing a Recordkeeping System You can employ any system for record keeping that is suitable for your company, so long it can clearly document your expenses and income. A reliable system will offer a comprehensive overview of all transactions in the business and be simple to understand and maintain. The summary of transactions is usually found in business books such as ledgers, accounting journals as well as financial reports. In the case of many small companies, a separate business checking account can be the main source of keeping track of financial transactions. A separate business account can ensure that your transactions are accurate as well as a simpler bookkeeping process. It also will provide a complete trail of your income and expenses. Your accounting records should reflect your income gross and the deductions and credits you claimed on your tax returns. Electronic Records and Accounting Software A lot of businesses opt to use electronic accounting software, or digital recordkeeping systems to collect and manage financial information. They can be extremely efficient when they are used correctly. However electronic records must meet the same standards similar to paper-based records. The IRS requires that digital records be precise, complete and readily accessible at times of need. If you are using accounting software, it must be able to clearly document your transactions, and allow the user to access records to be reviewed or used for audit. The same rules that apply to hard-copy books and records are applicable to electronic records. Companies should make sure that the security of their electronic systems is regularly backed up and able to store documents for the time period required. Supporting Business Documents Every business transaction generates documentation, and these supporting documents are necessary for confirming the data in your accounts as well as on tax returns. Documents supporting your business include things such as sales slips, invoices, paid bills, receipts, payroll records, deposit slips and cancelled checks. These documents serve as proof of expenses and income, and are used as evidence in the event that the IRS asks for verification. Documents supporting the claim should be stored in a secure and orderly manner. A good method is to arrange records according to year and the type of income or expense. A well-organized record not only aids in compliance, but helps in the process of tax preparation and financial review significantly more efficiently. Records of Gross Receipts Gross receipts include all the profits your business earns during the course of the year. This includes checks, cash and credit card transactions, digital payments, as well as the income that is reported to you by third-party companies. Keep a record which demonstrates the amount of money received as well as the source of earnings. The types of records that can support gross receipts include cash register tapes, receipt books, invoices, deposit records, invoices and Forms 1099-MISC as well as additional information returns. The maintenance of complete records for income helps to ensure that accurate reporting is done and lowers the possibility of discrepancies in IRS audits. Records of Purchases Purchases are the items you buy and then sell to customers. For producers or manufacturers it also covers the costs of raw materials and components used to make final products. Purchase records must clearly indicate the payee, the amount that was paid, the date of purchase, as well as proof of payment and the description of the item bought. The supporting documents for purchases can include invoices, statements from credit cards, canceled checks, cash register receipts, as well as electronic confirmations of payment. In many instances, a combination of documents could be required to verify the complete elements of purchase. The accuracy of purchase records is essential in determining the value of the items sold and overall profit. Records of Business Expenses The business expenses include the normal and essential expenses required for running your business, which excludes purchase of inventory. They could include utility bills, rent, advertising, office supplies, insurance, professional fees and other operating costs. Documents supporting expenses must clearly indicate who was paid, how much was paid, the date the expense was incurred, proof of payment, as well as the business purpose of the expense. Acceptable evidence includes invoices, bank statements, cancelled check, credit card receipts and electronic records of payments. Documentation that is accurate ensures deductions made for tax purposes are accepted. Travel, Transportation, Entertainment, and Gift Expenses There are certain expenses that require further proof according to IRS regulations. If you deduct entertainment, travel or gift expenses, you need to be able to demonstrate certain elements of every expense. This includes dates, amount, location as well as the purpose of business and the business connection of the people in the transaction. Some examples of records that are acceptable are the travel itinerary and hotel invoices, mileage logs, receipts for transportation, as well as detailed receipts for meals. Because deductions like these are scrutinized more closely, keeping accurate and current documents is crucial. Records for Business Assets Assets of your business include things such as equipment, machinery, furniture, vehicles and real estate utilized for your business. You should keep records that confirm the information required to calculate depreciation, and also determine the gain or loss in the event that assets get sold or disposed of. Asset records
Understanding the Difference Between Audit and Assurance
What is an Audit? Audits are a standard procedure across all companies and are widely recognized. They are usually managed by the financial service team, this process checks the authenticity in financial reports. It aids in meeting the requirements for compliance while also improving internal processes and increasing the confidence of stakeholders. Definition and Purpose An audit is defined as a method to review both the accounts and the records of an organisation to verify they are accurate and adhere to established guidelines and standards. The primary objective for an audit is to verify how the accounting records represent the real condition of an organization’s operation and financial status. Audits can also serve to ensure that lenders, shareholders, investors, lenders, and other stakeholders about the financial stability and health of an organisation. Sometimes audits can also uncover weaknesses in financial processes that are not evident to management. However, these deficiencies could affect operations over time. Audit findings are able to be identified, so that you can correct them as quickly as possible. Recognizing and fixing these weaknesses will also reduce the risk of fraudulent activities and mismanagement. Types of Audits Although the primary purpose behind an audit is the same, the manner in which it is utilized, the purpose for which it is used, as well as the intended audience decide the type of audit needed. Financial Statement Audits Audits of financial statements are the most frequent type of audit, and they determine the accuracy of an organization’s income statement, balance sheets, cash flow statements as well as other financial reports are in fact accurate. Audits are utilized by lenders and investors while conducting financial transactions. Internal Audits Internal audits, as their title suggests, are carried out within a company. They evaluate whether an organization is using the appropriate controls and has a proper procedure for recording and archiving transactions. Additionally, it is utilized to find weaknesses in order to boost performance and ensure security. For instance, internal audits can reveal delays in payments to vendors or highlight the excessive use of manual processes for approvals. All of which can affect the efficiency of your business. Compliance Audits Compliance audits are utilized by regulators to determine whether an organization is adhering to the regulations and rules of the relevant frameworks such as GAAP. They can also be specific to determine if your operations are in compliance with specific tax or environmental regulations. These types of audits are more common in highly regulated areas, such as banking and healthcare. It’s helpful to have audits of HIPAA as well as SOX to discover and fix issues, since any violation could result in millions of dollars in penalties. Who Conducts Audits? Whatever the form of audit, it has to be conducted with the help of certified public accountants (CPAs) as well as independent auditors that are affiliated with the relevant governing body. All auditors have to carry out their audits independently and without any conflicts of interests. Auditors may also be employees of companies, but their responsibilities will be limited to internal audits. What are Assurance Services? Assurance services encompass a wider selection of tests that include both financial as well as non-financial aspects. The aim is to build credibility for both external and internal stakeholders. These services are particularly beneficial in business environments of today where the burden is on companies to demonstrate the integrity of their operations, as well as risk management in addition to operational excellence. Definition of Assurance Assurance is a broad concept and scope, since it covers financial as well as non-financial operations and processes. It’s intended to assure everyone involved about the quality of a company’s operations as well as its integrity and security. Companies utilize assurance services to build trust and establish their operational and financial credibility. Contrary to audits, assurance services are generally voluntary and performed by businesses to accomplish specific goals. For instance, a business may decide to conduct an assurance process to demonstrate that it has met the CSR Responsibility objectives. In addition to providing an impartial analysis of the operation, these services can also increase transparency. Types of Assurance Services Given the broad scope, assurance services can come in many types and formats. Reviews A review is a quick look into a particular operation or phrase which focuses on the process of inquiry and analysis. Although it provides only a little assurance to the stakeholders, it’s not applicable to every situation. For companies that are growing, review is an efficient way to save money to ensure that full audits aren’t necessary, but trustworthiness is still required. Agreed-Upon Procedures They are extremely flexible and are geared towards a specific goal. For this type of assurance it is the extent of the process that is decided by the auditor and the manager together. Sometimes, they sign an agreement in writing to set the scope. The auditor is then able to examine the scope and further reports on the findings in a fair and impartial manner. The procedures are typically employed in situations where businesses must undergo due diligence in acquisitions, or to verify the validity of certain contractual obligations. Risk Assessments Risk assessments are a different kind of assurance service that identifies and analyzes the weaknesses of your business operations. They can be categorized as security, operational, financial and other risks. Based on the results that are made, companies can take the appropriate measures to enhance security and control the risks before they grow. Numerous organizations are now seeking these assessments as part of their risk programs to be prepared for potential disruptions arising from security and geopolitical threats. Who Provides Assurance Services? Similar to audit, assurance services are provided by CPAs or accounting specialists. When choosing a professional, be sure that they have expertise in the particular industry or the kind of assurance you require. Key Differences Between Audit and Assurance Services Although audit and assurance services are both related, they serve different goals and objectives. Understanding the differences between these two
How Nonprofits Can Avoid a Federal Funding Freefall
Non-profit organizations across the United States are facing significant problems because federal funding has been cut or decreased. This drastic move has a negative impact on the capacity of non-profit organisations to provide services and programs to the people who depend on them to bridge the gaps created by the government programs. Many organizations with their innovative and creative thinking are finding new ways to change, collaborate and continue their essential work. Find out how they employ to remain relevant and meet the demands of their clients. Strategy 1: Diversifying Funding Sources It shouldn’t be a surprise to learn that diversification has proven a successful strategy. Federal fund recipients should look for other avenues of income to cope with disruptions that come from any source. Private donations made through foundations, individuals or corporate alliances have proven to be an important source of income for non-profit organizations since the start of their history. Alongside donations, some organisations have turned to fundraising events such as auctions, galas and virtual campaigns to connect with the local community and earn income. Fee-for-service is another source of revenue that helps nonprofits bridge the gap by providing services such as education and training, and case-management. Recently the popularity of crowdfunding has increased momentum through crowdfunding websites such as GoFundMe or Kickstarter which help nonprofits to raise funds directly from supporters with less contributions which can add up. With the current state of government funding, a lot of nonprofits are turning to urgent capital campaigns to raise large amounts of money by focusing their fundraising initiatives. Making sure that the public is aware of the programs of your organization and their impact is a crucial and integral part of your plan to help with fundraising initiatives. In times of need, the majority of nonprofits employ professional fundraisers who are able to reach out to potential funders and donors. Strategy 2: Scaling Down or Adjusting Programs Everyone would prefer not to scale back or end services, however this could be a temporary option until a new source of funding is determined. When there is a budgetary crisis, businesses should look at their most crucial services and cut back or stop programs that are not essential to make the most of their limited resources. In the case of extreme circumstances, it could be necessary to cut staff to ensure that their operations are running. The positive side lies in the fact that you have alternative options to furloughs. Non-profit organizations can move team members to reduced or part-time schedules. It is also a perfect time to solicit volunteers who have previously supported the organisation to fill in any needs (for more details, refer to Strategy 7). Strategy 3: Streamlining Operations Technology today offers the opportunity to simplify operations and increase efficiency. There is no longer a time when nonprofit staff members are burdened with manual processes that consume precious resources. Nonprofits are constantly finding ways to reduce operational costs through using technology to improve efficiency by renegotiating contracts, cutting back on overhead expenses. To aid in the technological change in the industry of nonprofits, organizations are embracing digital tools to expand their outreach and boost efficiency. This includes providing virtual events, online services or remote working options for employees. Strategy 4: Partnership with other Organizations Collaborations between organizations that have complementary objectives are an effective strategy that is often overlooked. Combining with organizations serving the same audience allows non-profits to pool their resources and share costs in periods of financial strain. By collaborating, they can keep delivering services and not duplicate efforts, which saves costs. Additionally, collaborating with other organizations can enhance advocacy by increasing your voice and allowing your work to be more widely known to the public. Examples of partnerships with nonprofits include joint fundraising initiatives or programs that are co-created, as well as sharing volunteer resources in support of one another’s efforts. Strategy 5: Leveraging State and Local Programs and Alternative Funds Non-profit organizations are increasingly turning at local and state governments to fill the gaps that federal funding cuts have left. These grants, contracts and other partnership arrangements can be more easily accessible and tailored to local requirements. The benefits of these partnerships include more than just financial resources. Nonprofits have greater influence over policymakers and other donors while fulfilling their mission, and assisting governments address local issues at a reduced cost to taxpayers. Strategy 6: Advocacy and Lobbying Nonprofits are increasing their advocacy efforts to lobby for the restoration of federal funding or the implementation of alternative funding models, often forming coalitions to strengthen their collective voice. Advocacy efforts can build solid relationships with policymakers, making the public aware of their cause, and attracting supporters by utilizing grassroots initiatives and making use of efficient channels of communication like social media. Public awareness campaigns are effective for non-profit organizations to educate the public as well as decision makers about the vital services they offer, while also advocating for financial assistance from both public and private sources simultaneously. Strategy 7: Engaging Volunteers As budget cuts strain staffing levels, charities are utilizing volunteer networks to aid in the delivery of services. Volunteers could provide direct services as well as assist with administrative tasks or assist in fundraising initiatives. Nonprofits that are proactive are creating specialized volunteer programs to meet particular needs, like food security or disaster relief in which volunteers play more of a role in providing services. Non-profits can recruit volunteers by advertising opportunities on their websites and social media channels as in addition to posting on websites for recruitment. In order to attract and retain volunteers, they can be improved by offering various volunteer opportunities providing training to assist volunteers in their success and by highlighting the ways they are integral to the organization’s purpose. Strategy 8: Innovative Service Delivery Models Innovative organizations are using pop-up service or mobile units which provide resources directly to communities that are underserved which reduces the expense of infrastructure. Examples include utilizing mobile clinics for healthcare access or
