It Depends

Why Financial Reporting Matters: While balance sheets and income statements are essential, financial reporting for nonprofits goes beyond just numbers on a page. It includes internal reports such as budget-to-actual comparisons, cash flow projections, functional expense allocations, and the integration of key metrics relevant to the organization. These reports provide a foundation for sound decision-making, helping nonprofits stay financially healthy and focused on their mission. Accurate and reliable financial reporting is crucial because it affects every aspect of a nonprofit’s operations. Leadership teams rely on these reports to make informed decisions, fundraisers use them to demonstrate financial stewardship to donors, and external entities such as banks and auditors require them for compliance and funding approvals. Having accurate financial data ensures that strategic decisions support your organization's goals and strategic objectives. Key Differences Between Nonprofit and For-Profit Reporting: While the fundamental principles of financial reporting apply to both for-profit and nonprofit organizations, there are several notable differences: 1. Donor Restrictions: Unlike for-profit businesses, nonprofits have a fiduciary responsibility to honor donor restrictions. If a donor contributes funds for a specific purpose—such as building a new media room—the nonprofit must track and report those funds accordingly. 2. Endowments: Nonprofits must carefully manage donor-restricted endowments to comply with legal requirements for maintaining principal balances. This differs significantly from for-profit businesses, which do not have similar legal obligations. 3. Functional Expense Allocation: Nonprofits must track how much of every dollar goes toward program expenses, management, and fundraising. These allocations provide transparency and help demonstrate a nonprofit’s commitment to its mission. 4. Success Metrics: For-profit organizations measure success by profitability and shareholder returns. In contrast, nonprofits measure success by their impact—how well they fulfill their mission and serve their communities. Even the most well-intentioned nonprofits can struggle with financial reporting. Several common pitfalls can hinder financial clarity and decision-making. One challenge is an outdated or ineffective chart of accounts. An improperly structured chart of accounts can limit the relevance and clarity of financial reports. Reviewing and updating the chart of accounts periodically helps ensure it aligns with reporting needs and provides a clear financial picture. Another issue is inadequate fund tracking. Nonprofits must accurately track restricted funds to comply with donor intent and financial reporting standards. Investing in fund accounting software or developing supplemental tracking methods can help ensure proper fund allocation. Inaccurate or delayed reporting is also a concern. Making decisions based on outdated or incorrect financial data can impact a nonprofit’s sustainability. Establishing a structured month-end close process with clear deadlines helps maintain timely and reliable reporting. Finally, confusion over cash versus accrual accounting can create discrepancies. Many nonprofits operate on a cash basis internally but report on an accrual basis externally. To bridge this gap, supplementing cash-based internal reports with accrual data, such as a pledge receivable schedule, provides a more complete financial picture. Technology is transforming financial reporting by streamlining processes and increasing transparency. Online bill pay solutions, cloud-based accounting software, and automated reporting tools make financial management more efficient and accessible, especially for remote users. However, adopting new technology requires caution. If underlying issues persist, automation can sometimes make them harder to detect. That’s why maintaining strong financial controls and effective oversight remains essential for accurate reporting. Financial reporting is more than just numbers; it serves as the foundation for transparency, accountability, and strategic decision-making. By addressing common pitfalls, embracing technology, and ensuring accurate and timely reporting, nonprofits can strengthen their financial health and better serve their missions. If your organization needs help optimizing its financial reporting, Hantzmon Wiebel is ready to guide you through the process.

There are two main types of benefit plans: defined contribution plans and defined benefit plans. A defined contribution plan, such as a 401(k), ESOP, or profit-sharing plan, specifies the amount an employee contributes “up front,” but the final amount they can withdraw depends on market performance and is not guaranteed. In these plans, the investment risk falls on the employee since their returns are uncertain. A defined benefit plan, on the other hand, guarantees a specific benefit amount upon retirement, determined by a formula set by the employer, often based on years of service. Here, the risk is on the employer, as they must ensure they can pay the promised benefits regardless of their business’s future financial status. Both types of plans can help attract top talent and improve staff retention. For example, an employee may be motivated to contribute to a 401(k) if they know their employer will match a percentage of their contributions. With a defined benefit plan, employees receive a guaranteed annual payout regardless of their own contributions. Both options offer valuable incentives that make employment more appealing. Tax Advantages for Employers and Employees: Employees can choose to contribute either pre-tax or Roth funds, each offering different tax advantages, some providing immediate benefits and others offering long-term savings. Employers also gain tax benefits if they match employee contributions or make their own contributions, as these expenses are tax-deductible. Oversight and Regulations: Several government agencies monitor and regulate these benefit plans, with the most significant being the Department of Labor (DOL). Within the DOL, the Employee Benefits Security Administration (EBSA) is responsible for ensuring that retirement and health plans comply with ERISA (Employee Retirement Income Security Act of 1974). ERISA is the primary federal law that establishes minimum standards for retirement plans. One key change introduced by the SECURE Act 2.0 in 2022 was the updated requirement for when retirement plans must undergo a third-party audit. Previously, plans needed an audit if they had more than 100 eligible employees. Under the new rule, an audit is only required if a plan has 100 participants with an account balance. This distinction means fewer companies and organizations need to undergo audits. The Retirement Plan Audit Process: At Hantzmon Wiebel, retirement plan audits are conducted with a focus on several critical aspects: 1. Review Plan Documents: We analyze the adoption agreement and summary plan description to understand plan elections and rules. 2. Evaluate Policies & Procedures: We examine how the plan is administered in practice. 3. Identify High-Risk Areas & Conduct Testing: We perform detailed tests to ensure compliance. 4. Provide Audited Financial Statements: After completing the audit, we deliver financial statements for Form 5500 filing with the DOL. Whether or not your retirement plan is audited, it likely has a mandatory filing requirement for Form 5500 or 5500-SF (short form). This filing is due seven months after the end of the plan year. For example, if your plan follows a calendar year, the deadline would be July 31. However, you can obtain an automatic extension that moves the deadline to October 15. Best Practices for Retirement Plan Management: Every business should keep its retirement plan documents easily accessible. Those responsible for managing the plan, whether plan administrators or primary fiduciaries, must fully understand its rules and ensure compliance. Many businesses are caught off guard when they uncover errors in their retirement plans, and the penalties for uncorrected mistakes can be significant. To avoid costly consequences, it’s crucial to seek professional assistance as soon as an issue is identified. Hantzmon Wiebel understands the complexities of retirement plan audits and is committed to helping employers navigate compliance with confidence. Whether you need assistance with plan audits, Form 5500 filings, or understanding tax benefits, our team will provide expert guidance to keep your retirement plan on track. Partner with us to ensure compliance, protect your business, and provide employees with a secure future.

To properly value a business, one must first look into the past. This means all historical financial statements, such as income statements, balance sheets, statements of cash flows, and tax returns, should be evaluated to understand what the business has done historically. Interviews are often conducted within the business’s management team to achieve a more holistic view of the business. Human capital, strengths and weaknesses, competition, growth trajectories, and industry type are all factored into a business valuation. There are three main types of business valuations, each with their own sub-approaches: the income approach, the market approach, and the asset approach. 1. The income approach relies heavily on normalized historical earnings —and works best for stabilized companies with deep histories. If the company is in a period of transition or transformation, it may be more beneficial for the management team to create growth forecasts, which are then discounted back to present value to achieve a more accurate value. 2. The market approach looks at sales of comparable companies to infer value. It is also possible to analyze these comparable companies’ stock prices and other publicly reported data if the company has not been sold to see how the market has valued the company. 3. The asset approach is typically used when a company’s asset value exceeds its cash flow value. This method values a business based on both its tangible and intangible assets. There are two main types of valuation discounts: lack of control and lack of marketability. The discount for lack of control reflects the advantages and disadvantages of having decision-making authority versus not having it. For example, a minority owner without control cannot set salaries, distribute bonuses, or make other high-level decisions. This lack of control creates a risk of being excluded from earnings, making it essential to quantify marketability. The lack of a marketability discount reflects the difference in transferability between private stock and publicly traded stock. Several factors influence marketability, including a company’s financial strength, management quality, dividend issuance, and transferability restrictions. For example, a company with strong financial statements, experienced management, regular dividends, and no transferability restrictions would be considered highly marketable. The purpose of a valuation determines the standard of value used. The most common standard is fair market value, which represents the price agreed upon by a willing buyer and a willing seller, both having equal knowledge of the facts and neither being under any pressure to act. This definition ensures a level playing field. Additionally, marketability discounts may apply under this standard. Another common standard is fair value, which is essentially fair market value but without any discounts. Investment value refers to the worth of an asset to a specific buyer, considering their unique circumstances or strategic interests. Lastly, liquidation value applies when a company is forced to sell its assets or shut down, often resulting in lower valuations due to the urgency of the sale. At Hantzmon Wiebel, we understand that business valuations can be complex. Fortunately, our team of highly qualified CPAs, ABVs, and accountants are here to help. We provide accurate, detailed reports to determine your business’s true value.

Section 1031 Exchanges, or Like-Kind Exchanges. 1031 exchanges are a provision in the tax law that outlines a tax-deferred transaction within the real estate industry. The provision states that if one were to sell a piece of property, they may reinvest that money into another property without having to pay taxes on the previous sale’s profit at that moment in time. This does not mean, however, that the taxes are never paid, and other rules must be followed in order to qualify. Besides tax deferrals, 1031 exchanges allow participants to invest not only their money into new property but the government’s money as well. Over time, this results in healthy profit margins. 1031 Exchanges are Not for Everybody. Despite the 1031 exchange's monetary allure, there are many situations in which utilizing this provision would not be helpful or even detrimental to an investor. For example, 1031 does not benefit those who wish to diversify their investment, as the provision states that the profit must be re-invested into real estate. Also, an investor with large capital losses from other sources that would offset any gain from the real estate may also not want to employ a 1031 exchange. There are a few pitfalls. For one, any due date is a hard deadline, and if one were to miss a date, all of their money would become taxable, even if it were already reinvested in another property, which in some scenarios would leave the investor unable to pay the original tax. Also, the same taxpayer who sold the first property must be the same taxpayer who reinvests. 1031 Exchanges Require a Couple of Rules. Taxes must be paid for any money that is not reinvested after a sale. This allows for some degree of flexibility, as technically not every cent must be reinvested for one to qualify for a 1031 exchange. However, benefits will only befall the money that is. Also, when applying for a 1031 exchange, pay attention to any debt on the current/future property, as any debt relief is counted as money and therefore taxable. Applying for a 1031 Exchange Isn’t Difficult, but There Are Some Things to Watch Out For. Any money that you wish to be reinvested must not be touched. Instead, a QI (Qualified Intermediary) should handle it. Make sure to let your QI know which prospective properties you are interested in, as reinvestment must be done within 45 days. In addition to this strict 45-day deadline, closing must be finished within 180 days or by the due date of a tax return, whichever comes first. If you would like to engage in a 1031 Exchange, we recommend consulting a professional to make sure none of these crucial deadlines are missed. Reporting a 1031 Exchange, however, is less intimidating. 1031 exchanges are simply reported on the investor’s income tax form.

1. Tax Refunds are free money from the government: Unfortunately, this myth is as pervasive as it is false. Large tax refunds are a lot like interest-free loans given from you to the government. You may have had money over-withheld from paycheck, or overpaid any estimated payments from the government, leaving them with an excess of your money at the end of tax season. We recommend putting those funds to work by investing it, or letting it gain interest in a bank to build upon any interest you’ve potentially lost. 2. Filing an extension extends my payment deadline: Filing an extension may be helpful to those who need more time to fill out the necessary paperwork and tax returns, but it does not extend the actual date of payment. April 15th is a hard deadline (unless it falls on a weekend or holiday), so make sure you give yourself the time to make that payment. If not, you are liable for fees and interest rates. 3. Students and part-time employees don’t need to fill out a tax return: Every year the IRS releases filing thresholds for different ages/filing statuses. Even if you are filing as single under 65, if you have earned more than the threshhold gross income, you required to file. It may also be beneficial to file if you have had taxes withheld from you, or, if you are student, are qualifies for any refundable credits such as the American Opportunity Credit or Earned Income Credit. 4. Any Charitable Donation counts as a Deductible: As of the 2025 tax season, only donations to certain organizations are deductible. For example, contributions to political organizations would not be able to be filed as a deductible. If you have any concerns about your recent donations, the IRS was a search tool on their website thats identifies all qualified charitable donations. Donations to individuals also do not offer any tax benefits, and if any good or services are exchanged as a result of your contribution, the contributions will subsequently not count as a deductible. To ensure accuracy in the tax filing process, Any receipts, letters, and other physical forms of communication between you and the charity should be kept. 5. Only High Earning Tax Payers are Audited: While it is true that statistically more high earning tax payers are audited at a higher rate due to the potential revenue for the IRS, they are not the only people who are audited. The biggest cause for audits are any tax discrepancies or mathematical errors, or is the amount of deductibles claimed eclipse a person’s gross income for the year. Tax season can be difficult to navigate, but Hantzmon-Wiebel is here to help. Our tax services cover the planning and the completing processes to help you maximize your earnings. Learn more at https://www.hwllp.cpa/tax

Understanding the true value of a business is a critical yet often overlooked aspect of ownership. Business valuations provide clarity, whether you’re planning for the future, managing estate considerations, or preparing for a transition. Our team helps business owners uncover their company’s worth, turning financial data and industry insights into actionable strategies for growth and success. What is a Business Valuation? A business valuation is a comprehensive analysis that estimates the value of your business. This process involves a detailed review of financial statements or tax returns, interviews with owners and management, and comparisons to published data for similar companies. The result is either a full valuation report for external purposes, like estate or gift tax reporting, or a concise calculation of value for internal planning. Why Are Business Valuations Important? Business owners are often surprised by the results of a valuation. This insight is essential for several reasons. Valuations are frequently required for reporting compliance, such as estate and gift tax returns or annual reporting for Employee Stock Ownership Plans (ESOPs). They also play a crucial role in strategic planning, aiding in estate tax planning, gift planning, and exit planning. What Are the Benefits? For business owners, valuations extend beyond compliance; they provide an opportunity to gain clarity and take control. Understanding the current value of their business enables owners to plan a successful exit strategy, including setting realistic expectations for its price and identifying ways to enhance its value. Valuations also reveal areas for improvement, such as addressing risks or seizing opportunities to boost profitability. Moreover, having an accurate valuation ensures readiness for the future, whether it involves retirement, succession planning, or preparing for a sale. Our Approach Each valuation engagement begins with getting to know the client. We look into financials, operations, and market comparisons to create a report that meets your needs. Whether you need a full valuation for reporting or a concise calculation for planning, our team delivers actionable insights with clarity and precision. Our mission is to help clients make informed decisions based on reliable data. Listen to our full podcast episode on Apple Podcasts, Spotify, or your platform of choice to dive deeper into this topic.