This issue’s “News for Nonprofits” offers unique ideas for giving that people can incorporate into their everyday lives and that may not cost a lot of money. It discusses the final set of IRS rules regarding Form 990 changes, and describes a gradually improving environment for charitable giving.

Encouraging unconventional gifts

“Unconventional” appeals to a segment of the general population and may be more attractive to certain donors. Here are some unusual ideas for giving that people can incorporate into their everyday lives and that may not cost a lot of money:

• ·         Throw a children’s party for a cause — for example, the birthday girl or boy can ask guests to bring pet food and kitty litter to donate to an animal shelter, canned food for a food bank, or school supplies for a community organization.

• ·         Put charity on the wedding registry, figuratively — a marrying couple can ask for charitable donations and forgo getting another coffeemaker.

• ·         Give to charities through eBay — whether buying or selling, donors can set up a donation to their favorite charities through “eBay Giving Works.”

You can find these and other ideas on about.com. Search for “ideas for everyday giving.” Consider putting together your own list of offbeat ideas and circulate it to your constituents.

IRS implements Form 990 changes

The IRS has issued a set of final rules that largely reflect changes already made on the revised Form 990, “Return of Organization Exempt From Income Tax.” Published in the Sept. 8 Federal Register, the rules are effective immediately and replace the agency’s temporary regulations issued Sept. 9, 2008.

The final rules, as outlined in the instructions to Form 990, define new threshold amounts for reporting compensation and require that compensation be reported on a calendar-year basis. Among other things, they also eliminate the advance ruling process for new organizations, change the public support computation period for publicly supported organizations to five years (as already listed on the form), and clarify that nonprofits must use their overall method of accounting to report the public support.

Mild improvement in giving trends

While the economy continues its slow mend, Giving USA 2011: The Annual Report on Philanthropy shows some improvement in donor support of nonprofits for 2010 over 2009. Among its findings:

• ·         Total estimated U.S. charitable giving rose 3.8%.
• ·         Giving by individuals climbed an estimated 2.7%, and charitable bequests jumped an estimated 18.8%.
• ·         Corporate giving rose an estimated 10.6%.
• ·         Giving by foundations fell a marginal 0.2%.

You might want to keep these trends in mind as you plan your nonprofit’s 2012 fundraising efforts and make budget adjustments.

Many organizations want a new executive director (ED) to be a jack- or jill- fidence of those the organization servesof-all-trades, including management genius and financial wizard. But it’s also important that the ED deliver the organization’s message to the community, because this will affect the ability to raise funds, form alliances, attract quality staff and volunteers, and earn the con. This short article lists specific traits to seek.

If your nonprofit is looking for a new executive director (ED), you probably have a checklist of qualifications a mile long. Many organizations want their ED to be a jack- or jill-of-all-trades, including management genius and financial wizard.

But you’ll also want your next ED to be able to deliver your organization’s message to the community, because this will affect your ability to raise funds, form alliances with other nonprofits if needed, attract quality staff and volunteers, and earn the confidence of those your organization serves.

To find the right person with this potential, look for:

Public speaking ability. The examples your candidate provides should give you an idea of how often this person speaks to groups outside of the office, and of the types of groups he or she has reached out to. Can you visualize this person behind the mike at your annual event or addressing strangers at a Lions Club dinner?

Experience developing relationships with businesses and community organizations. Does the candidate demonstrate success in getting the community to rally behind his or her current organization by forming alliances, securing individual contributions and landing funding?

Charismatic personality traits. Determine by observation and by conversations with people who know the candidate if he or she is:

• ·         “People-friendly” — extroverted, sociable and likable,
• ·         Magnetic — projecting confidence and integrity, likely able to attract others to fall behind him or her to support your nonprofit, and
• ·         Persuasive — able to change one’s way of thinking through reason and argument, likely able to build a solid case for funders and others.

Identifying these qualities in a new ED during your external search — or during your search to find someone within your organization — can help ensure your next ED will be an effective leader of your nonprofit.

A nonprofit’s financial information has the potential to create a great first impression. A major funder likely will request the organization’s most recent audit or financial statements, along with a copy of the most recently filed Form 990. This information is then plugged into three ratios: a program spending ratio, a fundraising efficiency ratio and a management expense ratio. This article explains the distinctions and considers other financial factors, as well. A sidebar notes that potential funders are often just as interested in the impact a nonprofit makes in the community.

Attracting funding organizations and large individual contributors to donate money to your nonprofit is a little like finding a spouse — you want to create the best impression during the courtship in the hope that the other person will find you to be a “good catch” and make a commitment.

The financial information on your nonprofit has the potential to create a great first impression. Here are some things to keep in mind.

Sizing you up

Before deciding where to put its dollars, a major funder likely will request two pieces of information to make its assessment of your organization. One is a copy of your most recent audit or financial statements prepared by your accountant, and the other is a copy of your most recently filed Form 990.

Your challenge is to make sure that information in these documents presents your organization accurately and in the most favorable light. Armed with this information, your potential funder will be able to see how your nonprofit stacks up against similar organizations.

Funders often take information from a nonprofit’s financial statement and Form 990 and plug it into three ratios: a program spending ratio, a fundraising efficiency ratio and a management expense ratio.

How you spend money

Your program spending ratio is one of the most common benchmarking measurements that will interest possible funders. The ratio is calculated as follows:

Program expenses

Total expenses

The resulting percentage is the portion of your not-for-profit’s expenditures spent on program services. The higher the percentage, the more efficient your organization is with funder dollars.

In its BBB Wise Giving Alliance Standards for Charity Accountability, the Better Business Bureau (BBB) holds that a nonprofit should have a program spending ratio of 65% or higher. Several nonprofit watchdog organizations, including Charity Navigator and the American Institute of Philanthropy, routinely rate and publish this percentage for some of the larger and more prominent nonprofits.

A funder will benchmark your nonprofit against these percentages to determine if your organization — or someone else’s — will likely spend its dollars most efficiently. Because of this, it’s important to accurately categorize your expenses by function. This maximizes the amount allocated to program costs as opposed to management and general or fundraising expenses.

How you “bring home the bacon”

Your nonprofit’s fundraising efficiency ratio is another metric that frequently interests potential funders. It’s calculated as follows:

Total fundraising expense

Contribution and grant revenue

“Contribution and grant revenue” refers to those revenues received as a direct result of your nonprofit’s fundraising activities. This resulting percentage is a signpost of how much it costs to raise each contribution dollar. Generally, the lower this percentage, the more dollars available to support program services. The BBB states that this percentage should be no more than 35%, which would mean it costs no more than 35 cents to raise each contribution or grant dollar.

How you manage the “household”

Another good measure of a nonprofit’s efficiency is the portion of expenditures spent to support administrative functions, or the management expense ratio. It’s calculated as follows:

Total management and general expenses

Total expenses

Most funders want to see their donations support program services and thus will look for organizations with a low percentage of management and general to total expenses, usually in the range of 25% or less. A nonprofit with a high percentage will generally be deemed inefficient in running its organization, unless it’s able to communicate the reasons for the unusually high percentage.

Other yardsticks

Most funders will consider other financial factors, as well. Some may perform a trend analysis, placing the three most recent years of financial information side by side to see the increasing or decreasing trends in revenue and expenses.

A decreasing trend in financial support could indicate that the nonprofit will be unable to sustain itself in the future. Or, if program expenses are growing at a faster rate than fundraising expense, the nonprofit could be experiencing some inefficiencies or mismanagement.

Many funders also will examine your accumulation of unrestricted net assets. A successful not-for-profit avoids accumulating an excess of unrestricted funds that otherwise could be directed toward program services. According to BBB guidelines, a nonprofit’s unrestricted net assets available for use should be no more than three times the size of its past year’s expenses or three times the size of its current year’s budget, whichever is more.

If unrestricted net assets appear excessive, a funder may decide the nonprofit doesn’t need the contribution. To avoid the appearance of accumulating excess funds, an organization may choose to designate, either on the face of the Statement of Financial Position or in a descriptive footnote, certain amounts for specific purposes such as debt service or building repairs.

The image you present

In short, it’s in the best interest of your organization to understand what the numerical information on financial statements and Form 990 can represent to funding organizations, individual contributors and others in the public domain. The image you’re presenting to possible “suitors” can draw them in or send them running.

Sidebar: Show them the outcome

Funders have long valued expense ratios and other metrics that quantify your financial health. But potential funders are often just as interested in the impact your nonprofit makes in the community. Be sure you reliably measure the outcomes of your program dollars and report the results to the funder.

Let’s say that the Westport Doodads Company awarded the Westport Job Retraining Center (WJRC) $100,000 to fund job retraining programs. If WJRC wants to receive funding for a second year, it likely will need to report to Westport Doodads how that money was used — and, importantly, what results were achieved.

Westport Doodads, for example, would be most interested in knowing that 76 people upgraded their computer skills through a six-week training course (funded with dollars from the company) at the center. Of those 76, 57 were called in for interviews by employers seeking people for positions requiring computer skills. Of those 57, 28 people were called back for second interviews and 16 were offered a position.

Consider including outcomes information on Form 990, which has a lot of room for narrative. That way, readers of the form will have more information about you than simply numbers.

Change is a key reason why a not-for-profit needs to revisit and revise its strategic plan regularly. And the strategic planning process can be made as dynamic as change itself. But it takes focus and commitment. This article offers five tips to ignite the process, including hiring a strategic facilitator and doing the necessary prep work.

Is your nonprofit the same organization it was three years ago? Are your stakeholders the same now as then? Is your community and its support of your nonprofit the same?

It’s been said that the only thing certain in life is change, so you likely answered “no” to each of these questions. Change is a key reason why your not-for-profit needs to revisit and revise its strategic plan regularly. And you can make your strategic planning process as dynamic as change itself. But it takes focus and commitment.

Ignite the process

Here are five tips to help you ignite the strategic planning process:

1. 1.      Don’t wait too long. Three years is about the right length of time between strategic plans for most organizations. The goals and objectives you developed three years ago may still be on target, but it’s more likely they aren’t.

Almost all nonprofits have struggled over the last few years: Generally, funding and individual donations are down, staffs are smaller, and leadership changes have been common. Now may be the perfect time to resize your organization’s future and plot the route to get there. Strategic planning might be just the spark your nonprofit needs to revitalize.

1. 2.      Leave the routine behind. Because strategic planning is about a mission, a vision, and big-picture goals and objectives, the process works best when people brainstorm in a fresh setting. This requires the strategic planning team to get out of the office and temporarily put aside daily operations.

The core of most strategic plans can be formed over two or three days. So have designated staff members take care of what can’t wait — the rest of the work can sit until the employees on the strategic planning team return to the office. Better yet, hold your retreat over the weekend.

1. 3.      Hire an outside facilitator. Your nonprofit’s executive director will take a lead role during the strategic planning sessions. But the objectivity of an outsider is valuable when working with a planning team of board members, clients, staff and management. A facilitator can create the sense that all ideas are good ideas and keep the group on track. Team members may be more willing to speak candidly and throw away “the way we’ve always done things” at the urging of an outside professional with no vested interest in the organization.

Also, an experienced facilitator will be at ease using methods that stimulate thinking, such as the “scenario approach,” in which strategies are tested against possible external and internal events. (Your No. 1 funding source dries up, your executive director retires early, and so on.)

1. 4.      Do the prep work. You and your staff should put together a collection of documents that tell the story of your nonprofit, its current situation, and anything strongly related to its purpose — for example, demographic trend information and the results of a membership-needs survey (if applicable). You also should have a narrative description of your organization, including its history, values, mission, programs, leadership, staff and financial status.

Many organizations also include a SWOT analysis — a detailed description of the nonprofit’s strengths, weaknesses, opportunities and threats. Some nonprofits take the process a step further with a PEST analysis, which looks at the political, environmental, social and technical factors affecting the organization.

1. 5.      Make the big decisions. The strategic planning sessions should focus on the big picture as you review your nonprofit’s mission statement and create a clear and concise vision statement of what your organization will look like at a specific point in the future. Then you’ll want to discuss and draft your nonprofit’s goals (not more than two or three), objectives that need to be met to achieve each goal, and strategies for reaching the objectives.

As a follow-up to the sessions, the strategic planning team should form an action plan with a timeline and assigned responsibilities. The action plan will be the implementation boilerplate after the strategic plan is approved by the board of directors.

Keep it vital

The uniqueness of your organization will dictate the shape, complexity and, of course, the content of your strategic plan. The challenge after strategic planning is to implement the plan in a timely manner and to review it along the way for major changes that must be taken into account.

The IRS has released much-anticipated temporary and proposed regulations on the capitalization of costs incurred for tangible property. They impact how virtually any business writes off costs that repair, maintain, improve or replace any tangible property used in the business, from office furniture to roof repairs to photocopy maintenance and everything in between. They apply immediately, to tax years beginning on or after January 1, 2012.

These so-called “repair regulations” are broad and comprehensive. They apply not only to repairs, but to the capitalization of amounts paid to acquire, produce or improve tangible property. They are intended to clarify and expand existing regulations, set out some bright-line tests, and provide some safe harbors for deducting payments.

The regulations are an ambitious effort to address capitalization of specific expenses associated with tangible property. The regulations affect manufacturers, wholesalers, distributors, and retailers—everyone who uses tangible property, whether the property is owned or leased. The rules provide a more defined framework for determining capital expenditures.

Most taxpayers will have to make changes to their method of accounting to comply with the temporary regulations and will need to file Form 3115. Taxpayers who filed for a change of accounting method following the issuance of the 2008 proposed regulations will probably have to change their accounting method again.

The IRS has promised to issue two revenue procedures that will provide transition rules for taxpayers changing their method of accounting, including the granting of automatic consent to make the change. The regulations require taxpayers to make a Code Sec. 481(a) adjustment; this means that taxpayers will have to apply the regulations to costs incurred both prior to and after the effective date of the regulations.

The new regulations provide rules for materials and supplies that can be deducted, rather than capitalized. The rules provide several methods of accounting for rotable and temporary spare parts, and allow taxpayers to apply a de minimis rule so that they can deduct materials and supplies when they are purchased, not when they are consumed.

Costs to acquire, produce or improve tangible property must be capitalized. The regulations address moving and reinstallation costs, work performed prior to placing property into service, and transaction costs. Generally, costs of simply removing property can be deducted, but costs of moving and then reinstalling property may have to be capitalized.

To determine whether a cost incurred for property is an improvement, it is necessary to determine the unit of property. Generally, the larger the unit of property, the easier it is to deduct expenses, rather than have to capitalize them. The regulations provide detailed rules for determining the unit of property for buildings and for non-building tangible property. For buildings, the IRS identified eight component systems as separate units of property, requiring more costs to be capitalized. However, the new rules also provide for deducting the costs of property taken out of service, by treating the retirement as a disposition.

The new regulations require virtually every business to review how repairs, maintenance, improvements and replacements are handled for tax purposes, with both mandatory and optional adjustments made to past treatment as appropriate.

Please feel free to call this office for a more targeted explanation of how these new regulations impact your business operations.

The fate of the employee-side payroll tax cut along with a host of tax extenders and other expired provisions could be decided in coming weeks. A conference committee of House and Senate members is negotiating a full-year extension of the payroll tax cut and could add some or all of the tax extenders to a final package. Lawmakers also could extend the payroll tax cut without acting on any tax incentives.

Payroll tax cut

The Temporary Payroll Tax Cut Continuation Act of 2011 extended the employee-side OASDI tax cut through the end of February 2012. The employee-share of OASDI taxes is 4.2 percent for the two-month period, rather than 6.2 percent. The employer-share of OASDI taxes remains at 6.2 percent for the two month period. Self-employed individuals also benefit from a two percentage point reduction in OASDI taxes.

Unless extended, the employee-share of OASDI taxes is scheduled to revert to 6.2 percent after February 29, 2012. The White House and the leaders of the two parties in Congress agree that the payroll tax cut should be extended a full-year. They disagree, however, how to pay for the extension; even if it should be paid for at all.

Congress could extend the two-month payroll tax cut through the end of 2012 without paying for it. The 2011 payroll tax cut was unfunded. Congress appropriated to the Social Security trust funds amounts equal to the reduction in payroll tax revenues. The 2011 payroll tax cut was estimated by the Congressional Budget Office cost approximately $111 billion. Extending it through the end of 2012 is estimated to cost just as much if not more.

House Republicans reportedly have proposed a number of revenue raisers to offset the cost of extending the payroll tax cut through the end of 2012. One GOP proposal would extend the current pay freeze for employees of the federal government. Another GOP proposal would require higher-income individuals to pay increased Medicare premiums.

One possible revenue raiser, increasingly under discussion by Democrats, is a change in the taxation of so-called carried interest. Current law generally taxes carried interest as capital gains and not as ordinary income. Past efforts to change the tax treatment of carried interest have failed to pass Congress.

Extenders

The so-called tax extenders, popular but temporary tax provisions, expired at the end of 2011. Many taxpayers are surprised to learn that their particular tax break, whether it be the state or local sales tax deduction, the teachers’ classroom expense deduction, or the research tax credit, are temporary. The extenders have been routinely revived many times in the past. This year, however, could be different. Faced with record federal budget deficits, lawmakers may decide to extend only some of the expired provisions.

President Obama’s FY 2013 proposals

President Obama is expected to release his fiscal year (FY) 2013 federal budget proposals in early February, which will reignite debate over the Bush-era tax cuts. President Obama is expected to urge Congress to allow the Bush-era tax cuts to expire after 2012 for higher-income taxpayers, which President Obama defines as individuals earning more than $200,000 or families earning more than $250,000. In recent weeks, there has been speculation that President Obama may revisit those definitions in his FY 2013 budget, possibly raising the amounts.

Few Capitol Hill observers expect Congress to take any action on the Bush-era tax cuts before the November elections. Instead, Congress may take up some of President Obama’s other proposals. As in past budgets, President Obama will likely propose to extend some energy tax breaks for individuals and businesses, extend tax incentives for education and provide some targeted-tax breaks to businesses. President Obama has also promised to introduce proposals to encourage U.S. companies to “insource” jobs at home.

On some issues, such as energy and education, lawmakers may find common ground but negotiations are likely to go down to the wire. Our office will keep you posted of developments.

If you have any questions about the payroll tax cut, tax extenders or the various tax proposals under discussion, please contact our office.

The IRS reopened its offshore voluntary disclosure program in early 2012 in response to what the government described as strong interest among taxpayers. The reopened program, the third of its type in recent years, encourages taxpayers with unreported foreign accounts to make full disclosures in exchange for a reduced penalty framework. Like its predecessors, the terms and conditions of the reopened program are very complex. The IRS has promised to provide more details. In the meantime, the prior offshore disclosure programs are guides to how the IRS intends to implement the third, reopened program.

Previous disclosure programs

The IRS launched two previous offshore disclosure initiatives: one in 2009 and another in 2011. Both programs offered reduced penalties in exchange for full disclosure. In early 2012, the IRS reported it received 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. The government has collected over $4.4 billion from the 2009 and 2011 programs. The IRS predicted it will collect more revenue as it continues to work cases.

Reopened program

The reopened program operates very similarly to the 2009 and 2011 programs but with some key differences. The previous programs were temporary. The 2011 program ended in mid-September 2011. The reopened program has no set end date. The IRS cautioned, however, that it could close the program at some future date. The decision to end the program is solely at the discretion of the IRS.

The reopened program requires taxpayers to file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties. Additionally, taxpayers must pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. In comparison, the highest penalty in the 2011 program was 25 percent. IRS officials have said that the penalty was increased because the agency does not want to reward taxpayers who did not participate in the 2009 or 2011 disclosure programs because they anticipated that a future penalty would be lower.

In limited circumstances, taxpayers may qualify for a 12.5 percent penalty or a five percent penalty. Generally, taxpayers whose offshore accounts or assets did not surpass $75,000 in any calendar year may qualify for the 12.5 percent penalty.

The requirements for the five percent penalty are very narrow. The IRS has explained that taxpayers must meet four conditions: (1) The taxpayer did not open or cause the account to be opened; (2) the taxpayer exercised minimal, infrequent contact with the account, for example, to request the account balance, or update account holder information such as a change in address, contact person, or email address; (3) except for a withdrawal closing the account and transferring the funds to an account in the United States, the taxpayer did not withdraw more than $1,000 from the account in any year for which the taxpayer was non-compliant; and (4) the taxpayer can show that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation).

The penalty amounts in the reopened program are not set in stone, the IRS cautioned. It may eventually increase penalties in the program for all or some taxpayers or defined classes of taxpayers.

Quiet disclosures

One goal of the three programs is to caution taxpayers against so-called “quiet disclosures.” A quiet disclosure occurs when a taxpayer files an amended return and pays any tax delinquency without making a formal voluntary disclosure. The IRS warned taxpayers making quiet disclosures that they risked being sanctioned to the fullest extent allowed by law.

Critics

The offshore disclosure programs were not without their critics. The National Taxpayer Advocate recently told Congress that the IRS should streamline what is a very complicated process. The National Taxpayer Advocate also reported that IRS examiners were assuming that all violations were willful unless a taxpayer presented evidence to the contrary. It is possible that the IRS may revisit some of the terms and conditions of the reopened program in light of the National Taxpayer Advocate’s report.

If you have any questions about the reopened offshore voluntary disclosure program, please contact our office.

Taxpayers with children should be aware of the numerous tax breaks for which they may qualify. Among them are: the dependency exemption, child tax credit, child care credit, and adoption credit. As they get older, education tax credits for higher education may be available; as is a new tax code requirement for employer-sponsored health care to cover young adults up to age 26. Employers of parents with young children may also qualify for the child care assistance credit.

Dependency Exemption

In addition to the personal exemption an individual taxpayer may take for him or herself to reduce taxable income (Line 42 on Form 1040), that taxpayer may also take an exemption for each qualifying dependent who has lived with the taxpayer for more than half of the tax year. A dependent may be a natural child, step-child, step-sibling, half-sibling, adopted child, eligible foster child, or grandchild, and generally must be under age 19, a full-time student under age 24, or have special needs. The amount of the exemption is the same as the taxpayer’s personal exemption, $3,700 for the 2011 tax year and $3,800 for the 2012 tax year.

Child Tax Credit

Parents of children who are under age 17 at the end of the tax year may qualify for a refundable $1,000 tax credit. The credit is a dollar-for-dollar reduction of tax liability, and may be listed on Line 51 of Form 1040. For every $1,000 of adjusted gross income above the threshold limit ($110,000 for married joint filers; $75,000 for single filers), the amount of the credit decreases by $50.

Child and Dependent Care Credit

If a taxpayer must pay for childcare for a child under age 13 in order to pursue or maintain gainful employment, he or she may claim up to $3,000 of his or her eligible expenses for dependent care. If one parent stays home full-time, however, no child care costs are eligible for the credit.

Adoption Credit

Taxpayers who have incurred qualified adoption expenses in 2011 may claim either a $13,360 credit against tax owed or a $13,360 income exclusion if the taxpayer has received payments or reimbursements from his or her employer for adoption expenses. For 2012, the amount of the credit will decrease to $12,650, and in 2013 to $5,000.

Higher Education Credits

There are two education-related credits available for 2012: the American Opportunity credit and the lifetime learning credit. The American Opportunity credit amount is the sum of 100 percent of the first $2,000 of qualified tuition and related expenses plus 25 percent of the next $2,000 of qualified tuition and related expenses, for a total maximum credit of $2,500 per eligible student per year. The credit is available for the first four years of a student's post-secondary education. The credit amount phases out ratably for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for joint filers). The lifetime learning credit is equal to 20 percent of the amount of qualified tuition expenses paid on the first $10,000 of tuition per family. The phaseout for 2012 ranges from $52,000 to $62,000 ($104,000 to $124,000 for joint filers). Parents also find tax relief in saving for college though Coverdell accounts, section 529 plans and specified U.S.. savings bonds.

Extended Health Care Coverage

Effective since September 23, 2010, the new health care law requires plans to provide coverage for children until they attain age 26. Further, effective on or after March 30, 2010, children under the age of 27 are considered dependents of a taxpayer for purposes of the general exclusion from income for reimbursements for medical care expenses of an employee, spouse, and dependents under an employer-provided accident or health plan. Therefore, a plan must provide coverage to a child who is still a dependent up to age 26; but can do so up to age 27 without income tax consequences. A child includes a son, daughter, stepson, or stepdaughter of the taxpayer; a foster child placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction; and a legally adopted child of the taxpayer or a child who has been lawfully placed with the taxpayer for legal adoption.

Child Care Assistance Credit (for businesses)

Employers may take up to $150,000 of the eligible costs of providing employees with child care assistance as tax credit. These costs may include a portion of the costs of acquiring, constructing, improving, and operating a child care facility.

If you have any questions about these provisions and how they may benefit you, please contact our office.

The Treasury Department is authorized to offset a taxpayer’s tax refund to satisfy certain debts. A spouse who believes that his or her portion of the refund should not be used to offset the debt that the other spouse owes may request a refund from the IRS.

Offset

If an individual owes money to the federal government because of a delinquent debt, the Treasury Department’s Financial Management Service (FMS) can offset that individual's tax refund (and certain other federal payments) to satisfy the debt. The debtor will be notified in advance of the offset.

A taxpayer’s refund may be reduced by FMS and offset to pay:

• Past-due child support
• Federal agency non-tax debts
• State income tax obligations, or
• Certain unemployment compensation debts owed a state.

FMS advises taxpayers by written notice of an offset. FMS has explained that the notice will reflect the original refund amount, the taxpayer’s offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund.

Form 8379

If a taxpayer filed a joint return and is not responsible for the debt of his or her spouse, the taxpayer may request his or her portion of the refund by filing Form 8379, Injured Spouse Allocation, with the IRS. Form 8379 may be filed with the original return or by itself after the taxpayer is aware of the offset.

The IRS has instructed taxpayers filing Form 8379 by itself to attach a copy of all Forms W-2 and W-2G for both spouses, and any Forms 1099 showing federal income tax withholding to Form 8379. Failure to attach these items may result in a delay in processing by the IRS.

The IRS has reported on its website that it generally processes Forms 8379 that are filed after a joint return has been filed in approximately eight weeks. The timeframe for processing a Form 8379 that is attached to a joint return is approximately 11 weeks (14 weeks if the joint return is filed on paper).

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2012.

February 1

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 25–27.

February 3

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 28–31.

February 8

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 1–3.

February 10

Employees who work for tips. Employees who received $20 or more in tips during November must report them to their employer using Form 4070.

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 4–7.

February 15

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 8–10.

Monthly depositors. Monthly depositors must deposit employment taxes for payments in January.

February 17

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 11–14.

February 23

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 15–17.

February 24

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 18–21.

February 29

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 22–24.

March 2

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 25–28.

March 7

Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 29–March 2.