As 2025 draws to a close, calendar-year nonprofit organizations face a critical window for strategic planning, financial review, and regulatory compliance. For accounting professionals and their nonprofit clients, this season offers an opportunity to ensure fiscal health and prepare for the year ahead. Here are some essential considerations to keep in mind:

Financial Reporting and Budgeting

• Review Year-to-Date Financials: Ensure all income and expenses are accurately recorded. Reconcile accounts and verify that restricted funds are properly tracked.
• Prepare Next Year’s Budget: Use historical data and projected funding to build a realistic budget. Factor in inflation, program expansions, and staffing changes.
• Assess Cash Flow: Evaluate liquidity and plan for any seasonal fluctuations in revenue or expenses.

Compliance and Threshold Triggers

One often-overlooked area is the impact of large bequests or year-end donations on regulatory thresholds. In particular:

• $2 Million Threshold for Audit Requirements: In many states, including California, charitable nonprofits that receive $2 million or more in gross revenue during the fiscal year may be required to undergo an independent audit. This includes bequests, even if they are one-time gifts.
• Planning Tip: If your organization is close to the threshold, consider timing of revenue recognition, donor communication, and whether the bequest is restricted or unrestricted. As your trusted accounting and business advisors, we can help you determine if the audit requirement will be triggered and what documentation will be needed.

Donor Stewardship and Gift Acknowledgment

• Send Year-End Acknowledgments: Timely and personalized thank-you letters help retain donors and fulfill IRS requirements for gifts over $250.
• Highlight Impact: Use newsletters or social media to show how donations have supported your mission this year.

Operational and Strategic Planning

• Review Governance Policies: Update bylaws, conflict of interest policies, and board resolutions as needed.
• Evaluate Program Effectiveness: Use metrics and feedback to assess which initiatives delivered the most impact.

Tax and Accounting Considerations

• Review Unrelated Business Income (UBI): Ensure any UBI is properly reported and taxed.
• Consider Year-End Purchases or Investments: If surplus funds exist, evaluate whether to invest in infrastructure, technology, or staff development before year-end.

As your trusted accounting advisors, we’re here to help you navigate these complexities and position your organization for success in 2026. If your charitable nonprofit is approaching the $2 million revenue mark or has received a significant bequest, let’s talk now to ensure compliance and avoid surprises.

If you’ve received a letter from the IRS or California’s Franchise Tax Board (FTB, for short), don’t panic—but don’t ignore it either. Two of the most common notices we see—IRS CP5071 and FTB 3912—are all about protecting your tax account. These notices are designed to protect you from tax fraud, and responding promptly can keep your refund on track and your records secure. Let’s break down what they mean and what to do next.

IRS Notice CP5071: Identity Verification Required

Why you received it: The IRS sends CP5071 (or its variants CP5071C or CP5071F) when a federal tax return has been filed using your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), and they need to verify that you actually filed it. This is often triggered by potential identity theft, but the IRS also conducts random checks to ensure the security of the tax-filing system.

What to do:

• If you filed the return: You must verify your identity so the IRS can continue processing it.
• If you didn’t file the return: Contact the IRS immediately—someone may be using your identity fraudulently.

How to respond:

• Visit the IRS Identity Verification Service at idverify.irs.gov and follow the instructions.
• Alternatively, call the number listed on your notice. Be prepared with:
  • The tax return in question
  • A prior year’s return (if available)
  • Your current mailing address

Why it matters: Failure to respond can delay your refund or prevent the IRS from processing your return altogether.

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FTB Notice 3912: Confirming Your Authorized Representative

Why you received it: FTB 3912 is a new letter issued by the California Franchise Tax Board to confirm whether a tax professional or other representative listed on your account is still authorized to act on your behalf. This notice is part of FTB’s effort to maintain accurate records and prevent unauthorized access to taxpayer information.

What to do:

• Review the representative(s) listed in the notice.
• If the authorization is still valid, no action is required.
• If the representative is no longer active or authorized, follow the instructions in the notice to revoke or update the authorization.

How to respond:

• Log in to your online MyFTB account to view, edit, or revoke your POA Declaration(s).
• Call the FTB at 1-800-852-5711 and reference the associated Declaration ID number.
• Send the FTB a completed FTB 3520 RVK, Power of Attorney Declaration Revocation.

Why it matters: Keeping your authorized representative list current helps protect your tax data and ensures that only authorized individuals can communicate with the FTB on your behalf.

Losing someone close is never easy. Amid the emotional toll, there are also practical matters that must be addressed—many of which involve financial and legal responsibilities. As your trusted tax and accounting advisors, we want to help ease this burden by outlining key steps to take after a death, especially when it comes to managing bank accounts and accessing funds.

First Steps: Legal and Administrative Essentials

Before you can act on behalf of the deceased, certain documents and procedures are required:

• Obtain multiple copies of the death certificate. You’ll need these for banks, insurance companies, government agencies, and more. Most of these entities will make a copy and return the original to you, so you may need five or fewer certified copies of the death certificate.
• Locate the will (if one exists) and/or the trust documents, if applicable. These documents will name the executor or fiduciary—the person(s) legally authorized to manage the estate.
• File for probate if necessary. Probate is the legal process of validating the will and granting the executor authority to act. Some assets may pass outside probate, such as jointly held accounts or those with named beneficiaries.

Bank Accounts: What Happens and What You’ll Need

Bank accounts are typically frozen upon notification of the account holder’s death. Here’s what to expect:

Individual Accounts

• Frozen immediately once the bank is notified.
• Access requires legal authority, usually through probate.
• The executor or fiduciary must present:
  • A certified death certificate
  • Proof of identity
  • Court-issued Letters Testamentary (or Letters of Administration if there is no will)

Joint Accounts

• Often remain accessible to the surviving account holder.
• The bank may still require a death certificate to update records.

Payable-on-Death (POD) or Transfer-on-Death (TOD) Accounts

• Bypass probate and go directly to the named beneficiary.
• Beneficiary must provide:
  • Death certificate
  • Valid ID
  • Possibly a claim form, depending on the institution

Other Financial Considerations

• Notify Social Security to stop benefits and inquire about survivor benefits.
• Contact insurance companies to file claims.
• Review outstanding debts and notify creditors.
• Secure digital assets, including online banking and investment accounts.
• Meet with a tax advisor to discuss final income tax returns and potential estate tax filings. Settling the decedent’s financial affairs may require additional filings, and a tax professional can provide valuable assistance.

We’re Here to Help

Navigating the financial aftermath of a loved one’s death can be overwhelming. Our compassionate and highly experienced team is available to guide you through estate administration, tax filings, and financial planning for the future. If you’ve recently lost a loved one or are simply planning ahead, professional support matters.  Call us to book a consultation.  

Big changes for 2025 tax planning and beyond!

While you have probably heard a lot about the new tax law, the One Big Beautiful Bill Act (OBBBA) whether you consider it to be a good thing or a bad thing, it is time to concentrate on figuring out how it is going to affect you.  Even if you have never considered tax planning before, now you should probably consider it.

The new tax law has been talked about as having “extended the tax rules in the TCJA of 2017,” which is largely true, but there are quite a few new provisions which may affect your taxes going forward and could influence your decision-making.

One new provision you should be aware of is the new itemized deduction reduction for high-net-income taxpayers.  If you and your spouse earn more than $1 million in taxable income, a new rule could reduce the amount you’re allowed to deduct on your tax return. The IRS will reduce your itemized deductions by whichever is smaller:

• About 5.4% of your total deductions before the rule kicks in, or
• About 5.4% of your taxable income before the rule applies.

The tricky part? The calculation seems to loop back on itself, which might make it harder to figure out exactly how much you’ll lose in deductions. We’ll have to see how the IRS implements this new provision.

Another new provision now limits how much you can deduct for charitable contributions if you itemize your deductions. Specifically, the IRS will subtract 0.5% of your income from the total amount you claim for charitable contributions on Schedule A of your tax return—similar to how medical expense deductions work.

But there are exceptions:

• Donations made directly from your IRA aren’t affected by this rule.
• If you don’t itemize and instead take the standard deduction, you can still claim up to $1,000 ($2,000 for married couples) in charitable contributions without this limitation.

This change could make tax planning more complicated. For example, giving directly from your IRA (up to $108,000 allowed) lowers your adjusted gross income (AGI), which in turn reduces the threshold—or “floor”—used to calculate both your charitable and medical expense deductions.

The news isn’t all bad, though.  The state and local tax (SALT) deduction  limit was raised from $10,000 to $40,000, but the increase from $10,000 to $40,000 phases out between $505,000 and $606,333 of Adjusted Gross Income, and the amount which is deductible for taxpayers reporting AGI over $606,333 is limited to $10,000, the SALT limit since 2017.  The ability to pay state taxes on “pass-through income” has been retained under the new law. This significantly reduces taxes for anyone who receives income from partnerships and S-Corporations (even if through trusts), which elect to pay your state taxes through the entity. This applies even for those with Adjusted Gross Income higher than $500,000. 

In addition, the new tax law retains the lower income tax rate structure put in place in 2017. The exemption amount for transfers as gifts or through estates has been permanently increased to $15,000,000 ($30,000, 000 for married couples), with additional increases linked to annual CPI increases.  What makes it “permanent” is that unlike the increase in the 2017 tax act, the increased exempt amount does not “sunset” = automatically disappear at some point in the future. In addition, Social Security recipients are now allowed to deduct $6,000 from the reportable amount.

Changes unrelated to the new tax law now affect when and how you must handle accumulated retirement plan assets, which can significantly impact your tax planning strategies.

Let’s talk about how these tax changes could impact your planning strategies—and how to make the most of them moving forward.  Call today to book a session with one of our expert tax advisors.