Bible on a wooden desk

Do Churches Need Accountants?

The world of church accounting is vastly different from accounting for for-profit entities. There are many unique challenges facing religious organizations such as restricted donations, differences in financial reports, payroll for ordained ministers, and so forth. Churches may opt to try to handle this in-house, but below you’ll find several reasons why it may be helpful to get an accountant for your faith-based organization

1. Maintaining Designated Funds 

As already alluded to, churches oftentimes are tasked with managing designated funds, also referred to as restricted funds or donor-designated giving. These are donations that have a donor-imposed restriction and can only be used for one specific purpose. Designated or restricted funds can be problematic for several reasons. Sometimes churches may have thousands of dollars in a fund, but regular funds may be down and they are tight on money for regular operations.  Restricted funds also can cause much confusion among pastors and ministries leaders regarding its intended purpose. Church accounting also requires extra attention and care as it is vital that restricted donations go to the proper account and not a general account. 

Hiring an accountant may be a wise choice in order to manage designated giving. A good accountant will help you to streamline your finances and ensure that any earmarked donations get recorded to the proper account. An accountant would allow churches to always be able to see how much money is in all funds and ensure it is spent accordingly.

2. Good Accounting Can Help Churches Grow

How are the financial processes at your church? Are the books reconciled? When was the last time you saw a freshly prepared set of financials? Where is the money being spent? These are the important questions every church should be able to answer without hesitation. It is of utmost importance that the church finances be organized in order to maintain fiscal viability and invest wisely in your church’s mission. Proper church financial management will help your church leadership to make wise decisions and push your church’s mission forward. 

3. Save Time

All too often in church accounting, there are ministry leaders taking away their time from what really matters to focus on record keeping. Church leaders can spend countless hours trying to track incoming donations, funds, vendor invoices and bills, and so forth.  Hiring a professional that is efficient and experienced in church accounting will free you up for what really matters. 

4. Stay Compliant 

Churches and faith-based organizations may face more scrutiny than other businesses because of their tax-exempt status. There are regulations, standards, and legislation that affect churches that accountants must stay up to date on. It can be quite a challenge to keep up with these changes, especially during a pandemic when everything seems to be moving at a dizzying rate. Hiring an accountant will take all the daily accounting work and compliance research of you and put it in the hands of a professional. You’ll have a weight lifted and more time to devote to ministry. 


Contact A Church Accounting Professional at Marshall Jones

Many churches have over-zealous church secretaries or administrators who assume accounting duties. While they have the best of intentions, they don’t know the ins and outs of accounting for churches like the professionals at Marshall Jones. Reach out today to learn more about the services Marshall Jones offers for faith-based organizations and churches.

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How Much Do Charitable Donations Reduce Taxes?

Charitable donations provide an excellent way for businesses and individuals to support their communities. Whether you make a monetary gift to a nonprofit entity or donate useful items to a religious organization, you’re helping improve the lives of others in need. 

You can also benefit financially by making tax-deductible donations to a qualified organization that meets the eligibility requirements for a tax-exempt entity. 

How to Deduct Your Donations on Your Tax Return

You can claim your deduction for making charitable donations when you file your annual tax returns. You’ll need to itemize your tax deductions by filling out Schedule A and sending it with your return. You won’t get access to the tax benefits of donating to a nonprofit if you take the standard deduction unless the IRS makes an exception for a specific tax year. For example, filers in 2020 could deduct up to $300 of cash donations without itemizing. 

While giving money is the most common method of donating to a charitable organization, you can also deduct the value of items you contribute, such as furniture, food, automobiles, computer equipment or office supplies. 

If you choose to donate items, you can only deduct the amount you paid for them, not their fair market value or FMV. The FMV is the price the item would reasonably sell for in the current market.

Are There Limits to Tax-Deductible Donations?

You may not be able to deduct the full amount of your charitable deductions on your tax returns. In general, the amount cannot exceed 60% of your adjusted gross income (AGI), although the threshold could be lower depending on the donation and organization type. This limit drops to 30% when donating appreciated property or stocks. 

How to Calculate the Tax Benefits of Donating to a Nonprofit

You can determine your tax savings from making charitable donations with this straightforward calculation. Multiply your marginal tax rate by the value of your contributions. 

For example, if your rate is 32% and you contributed $10,000 in cash, goods or both, you’ll end up saving $3,200 at tax time. 

Tax Deductible Donation Considerations 

Note that your donations will only qualify for a tax deduction if you contribute to an organization that meets the tax-exempt status criteria outlined in section 501(c)(3) of the Internal Revenue Code. Also, be sure to document your charitable contributions by keeping records related to the transactions, such as receipts, bank statements and canceled checks. 

If you volunteer at a nonprofit, you can deduct any expenses directly related to your activities. 

Get Expert Tax Assistance From Marshall Jones

If you’re in the Atlanta area and need help weighing the tax benefits of donating to charity, turn to the Marshall Jones Certified Public Accountants and Advisors. Marshall Jones is an experienced, reputable public accounting firm that can provide reliable tax preparation, guidance and numerous additional financial services to businesses and individuals. 

Get in touch with our tax professionals today to learn more about the advantages of making tax-deductible donations to nonprofits. 

hinking financial advisor businessman working in office.

Tax Facts to Know When Selling Your Home

Selling your home for a profit is an exciting opportunity. However, you should know a few things before you begin the process. This guide to taxes on selling a home will help you learn more about capital gains taxes and how to qualify for exemptions.

Do I Have to Pay Taxes on Gains From Selling My House?

Generally speaking, you must pay taxes on any profits when selling a house. You’ll need to report the sale on your tax return if any part of it is taxable. However, you can be exempt from paying capital gain taxes under some circumstances. Understanding the rules and limitations of property law can help you maximize your tax benefits.

Luckily, there are ways to minimize how much tax you pay if you meet specific criteria. 


You can exclude the profit from selling a house if you can prove it’s your principal residence. To be eligible, you must have lived in the house for at least two years of the five years before the sale. Those two years can be nonconsecutive, but you must be able to prove it was your primary residence during that time. 

Exclusion Limits

If you’re able to show that the house was your primary residence, there are also exclusion limits for gains. Single taxpayers can avoid paying gains taxes on profits up to $250,000, while married taxpayers filing jointly can claim up to $500,000. 

A 1031 Exchange

If the home you’re selling is not your primary residence, you can still be exempt from paying capital gains taxes. The 1031 exchange allows you to sell an investment property for a profit and reinvest in a like-kind building or plot of land. You must use the profits from the sale to buy a property of an equal or greater value than the one you just sold. 

Section 1031 also states that you only have a certain amount of time after selling a house to buy another and avoid the tax penalty. There are many different ways to proceed with a 1031 exchange, but all of them require you to complete the exchange within 180 days to receive the full tax benefits. 

Get Property Tax Advice Today

Get professional advice from our experienced team of certified public accountants and advisors. Marshall Jones is committed to providing quality tax advisory services for corporations and individuals. Contact us today for help with your property gains taxes. 

Tax Tips for Starting a New Business

Starting a new business is no easy task — there are so many factors for new startup companies to consider. Between planning what type of entity structure you should be to ownership configuration, proper federal and state set-up and payroll, it’s difficult to know where to start and what you need. If it’s your first time building a business from the ground up, you might not know how to begin, especially when choosing a business structure and understanding the according tax brackets. So, what needs to be done before you can create a business? Where should you start? These are all important questions that you should be thinking of. Marshall Jones is a step ahead: here are the eight simple tax steps for starting a new business.

1. Choose a Name

Step one in a tax checklist for starting a business is exciting: you must first decide on a name for your new business. Doing this will not only make the business legitimate but will allow you to proceed with the legal steps to officially become a business. While this may seem like an easy task, it’s often more complicated than entrepreneurs expect. Make sure to carefully think about your business name, as it will soon be plastered everywhere and won’t be easy to change in the future.

2. Decide on a Business Structure

Next, you’ll need to discuss the business structure with your accountant. This may also seem like a simple decision, but it will financially determine the majority of your business decisions going forward. This step requires a great deal of time and planning, so it is imperative to discuss it thoroughly with a certified public accountant (CPA). Do you know the difference between a corporation, partnership, or limited liability company (LLC)? If not, your accounting expert can answer all of your questions and help you decide the most appropriate business structure to establish.

3. Register Your Business

The next step in the business creation process is checking with the Department of State to determine if your business’s name is available. You can do this simply by checking the Secretary of State’s website. This is also typically filed on your individual state’s website. Once you have an approved name, you can successfully register your new business.

4. Request a Federal ID 

After you get approval from the State Department to form the business, you then need to enter the federal tax registry. You can simply go to the International Revenue Service (IRS) website, where you’ll request a Federal ID Number, commonly known as an EIN, for the new business. This nine-digit number is a tax identification number and is used for your business similar to how a social security number is used for individuals. After requesting the number, you should receive it almost immediately. 

5. Discuss Salaries

Once registered with your EIN, you need to discuss salaries with your accountant. You should come up with appropriate salaries for the business’s owners — if it’s more than just you. Your accountant will help you calculate a business owner’s salary based on the type of business, its income, your typical work week, and other factors. Once a salary is calculated, your accounting expert can then estimate what your future tax payments will be.

6. Set Up Bank Accounts

You should then set up a separate bank account for your business. If you own more than one business, each one must have its own bank account and, if necessary, credit cards. It is also extremely important for new business owners to remember that business income and expenses cannot be commingled with personal funds. Failure to do this will result in unpleasant tax consequences and can also include legal repercussions. Many banks offer special bank accounts specifically for small businesses — do some research or ask your accountant for recommendations.

7. Apply for a Business License

In addition, each business you own has to have its own business license. After your financial accounts are set up, you can apply for one. A business license is a permit issued by the government that authorizes someone to conduct business within a geographical jurisdiction. These are usually issued on a local basis, except in special circumstances, like when your business operates in a dangerous industry. In the state of Georgia, many businesses can easily apply for their license online. The business license process, from application to reception, typically takes several weeks. Once you receive your license, your business is official and can begin operations. 

8. Stay in Touch

Finally, your accountant at Marshall Jones will always have your back. Throughout the year, our tax team will stay in touch with the business owner to answer any questions and ensure proper taxes are computed and paid. We’ll make sure your business continues to comply with important financial laws. Our goal is to ensure that business owners are always well informed and that there are no surprises. With our customized approach to helping you complete a checklist for starting a business, we will perform as many of these steps as the business owner sees fit. We are also happy to walk our clients through any steps they would like to perform for themselves. 

At Marshall Jones, we are committed to providing quality tax advisory services for corporations and individuals by customizing our services to fit your specific needs. You’ll work one-on-one with an expert who knows exactly what you and your business require — so you don’t have to do the heavy lifting. Your consultant will create a personalized plan for your business that checks all of the boxes. You’re busy enough building your own business — why spend time trying to figure out how to file taxes? Let our tax experts at Marshall Jones help you — so you can focus on what matters most. Contact us today to learn more about us and how we can make your business dreams a reality.

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Understanding Financial Statements

Financial statements are a significant player in projecting company growth, expenses and stockholder’s love when they see growth. Every business owner needs to understand how to digest their financial statements, from balance sheets to cash flow reports to the annual reports. Knowing how to successfully establish where your money goes, how it is coming in, and what you have available allows you as the business owner to make decisions that will benefit your company’s growth.

Whether you are an established business owner who knows how to read financial statements and wants to brush up on your knowledge or a beginner wanting to learn the ins and outs of proper financial statement reports, this article will be your guide. We will go over how to read each type of statement and why they are valuable to know.

How To Read a Balance Sheet

The balance sheet is a statement made to showcase what the company is worth, also known as “book value.” The balance sheet lists all of the companies assets, liability and owners’ equity as of the reporting date. These sheets are generally sent out either monthly or quarterly, depending on the area and the company. Since the balance sheet is a sort of “window” into the company on a financial aspect, they are used internally and externally for different reasons. 

Externally, balance sheets are a way to quickly look at the companies standing and how they do business. It allows investors and stockholders to know if you are smart with your investments or take risks. The balance sheets give enough information for external viewers to gauge growth, profits and liability.  Knowing how to read these metrics and convey them to the interested parties enhances their trust in you and shows them you know how to run your business.

Internally, balance sheets are a method to gain insight into how the company is doing and possible future growth or what changes they need to make to increase growth. Stakeholders, employees and the business owner can all use this information to see if the company is failing or succeeding. Having first-hand knowledge of the business allows you to focus on areas that are working to your advantage while backing out and changing directions in areas you are not succeeding in, opening doors to new active opportunities.

How To Read an Income Statement

Income sheets are where you get the information on income and expenses. You can find the companies performance over a given period telling how your decisions land financially. Much like the other documents talked about in this article, income statements can show if the company is profitable or not. Since income and expenses are the heart and soul of this statement, you can find information on how much the company is spending versus what it’s bringing in, production costs and self-investment info.

The business owners, accountants and investors use this information to project future growth based on current numbers and correct actions where they need to. When you look at the statements and notice you have missed a particular target, you can readjust your direction and try other ways to increase numbers in that targeted area. Investors will mainly use the statements to buy or sell parts of their shares of the company with what direction it’s heading.

How To Read a Cash Flow Statement

Cash flow statements show how the business uses cash over a certain period in a detailed format. There are three sections the cash flow statement can provide detailed information in including: 

  • Operating activities: Details profit income that is received when either the products or serviced are rendered complete. 
  • Investing activities: Gives information on the cash flow from assets such as property being sold or purchased, patents and other purchases using non-debted cash.
  • Financing activities: Provides detailed cash flow information from debt and the value of the company with financing.

The information provided in the statement allows you to see in which divisions you are generating the most cash and analyze where to put the companies assets in the future, enabling intelligent business growth decisions that would otherwise be harder to determine. The cash flow statement is different from profit. It details where your money is going and how much you’re getting back, while profit information is more about the income statement.

How To Read an Annual Report

Annual reports are published yearly. They are for public viewing, so anyone who wishes to know about any particular company can read up on their operations and financial standing. Current and new investors use this report to make their own financial decisions about where and how to invest in companies. When you are viewing the annual report, you will notice two sections. One of the sections is the story and history of the company and what they have accomplished and where they started, and where they plan to go as they progress. 

The second half of the annual report is all the financial information and statements for public viewing. These reports are often used for marketing purposes because they combine numbers and narrative with telling a story about the company’s past and future enticing people to engage with them. You can get these documents via the company website and are available to shareholders before the annual shareholder meetings that go over the company’s past year and where it is going.

Working With Marshall Jones Certified Public Accountants and Advisors

Marshall Jones is a trusted company that specializes in outsourced accounting. Many services are available from part-time controllership, accounting records cleanup, bookkeeping, budget preparation, cash flow projections and hiring.  If you need extra help to achieve proper growth within your company or are unsure of how to properly certain all these statements, contact Marshall Jones Certified Public Accountants and Advisors today. Our team can help you achieve your business goals.

Differences Between For-Profit and Nonprofit Accounting

When starting a company, one of the first decisions you need to make is whether the business should be a for-profit company or a nonprofit organization. For some founders, the answer is immediately obvious. It makes sense for a company that wants to make money to be a for-profit business. For a company with a social component, such as a business that produces a product or provides a service that enhances the greater good, the answer might be less clear. 

Understanding the differences between for-profit businesses and nonprofit organizations can help you decide which one best suits your company. One way to get a better grasp of the differences is to look at how nonprofits compare to for-profits, especially with accounting practices.

For-Profit vs. Nonprofit Organizations

When a business earns a profit, it brings in more revenue than it spends. One common misconception about the differences between a for-profit and a nonprofit company is that a nonprofit doesn’t earn more than it spends or doesn’t have money remaining at the end of each quarter. The definitions of a for-profit and a nonprofit business are a little more complicated than that. Take a closer look at what it means to have a for-profit business or a nonprofit organization:

What Is a For-Profit Company?

A simple way to define a for-profit company is a business that exists to earn money. A for-profit business wants to bring in more revenue than it spends to benefit the owners or investors or provide a financial incentive to its employees. In some circumstances, the owners or managers of a for-profit company might use the extra revenue to build or enhance the business.

For-profit companies earn money by selling products or services. For example, a clothing brand will sell clothing, and a for-profit attorney will sell their legal services. 

One thing worth noting is that although a for-profit business has the goal of earning money, turning a profit doesn’t have to be the sole aim of the company. There are several examples of for-profit businesses that also have a mission or social component. For example, a clothing brand might aim to reduce the fashion industry’s environmental footprint by producing more sustainable or recyclable garments. An attorney might provide legal services to help those in need. Earning a profit then helps those companies and individuals achieve their goals.

Common Examples of For-Profit Companies

A few examples of for-profit companies include:

What Is a Nonprofit Company?

A nonprofit company is not necessarily a company that doesn’t earn a profit. A struggling business can’t simply decide to be a nonprofit because it is earning less than it’s spending. Instead, the term “nonprofit” means that the goal of the company extends beyond earning money. Nonprofits have a mission and typically seek to benefit the public or further a particular cause. 

Compared to for-profit companies, nonprofits have certain tax advantages. Often, nonprofits apply to be 501(c)(3) organizations, which exempts them from paying certain taxes. A 501(c)(3) organization is usually a charitable organization, meaning the service or product it provides benefits the greater good somehow. To earn tax exemption, the organization needs to have at least one of the following purposes:

  • Religious
  • Scientific
  • Literary
  • Educational
  • Prevention of cruelty to children
  • Prevention of cruelty to animals
  • Testing for public safety
  • Encouraging amateur sports competition nationally or internationally
  • Charitable, such as defending human rights, eliminating discrimination or advancing science and education

Common Examples of Nonprofit Organizations

Some common examples of nonprofit organizations are:

  • Colleges and universities
  • Hospitals
  • Performing arts organizations
  • K-12 literacy programs
  • Organizations that aim to end childhood hunger
  • Humane societies
  • Adult education programs

Nonprofit vs. Not-For-Profit

Often, people occasionally use the phrases nonprofit and not-for-profit interchangeably. It’s worth noting that there are some subtle differences between the two. While a nonprofit typically services a charitable purpose or has a mission that enhances the public good, a not-for-profit company doesn’t need to do so. A not-for-profit instead operates to serve its members. The revenue it does earn goes back into meeting its goals and running the organization in general. For example, a social club or sports team can qualify for not-for-profit status. 

One key difference between the two is that a nonprofit is usually a business and typically does seek to earn more revenue than it spends. Not-for-profits are usually recreational organizations. They can often apply for tax-exempt status, but the IRS isn’t likely to recognize them as organizations eligible for 501(c)(3) status.

Who For-Profit vs. Nonprofit Companies Serve

In addition to qualifying for tax exemption or not, nonprofit and for-profit — and not-for-profit — organizations differ when it comes to their users and needs or who they aim to serve:

  • The public: Nonprofit organizations typically need to benefit the public in some way. Any profit earned by the organization gets directed back into the organization to further its cause and mission. All accounting information about a nonprofit organization needs to be freely available to the public to review.
  • Stakeholders and investors: Often, for-profit companies have stakeholders and investors who own a share of the business and who have an interest in how it is doing and its financial situation. If the business earns a profit, the investors earn a portion of the profit based on their stake in the company.
  • Members: Not-for-profit organizations often exist to meet the needs of their members. A social club or credit union provides services that benefit the people who sign up. Any additional revenue earned by a not-for-profit gets cycled back into the organization to help it better serve its members.

For-Profit vs. Nonprofit Accounting Differences

How you handle your company’s accounting will differ depending on whether you apply for for-profit status or to be a nonprofit. Take a closer look at some of the major accounting differences between for-profit and nonprofit organizations.

1. Tax Status

Tax status might be the difference that comes to mind first for many people when they think about for-profit versus nonprofit companies. A nonprofit organization that qualifies for 501(c)(3) doesn’t have to pay federal income taxes. Whether the organization has to pay state or local taxes depends on its location. Many nonprofit organizations also don’t have to pay property tax or sales tax.

If an organization has tax exemption under IRS section 501(c), it does need to file Form 990 each year. The public can access the information on Form 990 to see how a nonprofit organization manages its finances. 

Form 990 can influence a potential donor’s decision to give money to an organization or not. Suppose the form reveals that an organization is spending a significant portion of its revenue on overhead and a small portion of its income on fulfilling its mission. A donor might decide not to give money to the company.

In contrast to nonprofit organizations, for-profit companies need to pay federal income tax, state and local taxes where applicable and sales and property tax. The type of tax return a company needs to file and when it needs to file its returns depends on the corporate structure. A sole proprietor, for example, files Form 1040 and Schedule C each year. Corporations get taxed on their profits and need to file Form 1120 with the IRS.

Although for-profit companies do pay taxes, many can reduce their tax obligation through deductions. Deductions reduce the value of a company’s taxable income, lowering its tax bill. 

2. Balance Sheet vs. Statement of Financial Position

Whether they are answering to investors or the public, for-profit and nonprofit companies need to prepare financial statements. The format of the financial statements differs based on whether a company is for-profit or nonprofit.

Nonprofit organizations typically prepare a statement of financial position. A statement of financial position, or SOP, provides a snapshot of an organization’s finances at a particular point. A statement of financial position includes:

  • The organization’s assets: An organization’s assets are what it owns or has. Examples include cash and money in savings and investment accounts, furniture and equipment, valuables such as artwork, prepaid expenses, long-term investments and investments in endowment funds. Grant money that an organization has won but hasn’t yet received and money it has loaned others can also count as assets.
  • The organization’s liabilities: Liabilities are what an organization needs to pay to others. Examples of liabilities include accounts payable to vendors or service providers, loans the organization is repaying, payroll and credit cards or lines of credit. 
  • The difference between the two: The difference between an organization’s assets and liabilities is its net assets. Net assets can be unrestricted, meaning a company can use them whenever and however it wishes. If assets are restricted, a company needs to use them for a particular purpose, such as paying a particular employee’s salary. Temporarily restricted assets have restrictions set by the donor, which can be fulfilled within a short time.

For-profit companies’ financial statements include balance sheets, which they usually prepare every quarter. A balance sheet looks a lot like an SOP, but there are some key differences. You’ll typically find the following on a balance sheet:

  • Assets: Like an SOP, a balance sheet lists a company’s assets, or the value of what it owns, such as cash on hand, real estate, furniture and equipment, accounts receivable and investments.
  • Liabilities: A balance sheet will also include the value of a company’s liabilities, such as its debts and accounts payable. Liabilities can be long-term, such as a 10-year loan, or short-term, such as bills the company needs to pay by the end of the month.
  • Shareholders’ equity: Another way to describe shareholders’ equity is the company’s net worth. This net worth is the amount investors initially put into the business that the company decides to retain at the end of the year rather than pay out to investors. A company’s assets should equal its shareholders’ equity plus its liabilities.

3. Income Statement vs. Statement of Activities

For-profit and nonprofit companies have different ways of reporting their income and expenses. A for-profit company will create an income statement known as a profit and loss statement (P&L). It should include the following:

  • Sales and revenue: Sales and revenue are examples of income a company might earn during a quarter, such as the value of products or services it sold.
  • Operating costs and expenses: Operating costs and expenses can include the cost of the goods a company sold, bank fees, rent, office expenses, advertising costs and marketing expenses.
  • Net income: Net income is sales and revenue minus operating costs and expenses. If a company has a positive net income, it has a profit for the quarter. If the net income is negative, the company has a loss.
  • Other sources of income: Other sources of income a company might include on its P&L include interest income or income from investments.
  • Other expenses: Other expenses might include costs not directly related to the cost of running the company, such as taxes or penalties the company has to pay. 

A nonprofit’s statement of activities is very similar to a P&L statement. The statement lists a nonprofit’s revenue during a period, such as a quarter. It also lists the organization’s expenses during that time and shows the difference between the two. A statement of activities will usually include:

  • Revenue: A nonprofit’s sources of revenue can include donations from individuals, grant funding and funds released from restricted endowments.
  • Expenses: Expenses include operating costs, fundraising costs, management costs and program costs.
  • Change in net assets: The change in net assets is the difference between revenue and expenses during the quarter. It can be positive, if there is more revenue than expenses, or negative, if the nonprofit brought in less than it spent.

4. Net Assets

How an organization handles and classifies its net assets, or the value remaining after subtracting expenses, differs depending on whether a company is for-profit or nonprofit. Nonprofit organizations need to classify their net assets into three categories:

  • Restricted: Also called permanently restricted, restricted funds or assets are amounts of money that an organization needs to invest in perpetuity, usually in a trust or endowment. The money usually needs to be used for a single purpose. For example, restricted assets might fund a chair position in a department or pay for a particular program offered by a nonprofit.
  • Temporarily restricted: Temporarily restricted assets are often earmarked for a particular reason, such as paying for a new wing at a hospital or getting a literacy program off the ground. They usually need to be used during a specific time frame. 
  • Unrestricted: An organization is free to use unrestricted funds whenever and however it would like, as long as the use of the assets helps the organization fulfill its mission and purpose.

Handling net assets as a for-profit company involves calculating total assets minus liabilities. The remainder is the company’s profit.

For-Profit vs. Nonprofit: Company Ownership

Another important difference between for-profit and nonprofit organizations is who owns the company. For-profit companies can have one of several different types of ownership structures:

  • Sole proprietor: In a sole proprietorship, an individual owns the company. As the sole owner, they benefit when the company earns a profit. On the other hand, they might have difficulties if the company loses money. Sole proprietors typically file an individual tax return, Form 1040.
  • Partnership: In a partnership, two individuals usually have joint ownership or equal ownership of the business. Both partners pay taxes on their share of the business’s income on a personal tax return.
  • Cooperative: In a cooperative ownership model, multiple people own the business. An employee-owned company is an example of a cooperative, as are food co-ops or credit unions.
  • Corporation: When a company becomes a corporation, it creates a separate legal entity. Corporations become liable and responsible for the company’s actions and financial issues. Corporations have their own type of tax return to file.

A group of investors or shareholders can privately own corporations, or they can be publicly traded. In the case of publicly traded corporations, businesses and individuals can buy shares of the company, staking out small ownership claims. In some cases, a single or small group of investors will hold a majority stake in a publicly traded corporation.

No ownership structures exist for nonprofit companies because no one owns a nonprofit. Many nonprofits have a board of directors that guide the organization and ensure its longevity. Still, the members of the board don’t financially benefit from their participation in the nonprofit.

What For-Profit and Nonprofit Companies Have in Common

For all their differences, particularly for accounting and taxation, for-profit and nonprofit organizations do have some things in common. Perhaps the biggest similarity between the two is that both are examples of business entities. A nonprofit organization can be a corporation, for example. That means that no individual is solely responsible for the actions of the nonprofit, just as no individual is solely responsible for the actions of a for-profit corporation.

In either case, if a corporation loses money, the employees or executives won’t be directly affected. Likewise, if either type of corporation gets sued, no person at the corporation will be responsible for paying the court costs or the settlement. 

Another feature nonprofit and for-profit companies have in common is the presence of a board of directors. At a nonprofit, a board of directors oversees the governance of the organization. The board can make decisions that affect the organization’s overall operation, such as its strategic plan. The board isn’t typically responsible for managing the organization or overseeing the day-to-day functioning of the nonprofit. Usually, term limits exist for board members so no single person is carrying the weight of the organization for more than a few years.

For-profit companies also have boards of directors, if they are publicly owned. The board of a for-profit company usually consists of people in executive-level roles, such as the CEO and CFO. Board members at a for-profit usually get paid, while nonprofit boards are made up of volunteers who usually financially support the organization.

Members of for-profit and nonprofit boards of directors have a duty of care. For-profit boards have a duty of care to the stakeholders of the organization, and nonprofit boards have a duty of care to the organization itself. They need to make sure that assets aren’t used fraudulently. Nonprofit board members also need to ensure that the organization follows its mission to maintain its eligibility for tax exemption. 

Work With Marshall Jones for Expert Accounting Advice

Whether your company is for-profit or nonprofit, working with Marshall Jones Certified Public Accountants And Advisors helps you get your books in order. Our team of CPAs and advisors can help you prepare your monthly or quarterly P&L statements or statements of activities. We can also help you clean up your accounting records and prepare your annual audit. Learn more about our outsourced accounting services, or contact us today for more details.



Tips for Accounting Students From the Partners at Marshall Jones

As a college student, you have a lot of navigating to do when entering the workforce. That’s why the partners at Marshall Jones want to offer you some tips as an accounting major! Since beginning their own accounting careers, our partners have gained valuable knowledge, and they want to bestow their wisdom upon you. Consider these tips as you continue your accounting education and career.

1. Study, Study, Study

As a student, you’re probably no stranger to studying. However, much of the studying mentality revolves around studying material to pass a test. Our partners at Marshall Jones want to suggest that you should study to learn, not just to pass your exams. One of our audit partners, Nathan, admitted, “The thing I realized after I graduated was that the material actually mattered in the field I was pursuing. I had to research things I should have known because of that test mentality that I had [in college].”

Studying to learn the material will benefit you in the future and make you more knowledgeable after your exams end. It also allows you to hone highly sought-after accounting skills before entering the field. Rather than spend time relearning these skills later, you should take the free time you have now to ensure you’re ready for the accounting world.

2. Know Which Degree You’re Getting

Some schools have more than one version of an accounting degree. To become a certified public accountant (CPA), you need a certain amount of credit hours. While a few states allow accounting majors to take the CPA exam after completing the standard 120 credit hours of a bachelor’s program, most states require 150 hours through a master’s program. Make sure you know what degree you need. 

Either way, try to complete all your schooling at once so you’ll be eligible to get your CPA license right away.

3. Network With Professionals

Randy, another audit partner at Marshall Jones, emphasizes that “relationships are everything.” Join honors fraternities, attend expo events and take advantage of professional gatherings. These are all great ways to network and meet new people who could potentially help you with job or advancement opportunities. Nathan also suggests, “Make sure to focus your attention on networking events that will benefit you in the search for your accounting position,” instead of attending just any networking event.

4. Embrace Speech Classes

We know public speaking classes are among the least popular courses. However, having confidence when speaking with peers, coworkers and clients is an important skill to have. Kristen, a partner of firm administration, shares, “Clients are the backbone of everything that you do. So, you want to be able to talk with them, build relationships, build the trust with them. A lot of that comes from just how you explain things or discuss things with them.” 

You’ll do a lot of speaking as a public accountant, so use speech classes as a beneficial tool to help build skills early. 

5. Know Mistakes Can Lead to Future Success

We think this tip is important because of its versatility. Randy reminds accounting students, “Realize that mistakes are often steps to future success. Everybody makes mistakes, but the key is to learn from them so that they’re not repeated.” Embrace the possibility of making mistakes, as they’re meant to teach you valuable lessons, even if they don’t always seem like it in the moment.

6. Be Involved and Build Your Resume

During your time in college, be sure to join clubs and become a leader in that club if possible. Susan, one of our tax partners, tells students that “belonging to clubs demonstrates personal skills, [so] if you are an officer of the club it demonstrates leadership skills, [and] charitable activities show character.” These are all great ways to build your resume, which Susan suggests is something accounting students should begin to think about during their first couple years of college.

7. Get Internships

One of the most important tips the partners at Marshall Jones have for accounting students is to get internships — more than one if possible. These opportunities can be valuable for several reasons. Susan encourages students to get more than one internship because you’ll have “more information to determine the precise area of accounting you would prefer.” 

Kristen also suggests getting an internship because “you’re going to get a firsthand feel for how CPA firms work, especially if you’re interested in working in public accounting.” More importantly, internships provide you with valuable work experience, and you can apply the things you’re learning in school. 

These positions allow you to understand the nature of the business and what you should expect from this field. 

8. Understand the Accounting Industry

Get to know the accounting industry. Understand the different divisions of accounting — auditing, tax and consulting — to determine which might be most interesting to you. Think about what you want in your career. After five years with a CPA firm at the beginning of his career, Charlie, one of our founding partners, realized that real estate development was something he was interested in, so he made the change. Therefore, he suggests that if there’s a specific industry you know you’re passionate about, pursue it.

Greg, a managing partner, encourages accounting students to understand the types of firms because they’re all different. “CPA firms often take on the personalities of their leading partners, and this leads to a great variety between CPA firms and their cultures.” Because of how different every firm can be, it’s also essential to understand yourself so you can find a firm that will be the best fit for you as you build your accounting career.

9. Realize There’s No Rush to Figure It All Out

If you’re struggling to determine what aspect of accounting you’re passionate about or feel unsure about which firm you want to join, we’re here to assure you there’s no rush to have your whole career figured out. Greg emphasized this idea: “…The answers about what kind of firm you want to join and what kind of accountant you want to be cannot always be known until after you start your career.” It’s important to remember many people don’t have the answers at first — and that’s OK!

Start Your Career at Marshall Jones

As you approach the end of your college career, consider starting your accounting career at Marshall Jones. Our team of CPAs and advisors creates a supportive environment for you to find what you’re passionate about. Learn more about our team to discover why we’re the right move for your career.

How to Review Your 5500

The Form 5500 is an annual report that is filed with both the IRS and the DOL. It has information that relates to the operation and compliance of a retirement plan, such as a 401(k) plan. If your company has a retirement plan, it will likely need to file this form every year. Typically, this is July 31st (, but can be different depending on the plan year end of the 401(k) plan. There is one extension allows for 2 months and 15 days, which ends up on October 15th

Generally, these retirement plans have a third-party administrator that is going to prepare this form as part of its responsibilities. However, as the plan sponsor, the company who created the retirement plan, it is ultimately your responsibility to understand, review, and approve this form prior to filing.

Here are a Few Tips to Help You Review Your Form 5500

  1. Review all the information regarding page 1 as it concerns your name, the name of the plan, the type of plan it is, and other important business information.  You would likely check this in the first year of filing, and in subsequent years, you would just review briefly to ensure it is still correct, like addresses, etc.
  2. On page 2…
    1. There are lots of numbers of participants. You will need to ask the preparer for their reports that have these numbers, and you can review the lists to ensure all employees that should have been recorded here are recorded.
    2. There is one very important number, Line 5. If the amount of this line exceeds 99, then you will need to request a proposal for audit services on your retirement plan.
    3. Review line 10 a and b to determine which schedules you will need to review later in the return.
  3. Schedule A – This section describes any company or person who benefited from commissions related to the operation of the plan. Typically, in this section, you will see financial advisors, investment companies, insurance companies, etc. All of these people would have sent a tax document that shows their commissions. To review, you would need to ask for the forms in order to verify the amounts recorded.
    1. On page 3, you might see a breakdown of any annuities that are a part of the plan. Typically, this is where insurance contracts are reported (Line 4) and Pooled Separate Accounts (Line 5).
    2. If there is an annuity with unallocated funds in a general account, you will see a schedule starting at 7b for the prior year ending amount, all the various activity, and the ending amount on 7f. 7f should tie to the amount on Line 4. You can pull your investment statement for the year, and look at the annuity to determine if the proper amounts were recorded.
  4. Schedule C – This section describes any company or person who benefited from fees related to the operation of the plan. Typically, in this section, you will see third-party administrators, auditors, investment companies, etc. All of these people would have sent a tax document that shows their fees. To review, you would need to ask for the forms in order to verify the amounts recorded. Note: if the company providing the plan pays for the audit or the TPA fees, those fees do not show up here; fees only paid by the plan show up here.
  5. Schedule D – This is a list of all the MTIA, CCT, PSA, and 103-12 IEs that are involved with the plan. If information is here, you need to get your investment statement for the year, and match up the items from that list to the items in this Schedule. This form basically shows the value of each investment vehicle that is related to the items that are included here.
  6. Schedule G is usually required if something went wrong during the plan year. Any information included on this Schedule needs to be reviewed with your third-party administrator, so they can explain the transactions reported. The most likely is going to include nonexempt transactions that you are going to be well aware of prior to the filing of this form. Make sure you understand all of the transactions listed.
  7. Schedule H and Schedule I – The difference between these forms are determined by the size of the plan, but they do report the same information, which is the activity and balances of the plan. Compare the balances and activity listed on the schedule H and I to the investment statement for the year. There should be no differences.
  8. Schedule MB and SB – In a defined benefit plan, you are going to have a valuation based on an actuarial report. Those balances and other operating aspects of the plan (number of participants, liabilities, contributions) and assumptions of the actuarial report get reported during this Schedule. This only pertains to defined benefit plans and will not be typical of a 401(k)-like retirement plan.
  9. Schedule R – This form is going to have information about distributions that were not cash, information about funding minimum amounts into a plan, like an ESOP, and other information regarding defined benefit plans and ESOPs.  Make sure to talk with your third-party administrator to understand any information presented in this form. It is unlikely to be used, unless something significant happens.
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Want More Help? Talk to the Professionals at Marshall Jones!

If you have followed the above advice, you will have a much greater understanding of your retirement plan, the form 5500, and have the confidence to complete reviews of the Form 5500 and all of its schedules. If you have questions or want further assistance, contact Marshall Jones today!

What Should a Non-Profit Board Ask of Their Auditor?

An audit is an independent review of your non-profit organization’s financial statements and records. The goal of an audit is usually to determine if a company is adhering to generally accepted accounting principles or GAAP. GAAP was created by the Financial Accounting Standards Board and is the standard used by the U.S. Securities and Exchange Commission.

There are several reasons why your non-profit might schedule an audit, such as ensuring you are abiding by state or federal laws or providing evidence of financial transparency to current and potential donors. If your organization receives grant funding, submitting the results of an audit might be a requirement.

It’s important to go into the audit process with as much information as possible, particularly about the auditor and the methods they use. Here are some questions to ask before the audit begins and after it’s completed.

Questions to Ask During the Planning Stages of the Audit

Some questions to ask as you begin the planning stages of the audit include:

1. How Are You Going to Handle the Prior-Year Auditor?

If this is the first time your company is working with a particular auditor, ask them how they will approach the auditor you worked with previously. What will the auditor do to smooth the transition?

2. How Does Your Audit Plan for This Year Differ From Last Year?

If you’re working with the same auditor again, ask them if they are taking a different approach or what they might be doing differently this year.

3. What Are the Major Accounting Changes That Could Affect the Audit This Year?

Regulators make adjustments from year to year. Ask the auditor to describe any changes and what those changes mean for your company’s audit.

4. What Is the Scope of Your Audit?

An audit’s scope is the range of the records that the auditor examines. For example, the audit could cover an entire fiscal year or a quarter. In addition to asking about the scope of the audit, ask the auditor how the scope will affect their ability to discover fraud, errors, problems with internal controls or illegal acts.

5. In What Ways and Where Do You Think Our Staff Could Help Reduce Your Time?

Ask the auditor if there is anything you or your team can do to streamline the audit process for them or make it go more smoothly. Reducing the time it takes to complete the audit can mean a lower fee. It also means you’ll get the information you need more quickly.

6. Does Your Control Assessment of Our Company Enable You to Reduce Substantive Testing?

An auditor will likely review multiple transactions during the audit and will ask you to produce records for various transactions. Ask the auditor what type of control assessment they perform and the effect it has on their process.

7. How Do You Determine Materiality and What Is It?

Materiality is the effect a misstatement or omission has on the use of a company’s financial statements. Ask the auditor how they determine whether an issue is material or immaterial and what it means for your audit results.

8. Do You Anticipate Any Independence Issues?

The person performing an audit for a non-profit needs to be independent, meaning they can’t be an organization employee. An auditor might have independence issues if they’ve performed other work for the organization over the past year or if a relative has a connection to the organization. For example, if the auditor’s child attends a non-profit university or if their spouse works for the organization, there would be independence issues.

9. How Do You Determine If You Are Independent?

Along with asking the auditor if they anticipate any independence issues, ask them what methods they use to determine their independence. For example, you can find out if they believe volunteering for the organization in another capacity affects their independence.

Questions to Ask During the Finalization Stage

While it’s a good idea to keep in touch with your auditor throughout the process, you can also generally expect a meeting at the end of the audit to discuss what happened. During that meeting, consider asking the following.

1. Did You Run Into Any Circumstances That Caused You to Change Your Audit Plan in Any Audit Area?

The unexpected can happen during an audit. Find out if the auditor experienced any difficulties or if they had to change their approach at any point. Ask for more details about what they had to change or why they had to make those changes.

2. Did Management Give You Everything You Requested?

Ideally, the organization’s management team will provide the auditor with the statements and other information they need to complete the audit. If that wasn’t the case, the board of governors should be aware of future audits.

3. Were There Any Areas in the Control Environment That Caused Significant Alarm?

It’s the auditor’s responsibility to review the organization’s control environment and come to their own conclusions about it. Ask the auditor if they discovered any parts of the control environment that were particularly concerning.

4. Were There Any Identified Fraud, Errors or Illegal Acts?

It’s also critical that you ask the auditor if they found any evidence of errors, fraud or illegality during their audits. If they found evidence of fraud, what was it?

5. Were There Any Significant Material Weaknesses or Deficiencies Noted in the Control System?

Control deficiencies or material weaknesses are issues in an organization’s financial reporting that can make it more likely for a misstatement to occur. Find out if the auditor detected any and, if so, what they were and what can be done about them.

6. What Type of Opinion Are You Giving and Why?

You must get the auditor’s overall view of your organization’s financial statements. Even if their opinion lines up with that of the board, it’s important to understand why they have come to that conclusion. What details lead them to make their final decision or develop their final opinion?

7. How Were Any Disagreements Between You and Management Resolved?

It’s not a given that management and the auditor will disagree on certain aspects of the company’s financial statement or that the auditor will differ from management in their assessment. But it is possible. If the auditor disagreed with management in any way, find out how they disagreed and what was done to solve the issue.

8. Were Any Adjustments That You Proposed Not Made?

It’s possible that the management team didn’t acknowledge or implement recommendations an auditor made. It’s a good idea for the board members to learn about those recommendations or adjustments and to decide how to move forward with that information.

9. Are There Any Matters Remaining?

It could also be that management didn’t fully address several issues the auditor brought to their attention. Ask about any remaining matters and what the board can do to address them.

10. Were There Any Accounting Principles That Changed?

If a non-profit organization decides to adopt a change in accounting principle, it needs to apply the change to all previous reporting periods, as well, unless doing so proves to be impractical. The auditor should note any changes made, so it’s important to ask them about those changes. It’s also a good idea to reflect on how changes to accounting principles affect financial statements.

11. Are Our Policies in Line With Best Practices?

Accounting best practices are critical for any company and particularly essential for non-profits, which need to prove to donors and foundations that they are trustworthy and reliable. An auditor can give you insight into whether or not you’re using accounting best practices. If not, they might be able to help you determine what changes to make to adopt those best practices.

12. Were There Any Unusual or Significant Items That We Need to Be Made More Aware Of?

One of the benefits of having an independent party review a non-profit organization’s financial statements is that they are likely to note issues or items board members or the management team are likely to overlook. Ask the auditor about any concerning items and why they think those items might be an issue. You can also find out if they have recommendations for ways to handle any unusual items.

13. How Is Your Perception of Management’s Attitudes Towards Internal Controls?

Working with an auditor gives you a chance to get someone’s unbiased opinion about the non-profit and the management team. Ask the auditor what they think of your management team’s attitudes, particularly about the internal controls your organization uses.

14. What Percentage Is Our Fee in Relation to the Total Fees Earned by Your Firm?

Several factors influence how much a non-profit organization’s audit cost. It can be worth asking the auditor how much your company’s fee contributes to their total fees. Are they charging you so much that your audit fee makes up a significant portion of their total fees? Or is it a small percentage of the total revenue earned by the firm? Finding out how your company’s fee compares to the firm’s total fees will give you an idea of whether or not the auditor depends on your company’s audits or is spending more time than average working for you.

15. What Could We Do to Reduce Your Time and the Audit Fee Next Year?

A non-profit’s size, financial complexity and accounting practices contribute to the time it takes an auditor to perform an independent audit. The length of the audit typically directly connects to the size of the fee. If your company made significant changes during the year, such as adopting new account principles, you could expect a higher fee than in a year with few, if any, changes. It can be worthwhile to ask the auditor what you can do in the future to reduce the complexity of the audit and the length of time it takes, lowering your fee.

16. How Did the Audit Fee Compare to the Estimated Total?

The auditor most likely gave you a quote for the fee before the audit began. Now that it’s over and the auditor has billed the organization for the services, compare the estimated fees to the actual cost. If there’s a significant difference, ask the auditor about the change. If the actual fee is much lower than the estimated amount, it’s still a good idea to learn more about what influenced the change. Why did the auditor spend less time performing the audit they expected?

17. Is There Anything Else You Would Like to Discuss With Us?

Give the auditor a chance to bring up any issues that you might have missed or that they think are worth discussing. It might be the case that they have ideas you haven’t thought about that can improve your non-profit’s financial statements or help you improve the accounting process moving forward.

Work With Marshall Jones on Your Next Audit

Although you might think that asking your auditor a long list of questions during the planning stages and the finalization stage will put them on the spot, a quality auditor will be ready and willing to answer anything you ask. Asking questions also helps you better understand the process and what the findings mean for your non-profit.

Another benefit of asking questions is that doing so allows you to maintain oversight and fiscal responsibility for the process. Marshall Jones’ team of CPAs and advisors perform audits that can give your board of governors the assurance it needs to make financial recommendations for your non-profit. An audit can also help your non-profit attract more donors or meet regulations. Contact us today to learn more about the process and set up an audit in the Atlanta, Georgia, area.

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401K Audit Checklist

Many employers are realizing the need to offer benefits to retain and recruit top talent. One of the most common benefits that we see used is the 401(k). There are many different styles of 401(k) plans, but all 401(k)s are designed for employees to contribute a portion of their income, for those contributions to be placed as investment vehicles, and for the employees to receive deferred tax treatment on the contributions and any investment gains earned over time.

Department of Labor (DOL) and 401K 

The Department of Labor (DOL) is charged with making sure employees are being treated fairly, and in the case of 401(k) plans, there is an act they designed to govern those plans called the Employee Retirement Income Security Act, or ERISA for short. ERISA gives guidance on how plans are supposed to perform and provides protection for individuals in the plans.

Form 5500

The DOL needed a way to track information in these plans, and in conjunction with the Internal Revenue Service, they created a Form 5500, which every 401(k) will need to file. Some 401(k) plans are small enough to file a Form 5500-EZ. These plans have less than 100 eligible participants and do not require an audit, per ERISA. Plans that have over 100 eligible participants are required to file the Form 5500, which includes a section on the Schedule H about the audit performed for the plan. Once the Form 5500 is completed, the audit is also attached to the return and filed.

When Do You Need a 401K Audit?

If a company that provides a 401k has more than 100 eligible employees, it is likely they have been through an audit or another assurance service. The audit for a 401k plan is similar to that of an audit of a company. There will be an agreement for the services provided, a list of items the auditor will request, testing of documents and other evidence, and a report on the financial statements. The best way to have an efficient and effective audit is to understand, gather, and provide those requests back to the auditor.

From the company’s perspective, the requests can be divided into different areas based on where you might pull the information.  There will be a custodian involved, which is where you will pull financial data; there will be a third-party administrator (TPA), which is where you will pull some compliance information; often a payroll provider, which is where you will pull payroll information; and finally, your human resources department will need to provide some plan documents and employee files.

Documents and Information Needed for a 401K Audit

For the financial information (investment company can help):

  • Investment Statement – this shows all the activity from the beginning of year to end of year. It will likely include detail on each investment vehicle, each participant, and a summary.
  • List of contributions – this shows a list of all contributions to the plan in summary and by participant. It will include the pay date, contribution date, date of receipt by custodian, and the amount of contribution. This item is extremely important because it is used to determine if the company made the contributions timely.
  • List of distributions – this shows a list of all distributions from the 401k plan, and it includes the gross amount, any amount of tax withheld, amounts related to forfeiture, net amount paid, and if the funds were transferred to another qualified plan.
  • Certification of Assets – this is a report from the custodian that certifies the amounts reported in the investment statement are complete and accurate. With this report, the audit can be considered “limited-scope” and the auditor can reduce testing on investments. Without the report, the auditor will need to spend significant time testing the investments.
  • You will need to retrieve the SOC1 report or equivalent. This is a control report usually done by another auditor and represents the controls at the investment company.

For compliance (third-party administrator can help)

  • Draft 5500 – The TPA usually prepares this form as part of their responsibilities in the contract. The auditor will need to compare the information in this form with the investment statement and discuss any differences with the TPA with possible disclosure of the differences.
  • Adoption Agreement – The TPA will have one of these on file, because it is their responsibility to review this document and determine if your plan is in compliance.
  • Summary Plan Description – this is a user-friendly document that explains the plan in everyday language and should be what the eligible participants receive upon becoming eligible.
  • IRS Determination Letter – This is the letter that the IRS sent to your company once you were approved to start the 401(k) plan.
  • Compliance Report – The TPA will run various tests associated with the 401(k) options that you have. Some of those tests are called ACP, ADP, and Top-Heavy testing. They will also run tests to see if anyone gave over the limits.
  • You will need to retrieve the SOC1 report or equivalent. This is a control report usually done by another auditor and represents the controls at the third-party administrator.

Payroll information (from your payroll provider or human resources):

  • W-2 – W-2s will help provide evidence for tested participants’ salary and total contribution for the year.
  • Payroll Registers – Often times, it is easier to test 1 or 2 contributions at a point in time, rather than the whole year to determine if the plan is operating correctly. Having the ability to provide any payroll registers requested will help. Payroll registers usually include payroll information related to the time period tested, like amounts paid, withheld, and net pay.
  • If using a payroll service provider, you will need to retrieve the SOC1 report or equivalent. This is a control report usually done by another auditor and represents the controls at the payroll company.

Employee information (from your human resources):

  • Enrollment Form – This form shows the selected participants’ payroll deferral percentage and the options they have chosen in the plan.
  • Employment Form – This will be the form the employee completed that shows their demographic information and their hire date.
  • Termination Form – For employees that were terminated and received distributions, these forms help auditors test the 

Document Your Controls 

If not already done, as you gather these items, document the procedures you have over what happens when someone is employed, becomes eligible, participates in the plan, asks for a withdrawal or terminates from the plan. Some questions to answer in this control document are:

  • How do I know we are withholding the right amount from the employee for the 401k contribution?
  • How do I know we are matching the right amount?
  • How do I update the system with a 401k contribution % or dollar amount?
  • When someone became eligible how do I know they received a 401k packet?
  • How are the investment options we chose performing?
  • How do I make a payment of all the employees’ withholding and the match to the investment company? And how do I check to see if it is right?
  • Are employee personnel files secured for restricted access?

Knowing how to access these items above and provide them to the auditor will lead to a successful audit.

Contact a 401K Auditor

At Marshall Jones, we know that employee benefit plans are important because it is how you take care of your employees. It also represents many fiscal and regulatory responsibilities for you, and we hope to help relieve the stress related to the auditing portion of those responsibilities. Contact Marshall Jones today to start working with our financial professionals.