For nonprofit organizations across Virginia and Washington DC, the question of whether to obtain an independent audit is often driven by external requirements rather than internal preference. Funders, lenders, boards, and regulators may require audited financial statements as a condition of funding or governance. This guide explains when a financial statement audit is required, what the audit process involves, and how to prepare for it. When Is an Audit Required? A financial statement audit is the highest level of assurance a CPA can provide. It is typically required in the following circumstances: Federal Grant Recipients: Organizations expending $1,000,000 or more in federal awards during a fiscal year must undergo a Single Audit under the Uniform Guidance. This includes both a financial statement audit and a compliance audit of major federal programs. Virginia Nonprofits: Virginia requires a financial review (not a full audit) for organizations with gross annual revenue of $750,000 or more when applying for or maintaining sales tax exemption. A full audit may be required for organizations with revenue of $1.5 million or more. Lender and Funder Requirements: Many private foundations, major donors, and financial institutions require audited financial statements as a condition of funding or credit. Board Governance: Even when not required, many boards choose to conduct independent audits to fulfill fiduciary responsibilities and demonstrate transparency. The Audit Process A financial statement audit follows a structured process: Planning: The auditor meets with management to understand the organization’s operations, internal controls, and risk areas. A document request list (PBC list) is provided. Fieldwork: The auditor performs testing, confirms balances with third parties, reviews contracts and board minutes, and evaluates internal controls. Reporting: The auditor issues an opinion on whether the financial statements are presented fairly in accordance with GAAP. A management letter may identify control weaknesses and recommendations. Follow-Up: For Single Audits, corrective action plans are tracked, and prior-year findings are reviewed in the next audit cycle. Preparing for an Audit Organizations can prepare for an audit by maintaining clean, up-to-date books throughout the year, documenting internal controls, and reconciling accounts monthly. A pre-audit readiness assessment can identify gaps before the auditor arrives. When a Review or Compilation Is Sufficient Not every organization needs a full audit. A review provides limited assurance through analytical procedures and inquiries, and is often sufficient for smaller organizations or those with fewer reporting requirements. A compilation organizes financial data into statement format without providing assurance, and is appropriate for internal management or simple loan applications. The right level of service depends on your funders, lenders, and governance requirements. How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services provides financial statement audits, reviews, and compilations for nonprofits across Virginia and Washington DC. Our team also conducts Single Audits under the Uniform Guidance for organizations receiving federal awards. For more information, visit https://novataxservices.com/audit-attestation-services/ or schedule a free consultation. Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws are subject to change, and individual circumstances vary. Consult a qualified tax professional for advice regarding your specific situation.
The IRS released its annual inflation adjustments for tax year 2026 in Revenue Procedure 2025-32, incorporating amendments from the One, Big, Beautiful Bill . More than 60 tax provisions were adjusted, affecting tax rate schedules, standard deduction amounts, credit limits, and estate tax exclusions. This guide summarizes the key changes for tax year 2026 (returns filed in 2027) and explains what they mean for individuals and businesses. Tax Rate Schedules for 2026 The top tax rate remains 37% for individual single taxpayers with incomes greater than $640,600 ($768,700 for married couples filing jointly). The other rates and thresholds are : 35% for incomes over $256,225 ($512,450 for joint filers) 32% for incomes over $201,775 ($403,550 for joint filers) 24% for incomes over $105,700 ($211,400 for joint filers) 22% for incomes over $50,400 ($100,800 for joint filers) 12% for incomes over $12,400 ($24,800 for joint filers) 10% for incomes of $12,400 or less ($24,800 for joint filers) Alternative Minimum Tax Exemption For tax year 2026, the AMT exemption amount is **$90,100** for unmarried individuals and begins to phase out at $500,000. For married couples filing jointly, the exemption is **$140,200**, with phase-out beginning at $1,000,000 . Estate Tax Exclusion Estates of decedents who die during 2026 have a basic exclusion amount of **$15,000,000**, up from $13,990,000 for estates of decedents who died in 2025 . This significant increase is a direct result of the One, Big, Beautiful Bill. Adoption Credit The maximum credit allowed for adoptions for tax year 2026 is the amount of qualified adoption expenses up to **$17,670**, up from $17,280 for 2025. Up to $5,120 of this credit may be refundable . Employer-Provided Childcare Credit Expansion The One, Big, Beautiful Bill significantly enhanced the employer-provided childcare tax credit for tax year 2026. The maximum credit increases from $150,000 to **$500,000**, and to $600,000 if the employer is an eligible small business . This provision is designed to encourage employers to provide childcare benefits to their employees. Earned Income Tax Credit The tax year 2026 maximum Earned Income Tax Credit amount is **$8,231** for qualifying taxpayers with three or more qualifying children, up from $8,046 for tax year 2025 . The Federal Scholarship Tax Credit (Beginning 2027) Beginning January 1, 2027, individual taxpayers may be able to claim a federal scholarship tax credit for certain cash contributions of up to $1,700 to Scholarship Granting Organizations (SGOs) . An SGO is a charity that awards scholarships to help students pay for elementary and secondary educational expenses. Important details include: A state or the District of Columbia must choose to participate and provide a list of SGOs to the IRS before taxpayers can donate and claim the credit The credit is nonrefundable but can be carried forward for up to 5 years The IRS issued proposed regulations in October 2026 to implement the credit How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services helps individuals and businesses understand the 2026 inflation adjustments and plan for the new credit provisions. Our CPAs stay current with IRS guidance and can help you maximize your eligible benefits. For more information, visit https://novataxservices.com/ or schedule a free consultation. Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws are subject to change, and individual circumstances vary. Consult a qualified tax professional for advice regarding your specific situation. Blog 3: Small Business Filing and Recordkeeping: An IRS Guide for 2026 Introduction: The Foundation of Compliance There are approximately 57 million small businesses and self-employed taxpayers in the United States, including corporations and partnerships with assets under $10 million, sole proprietors, independent contractors, and gig workers . For all of them, accurate filing and recordkeeping are the foundation of tax compliance and financial health. The Taxpayer Advocate Service (an independent organization within the IRS) published updated guidance in May 2026 outlining small business filing and recordkeeping requirements . This guide summarizes the key points. Filing Requirements by Entity Type The federal tax forms a business must file depend on its entity type : Sole Proprietor Income Tax: Form 1040/1040-SR, Schedule C or F Self-Employment Tax: Form 1040/1040-SR, Schedule SE Estimated Tax: Form 1040-ES Employment Taxes: Forms 940 and 941, 944, or 943 Partnership Annual Return of Income: Form 1065 Partner’s Income Tax: Form 1040/1040-SR, Schedule E Corporation (C or S) C Corporation Income Tax: Form 1120 S Corporation Income Tax: Form 1120-S Estimated Tax: Form 1120-W (C-Corp only) S Corporation Shareholder Income Tax: Form 1040/1040-SR, Schedule E Recordkeeping Requirements The Taxpayer Advocate Service emphasizes that good records can assist in preparing financial records, tracking property and deductions, knowing where to target funding, and reducing expenditures to optimize profit . At a minimum, records should track: Gross Receipts: All income from business operations Inventory: Including any merchandise withdrawn from sale for personal use Expenses: All costs incurred in running the business The IRS provides several publications to assist small businesses, including Publication 334 (Tax Guide for Small Business), Publication 583 (Starting a Business and Keeping Records), and Publication 463 (Travel, Gift, and Car Expenses) . Estimated Tax Payments If you expect to owe self-employment tax of $1,000 or more** for 2026, you may need to make estimated tax payments using Form 1040-ES . For 2026, the maximum amount of self-employment income subject to Social Security tax is **$184,500 . Small business owners and self-employed individuals should calculate their estimated payments carefully to avoid underpayment penalties. The Value of Professional Guidance The Taxpayer Advocate Service notes that the federal tax forms vary depending on business type, and that small business taxpayers should understand their filing requirements to file accurate returns . A qualified CPA can help you determine which forms apply to your business, set up a recordkeeping system, and calculate estimated tax payments accurately. How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services provides tax preparation, bookkeeping, and advisory services for small businesses across Northern Virginia and Washington DC. Our CPAs
The Working Families Tax Cuts, enacted through the One, Big, Beautiful Bill, introduced some of the most significant changes to individual taxation in recent years. For taxpayers filing in 2026 and 2027, these provisions create new deductions and modify existing ones in ways that require careful attention. The IRS has issued extensive guidance, including Fact Sheets and FAQs, to help taxpayers understand and claim these benefits . This guide explains the core provisions of the Working Families Tax Cuts, who qualifies, and how to prepare your records for the upcoming filing season. The New Deductions: Tips, Overtime, and Car Loan Interest No Tax on Qualified Tips Effective for tax years 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that the IRS identifies as customarily and regularly receiving tips . The tips must be reported on Form W-2, Form 1099, or another specified statement, or reported directly by the individual on Form 4137. The maximum annual deduction is **$25,000**. For self-employed individuals, the deduction cannot exceed net income from the trade or business where the tips were earned. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for married couples filing jointly) . No Tax on Qualified Overtime Also effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the portion of overtime pay that exceeds their regular rate of pay—for example, the “half” portion of “time-and-a-half” compensation required under the Fair Labor Standards Act . The maximum annual deduction is **$12,500** ($25,000 for married couples filing jointly). The deduction phases out at the same income thresholds as the tips deduction. The IRS issued Fact Sheet 2026-01 in January 2026, providing answers to frequently asked questions about the overtime deduction, including eligibility for federal employees and where to find supplemental information . No Tax on Car Loan Interest Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use. The maximum annual deduction is **$10,000**, and the deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers) . A qualified vehicle is a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that underwent final assembly in the United States. Taxpayers must include the Vehicle Identification Number (VIN) on their return for any year they claim the deduction. The Enhanced Deduction for Seniors Effective 2025 through 2028, individuals age 65 and older may claim an additional **$6,000 deduction** ($12,000 for a married couple if both spouses qualify). This is in addition to the standard deduction for seniors available under existing law . The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers). To qualify, you must be age 65 on or before the last day of the tax year. The deduction is available to both itemizing and non-itemizing taxpayers. Standard Deduction Increases for 2026 The IRS released the 2026 inflation adjustments in Revenue Procedure 2025-32, incorporating amendments from the One, Big, Beautiful Bill . For tax year 2026 (returns filed in 2027), the standard deduction is: $32,200 for married couples filing jointly $16,100 for single taxpayers and married individuals filing separately $24,150 for heads of households These amounts represent an increase from the 2025 figures of $31,500, $15,750, and $23,625 respectively . Recordkeeping and Documentation The IRS emphasized in Fact Sheet 2026-05 that the new deductions do not change how taxpayers file their returns—they change what information must be included . Taxpayers should maintain: Tip records: Form W-2 or 1099 showing reported tips, or Form 4137 if self-reporting Overtime records: Documentation from employers showing qualified overtime compensation Car loan documents: Loan agreement showing the VIN, origination date, and interest paid Senior deduction: Proof of age and income documentation to confirm phase-out status How Nova Tax & Accounting Services Can Help Nova Tax & Accounting Services helps individuals and families navigate the new Working Families Tax Cuts provisions. Our CPAs can review your records, confirm eligibility for each deduction, and ensure your return is prepared accurately. For more information, visit https://novataxservices.com/ or schedule a free consultation. Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws are subject to change, and individual circumstances vary. Consult a qualified tax professional for advice regarding your specific situation.