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Q&A

End of Year Donations

Jan 6th, 2011
by Alan.
4 comments

Is the end of the year the end of your year? We get questions like this all the time:

Question — The end of our fiscal year is December 31. Our offices our closed from December 31 through January 3rd. If funds are sent on or before December 31 but not received and deposited until after January 3, do those funds get credited for the previous fiscal year as a donation?

Answer — You should set a cut of date in January for when you start recording gifts as 2011 rather than 2010. A week to ten days in is usually sufficient. If funds are sent prior to 1-1-11 (I prefer to use the post mark on the envelope as a guide rather than the date on the check) I would definitely honor those as a 2010 contribution.

You would record those as 2010 income even though you deposit them in 2011. In QuickBooks, you would list each of the checks as a sales receipt and date them for the appropriate December date and have the funds go to Undeposited Funds (you may have to create or activate that account). Then record the bank deposit of those funds on the day they were deposited. The income matches the donor intent and your checking account will reconcile up nicely to the bank statement. Then all you have to do is get the donor thank-yous out so they can prepare their tax returns.

Other ideas out there? Questions? Ask them or tell us in the comments below.

2011 IRS Mileage Rate

Dec 5th, 2010
by Alan.
3 comments

The Internal Revenue Service has announced the 2011 Standard Mileage Rates. From their press release:

Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 51 cents per mile for business miles driven
  • 14 cents per mile driven in service of charitable organization
  • 19 cents per mile driven for medical or moving purposes

Click here for the full press release and more information.

2010 IRS Mileage Rates

Dec 14th, 2009
by Alan.
2 comments

From the IRS’s Website:

The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 50 cents per mile for business miles driven
  • 16.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

Click here for the full news release.

Even More Questions and Answers

Nov 4th, 2009
by Alan.
1 comment

Questions?Here are even more nonprofit accounting and financial questions that have come to from this site and from my workshops and my answers.

Question – California’s RRF-1

Are there any income minimums for filling out the California Attorney General’s Registration / Renewal Fee Report (RRF-1 form)?

Answer – No, but the fees charged vary based on the organization overall income.

Question – Donation Transactions

Let’s say Joe buys a necklace for $1,000.00. He gives it to a nonprofit to sell at auction. Two questions:

  1. It sells for $1,200.00 – what year end donation value does Joe get on his year end donation statement.
  2. It sells for $800.00 – what year end donation value does Joe get on his year end statement for IRS.

Also, if it sells for $1,200.00 what donation value does the purchaser get on her year end tax statement? My concern is who to give the donation credit to for year end tax purposes.

If someone gives a basketball that a sports star signs and the basketball cost $10.00. Yet someone is a real fan of the sports star and is willing to purchase the basketball for $1,000,000.00 – does the purchaser not receive any donation value for income tax purposes, he gets no statement at the end of the year, even though he gave $1,000,000.00 for a $10.00 basketball? And the person who bought a $10.00 ball and had a signature put on it gets a year end tax donation statement for 1,000,000.00?

I have read GAAP until I am blue in the face and cannot find an answer to the donation side of this issue. Lots on the bookkeeping of the sold asset, but not on what to report to IRS as donation value per donor and purchaser.

Answer -In your example above, for the person who gave the ball to be auctioned you do not put a value on the donor acknowledgment. It is not the nonprofit’s job to give tax advice to the donor, and by giving them a value that is what you are doing. Just simply say, “Thank you for the donation of the autographed basket ball.” What the donor values it on their tax form is between them and the IRS.

For the person who pays $1,000,000.00 for the ball you would give them a receipt showing that they donated $1,000,000.00 to the nonprofit less the cost of a basket ball. If you can find a value for a similarly signed ball, say on Ebay or something, you could tell them the value is their donation less the cost of the autographed ball.

Donation rules tend to be made by the IRS rules and not come from GAAP rules. A really good resources for this is IRS publication 1771. Gives you the rules and even sample language. Please check out this post, it also help answer your questions.

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