Tax Forms

The IRS Wants To Hear From You

If you have not filed a a form 990 for the last three years you may be in trouble. If you work with a nonprofit and have just asked yourself, “what is a 990?” read this and these, then come back. But since this is the Not-For-Profit Accounting blog devoted nonprofit accounting issues I’ll assume my readers know all about 990s. But there may be folks new to the sector out there, maybe you know a new board member, so please pass this information on to them.

As this press release from Guidestar says,

The IRS will begin revoking exemptions on May 16, 2010, but will wait until 2011 to send revocation notices.

If you miss the first filing deadline for 2009 990s of May 15 2010 (the deadline for nonprofits who have calendar year fiscal years that end on December 31) the IRS will start pulling exceptions in six months or so. More about that from the IRS can be found here.

Financial Management

Sep 30th, 2009

by Alan.

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I have written before about creating policies for your nonprofit. Now nonprofits have a new tool they can easily use to create their own financial management policies and plans. The Nonprofit Risk Management Center has a new tool called My Financial Management Plan where users can go through up to 21 different modules on nonprofit financial and accounting topics to create a variety of policies and procedures to help manage, organize and streamline their financial operations. From the Risk Management Center:

Nonprofit leaders have spent countless hours developing the necessary components of a financial management plan. But for many organizations the components, from an annual budget, return on investment strategy, cash flow planning tool and more, remain disparate. The nonprofit lacks a cohesive plan that reflects the organization’s commitment to the effective stewardship of its assets. My Financial Management Plan was created to guide leaders in updating the components of their financial management systems and integrating these components into a cohesive plan. This powerful system features covers topics such as Board Fiduciary Obligations, Managing Fraud Risk, Managing Cash Flow, Return on Investment Analysis, Cost Allocation, Classifying Net Assets, Managing Cash Flow, Budgeting, the form 990 and Grants and Contributions.

My Financial Management Plan is a powerful tool to turn financial management strategies, policies and protocols into a plan that will help your nonprofit demonstrate both competence and accountability. Use the “Plan Modules” feature to go through the 22 system modules. Each module offers the opportunity to upload existing material from your financial management system, create new content (based on our templates or created “on the fly”), or skip sections you don’t wish to use. Use the “Manage My Plan” feature to edit your draft plan, upload supporting PDF files and view/download your plan. The system also features a classroom with easy-to-understand articles and resources on a wide range of financial management topics.

I was fortunate enough to work on this project and create a lot of the module content. I know that this will be a great tool for nonprofits to learn about what they need know about with regards to their nonprofit’s finances and creating the appropriate policies and procedures to ensure good financial stewardship. For those not ready to buy access to the program you can register with the site to receive periodic email updates on nonprofit financial issues.

If you have any questions or comments about the program please let me know via email or in the comments below.

Nonprofit News Update

Aug 20th, 2009

by Alan.

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roundup This weeks update features a great piece on using Social Capital, more human resource topics that didn’t make it in to the last post and the latest from the Internal Revenue Service that might affect your organization.

The Power of Social Capital

The Fieldstone Alliance has a great e-newsletter and this topic caught me eye: Mapping Your Networks to Mine Valuable Resources. From the article:

After Exploring all possible options for reducing expenses and increasing revenues, many nonprofits are stymied—how can they survive this downturn? Every nonprofit has another valuable resource that they can tap—social capital. Positive, productive relationships represent social capital, which is just as important (well, almost as important) as money in the bank.

Social capital has been described as the resources available to people based on the networks their relationships give them access to. Just as a skilled plumber knows how the water is piped throughout the house, a skilled nonprofit or community leader knows how social capital flows through their networks or community.

Check out the article for more.

More on Nonprofits Human Resource Issues

Are you, or have you ever had to draft a severance agreement? This article talks about a new publication from the Equal Employment Opportunity Commission that may be of help, even though some are renaming the document, “How to Sue Your Employer.”

Exempt employees can present a challenge to employers, nonprofit or for-profit, especially when it comes to the issue of docking an employee’s pay. Make a mistake and you can violate their exempt status and open your self up to a world of financial and legal hurt. This article and this article offer some guidance that may be of help. You should also make sure there are not any separate, or even more stringent state rules that may apply to your organization as well.

IRS Updates and News

For those who have been waiting, efile.form990.org is ready to help you through filling out your 2008 form 990. They can also help you with several state filings as well, please do pay them a visit.

The final regulations for the 990-N, the electronic post card filing for small nonprofits have been released. No changes from the draft version, but it should be noted that organizations that are required to file the form and fail to do so for three consecutive years will automatically lose their tax-exempt status. Revocations will begin in May 2010.

The latest Form 990 filing tip is all about related organizations and schedule R. What is a related organization you ask? From the IRS:

Related organizations are organizations that stand in a parent/subsidiary relationship, brother/sister relationship, or supporting/supported organization relationship. Supporting and supported organizations are defined in section 509(a)(3) and 509(f)(3). Determination of the first two relationships depends on a definition of control set forth in the Form 990 instructions glossary and Schedule R instructions. The definition of control depends on whether the organization has owners or persons with beneficial interests.

Finally, the IRS wants us to make sure we handle donated property and non-cash contribution transactions the right way. Here is a page with several more links that might be of interest to any organization that receives non-cash contributions.

Employee Classification

Jun 1st, 2009

by Alan.

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A little of this, and a little of that today; employee classification issues and two Q&A’s: payroll and capitalization issues.

Exempt vs. Nonexempt, Independent Contractor vs. Employee

I came across what I think is an interesting piece, The workplace violations feds will be investigating this year. Not surprisingly there is an increase in funding for the Wage and Hour Division, specifically to look and exempt vs. non-exempt employee classification. Another popular item to look at is the misclassification of employees vs. independent contractors.

Why are these areas of interest to look at? Two reasons I can think of off hand, with the first being to protect workers. Exempt vs. non-exempt, independent contractor vs. employee, all of those are very specific designations with differing employer responsibilities. Putting someone in the wrong bucket may violate an individual’s rights. The second reason is that the IRS wants to make sure it is getting all that it is due from the employer or individual in the form of payroll and income tax. Even part 5 of the updated form 990 asks more questions about payroll and withholding amounts.

Misclassification of employees has always been a big compliance problem for nonprofits and forprofits alike. I have heard more than once someone tell me, “No one would sue us, we’re a nonprofit.” If that was ever true, it is true no longer. Any employee, no matter what the sector, who feels unfairly treated may sue their employer. To help mitigate lawsuits, as well as unwanted attention from state and federal regulators I encourage all nonprofit employers to make sure the folks they are paying are classified correctly. For starter the IRS has a nice pdf on Independent Contrator issues, and other resources here. A good primer on exempt and nonexempt issues can be found here.

Questions and Answers: Payroll

I just started doing bookkeeping for a non profit. I have to set up payroll and payroll takes but I’m not sure where to start. Do I have to notify the IRS? How about my state taxes?

Are you using a payroll company? I would strongly recommend you do. There are plenty of companies out there. They usually handle all the forms and take all the responsibility in case anything goes wrong. Payroll is one of the few things I have intentionally avoided learning about as it is so cheap to outsource it, it is pretty much a commodity at this point. I recommend comparing the price and services they offer. Do they offer a time tracking system? Do they integrate with your accounting software? Do you have the option of doing it all on-line?

Questions and Answers: Capitalization

We received $30,000 to be used to replace part of our building. The cost to do this was $40,000. What amount should be capitalized – the entire $40,000 or the $10,000 that we had to come up with?

The entire cost of the repair should be capitalized. Regardless of how it was paid for the cost was $40,000.00.

Tax Forms

The IRS Wants To Hear From You

Financial Management