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Understanding the IRS Form 990 Mitch Weintraub, CPA Cordia Partners Michael Drennan, CPA Cordia Partners Tamara Vineyard, CPA Dixon Hughes Goodman Sponsored.

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Presentation on theme: "Understanding the IRS Form 990 Mitch Weintraub, CPA Cordia Partners Michael Drennan, CPA Cordia Partners Tamara Vineyard, CPA Dixon Hughes Goodman Sponsored."— Presentation transcript:

1 Understanding the IRS Form 990 Mitch Weintraub, CPA Cordia Partners Michael Drennan, CPA Cordia Partners Tamara Vineyard, CPA Dixon Hughes Goodman Sponsored by Member Services, United Way NCA September 30,

2 Today’s Discussion 1.IRS Form 990 Filing Requirements for 501(c)3 exempt organizations Requirements for United Way NCA members United Way NCA Membership Criteria 2.Best Practices for Accounting and Preparing Form 3.Resources 2

3 IRS Form 990: IRS Requirements The 990 can be a positive, beneficial tool! Almost all organizations must file annually. Due 5½ months after fiscal year ends (an automatic 3 month extension may be requested by filing Form 8868). Depending on receipts and total assets, organizations file one of three possible forms: 990 N (e-postcard): Gross receipts ≤ $50, EZ: Gross receipts < $200,000 and total assets less than $500,000. Or full IRS Form 990 3

4 IRS Form 990: IRS Requirements Consequences of failure to file: Automatic revocation of tax exemption status. The maximum penalty imposed regarding any one return is the lesser of $10,000 or 5 percent of the gross receipts of the organization for the year. In the case of an organization having gross receipts exceeding $1,000,000 for any year, the penalty is increased to $100 per day with a maximum penalty of $50,000. 4

5 IRS Form 990: United Way NCA Requirements If you file a 990N or a 990EZ with the IRS: Must provide a Pro Forma IRS Form 990 Page 1: A-M, Part 1 (Summary) lines 1-4 ONLY, Part II (Signature Block); Pages 7-8: Part VII (Compensation) Section A; Page 9: Part VIII (Statement of Revenues); Page 10: Part IX (Statement of Functional Expenses); Page 12: Part XII (Financial Statements and Reporting). Copy of what was filed with the IRS (990N or 990 EZ) 5

6 IRS Form 990: United Way NCA Requirements If you file a full IRS Form 990 with the IRS: Complete, signed copy of the filed 990, including all schedules (except B). Organizations with revenue in excess of $100,000 must include a copy of an independent audit. Audit must cover same period as IRS Form 990. If you are not required to file (religious orgs, chapters): Must provide a Pro Forma IRS Form 990 6

7 IRS Form 990: Example 7

8 Important Criteria for United Way NCA Eligibility Application IRS Form 990 (and audit, if required) must: Cover a fiscal year ending not more than 18 months prior to January 2015 (i.e. ending on or after June 30, 2013). 990 must show total revenue of $50,000 or greater (Page 1, line 12). Mistakes to Watch For: Are you recording all revenue sources? In-kind or non-cash donations Loans converted to donations 8

9 Important Criteria for United Way NCA Eligibility Application IRS Form 990 documents must: Reflect AFR (admin. and fundraising rate) of 35% or less. Calculated from Page 9 (Part VIII - Statement of Revenue) & Page 10 (Part IX - Statement of Functional Expenses) Membership application calculates the AFR automatically Mistakes to Watch For: Expenses are not properly allocated Money spent to provide programs must be recorded as such Labor or effort costs must also be allocated 9

10 Best Practices for Accounting and Preparing IRS Form

11 Best Practices: What are….? Program Services Activities that further the organizations exempt purposes. Management and General Expenses Expenses related to overall operations and management. Usually includes: Board of Director meetings, legal services, accounting, general liability insurance, office management, auditing, HR, annual report production, management of investments. Anything not specific to programs or fundraising. Fundraising Expenses Expenses incurred in soliciting cash and noncash contributions, gifts and grants. Includes expenses incurred participating in federated or United Way campaigns. 11

12 In-Kind Contributions Generally, they are non-cash donations of: Property/Goods Services Use of facilities (rent) or equipment How do you value In-Kind Donations? Generally, in-kind contributions are recorded at the fair market value of the donation at the time of donation Fair market value is the price at which a willing buyer would purchase the good or service Examples of fair market value: Donated stock – fair value of publicly traded stock on the date of donation Donated clothing – fair value per thrift store listing Donated food – fair value per pound per local area Food Bank 12

13 In-Kind Contributions (Continued) More Examples: Donated facilities- value per real estate assessment or similar means to estimate annual rent Donated artwork or other collectible- value from donor appraisal for donor’s personal return Contributed services have special requirements: Services provided must create or enhance nonfinancial assets Require specialized skills, are performed by those with specialized skills Service would otherwise be purchased Fair value of these services can be determined through comparable quotes for similar services 13

14 In-Kind Contributions (Continued) Reporting In-Kind Contributions on Form 990: Schedule B (for those required to file) discloses contributions between cash and non-cash by donor Schedule M is required for aggregate in-kind contributions over $25,000 Doesn’t include donations of services, use of facilities, use of materials or equipment Donations of services, use of facilities, and use of materials or equipment are not reported as income and expense on form 990; they are reversed on Schedule D Part XI as reconciling items between audited financial statements and Form

15 Other Mistakes to Watch For: Form is incomplete Pro forma does not include required pages Signature is missing Accounting method is not indicated (cash/accrual) For United Way / CFC participation, those with greater than $100,000 revenue must use the accrual accounting method. Form is manually prepared More opportunity for mathematical or other errors Board of Directors information is inconsistent Information on Page 1 must match information on Page 7 (Part VII) 15

16 Cost Effective Solutions to Improve Accounting and Reporting Implement QuickBooks system QuickBooks online starting at $12.95/month QuickBooks Pro 2012 software starting at $ Consider implementation of Bill.com, an electronic bill pay system that integrates with QuickBooks Record and reconcile all transactions Develop basic policies and procedures Maintain accurate time sheets (or monthly effort reports). Signed, dated and initialed & dated as approved. Recruit appropriate board members (Minimum 3, ideally more) Treasurer – attempt to find individual with finance background 16

17 Contact Info and Resources Member Services : Phone: (703) , Option 1 If you would like electronic copies of the General Accounting Policies & Procedures Manual and/or the Time Sheet template, please us. Additional Resources: Determining Fair Value of Non-Cash Property Search for the Form 990 of any organization at 17


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