Feb 22 2014

Self-Dealing Transactions

Written by Cynthia A. Cox CPA

Here’s an all-too-frequent scenario in nonprofit organizations that places the organization at risk to be assessed excise tax payments by the IRS. A board member of an Organization purchases land adjacent to the nonprofit knowing that the it is looking to either purchase or lease adjacent properties. The board member then leases the property to the Organization for fair market value. The lease is voted on by the full board and everyone is aware of the lease cost. The board would have paid any other potential owner the same amount because it was reasonable. The board was also fully aware that the property was owned by one of its own members. By entering into this lease agreement the board has just compromised its tax-free status and could be assessed an excise tax for this arrangement.

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Jul 25 2013

The IRS Scandal What It Means to You

Written by Cynthia A. Cox CPA

Many non-profit organizations are understandably shaken and disturbed by the revelations coming out of the current scandal at the Internal Revenue Service. The IRS has been accused of using its power to prevent or delay ideologically conservative non-profit organizations from securing their tax-exempt status. Whether the reason for the delay is politically motivated or not, what lessons can we learn from the alleged abuse of power by the IRS?

First, it is critical that all non-profits stay current with the required governmental filings. These filings include everything from Form 1023 filed at inception to payroll tax reports and Forms 990 that are filed annually. Not all non-profits have the same filing requirements, but all of them have at least one filing requirement. Consult with a CPA experienced in non-profit taxation to ensure your organization knows exactly what it is required to file. If you are a church, you do not have to file a 990.

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Jul 25 2013

Who Commits Financial Fraud?

Written by Christopher Russell

As someone charged with the management or governance of a non-profit organization, you have a responsibility to your supporters to be a good steward of the monies you receive. While this responsibility includes the obvious, such as making and using a good budget and keeping administrative costs low, it also includes a responsibility to beware of fraud within your organization.

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Apr 07 2013

Bank Reconciliations as a Tool for Internal Controls


Is it Really Important to Reconcile the Bank Statements Before Issuing the Monthly Financials?

The very first step I always take toward preparing monthly financial statements is to reconcile the bank statements. Without this process, you cannot know if the information you are presenting is accurate. Two important benefits can be gleaned from the reconciliation process.

First, it helps ensure that all transactions have been recorded in the general ledger. By comparing the transactions that cleared the bank with the transactions recorded in your general ledger, you know if everything has been included. You will also want to verify the numerical sequence of all checks written during the month, including the voided checks, to be sure that they have all been recorded. If you receive copies of the deposit slips, remember to verify that the cash portion of each deposit agrees with the cash received as shown in your count sheets.

Secondly, bank reconciliations help safeguard your assets by making sure that there is no unauthorized use of company funds. All cancelled checks should be examined to make sure the payee is a vendor of your organization and that the signer is an authorized check signer. Don’t forget about those bank drafts and electronic withdrawals; it is too easy today for someone to make a withdrawal from a bank account with minimal confidential information. To prevent this, we recommend that you compare the withdrawals on the bank statement with the invoices that support the disbursement. Fraud sometimes occurs when the bookkeeper decides to pay her personal bills out of her employer's bank account!

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Jan 25 2012

Are You Doing The Math?

You have completed the 4th quarter 941 and you have mailed out the W-2's, but did you compare the numbers? The IRS will compare them and send you one of their tacky letters if there are differences. So before you send that W-3 to the IRS, check the following calculations...

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Jan 23 2012

The $64,000 Question


The $64,000 question for any employer is: "What goes into taxable income?" For the minister, we often think that the congregation can "give" him a love offering, gift cards, or personal use of a Church vehicle, etc, and it will not be considered taxable income. Maybe you are saying "Our pastor is self employed according to the social security administration, so the church wants to pay him extra to cover what would have been the church's half of his social security. That's not taxable income to him." Unfortunately, it is. According to the IRS, all payments that are made to an employee because of his relationship with his employer are taxable unless the IRS has excluded them by statue.

What does that mean for the Church? It means that if a church member wants to "bless" his pastor or other minister on staff, and he gives a check to the church office to give to the minister, it is taxable income to the recipient. If another member wants to give a check to the minister who is retiring from the church, and he gives a check to the church office to give to the minister, it is taxable income to the recipient. The love offering or retirement gift was given because of the relationship between the member and the pastor of that church. It is a result of his employment at the church, and the IRS considers it to be income to the recipient.

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Jan 23 2012

1099-K... What is it?


January 31 is approaching and the tax forms are accumulating. Your organization or church has prepared the 1099-Misc forms for 2011, the W-2s have been sent out, and you're ready to breathe a sigh of relief. Then you get a new form in the mail, a 1099-K. "Oh no, another form,” you think. “What do I do with it?" For most non profits, the answer...

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