1 afcea international chapter accounting and tax update 4 october 2013 afcea international
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AFCEA International
Chapter Accounting and Tax Update
4 October 2013
AFCEA International
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WHAT’S NEW WITH TAXES?
NOT TOO MUCH
• No changes in the tax codes relative to filing limits and types of returns– Form 990-N (e-postcard) – gross receipts under $50k – Form 990-EZ – gross receipts under $200k and total assets under $500k – Form 990 – gross receipts over $200k or total assets greater than $500k
• No changes in filing timeline – 15th day of the 5th month following year-end– 30 September year-end – due NLT 15 February– 31 December year-end – due NLT 15 May
• Some reminders:– Don’t file for 3 consecutive years – you lose your tax exempt status– Form 990 – public document open to public inspection– Late filing – hefty penalties - $10k to $50k – File an extension– IRS Publication 557 – everything you ever want to know about NPO’s
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Form 990-N (e-postcard)
Form 990 – N (e-postcard): For small tax exempt organizations where annual “… gross receipts are normally $50,000 or less.”
You need 8 pieces of information – EIN, tax year, legal name and address, any other names used by the organization, name and address of the principal officer, web site (if applicable), confirmation of gross receipts normally $50,000 or less, statement that the organization has not terminated operations.
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Form 990-EZ and Form 990
File the Form 990–EZ when:
Gross receipts less than $200,000 and total assets less than $500,000
File the Form 990 when:
Gross receipts equal or exceed $200,000 or total assets equal or exceed $500,000.
Schedule A – Public Charity Status and Public Support – 501(c)(3)
Schedule B – Schedule of Contributors - 501(c)(3)
Schedule C – Political Campaign and Lobbying Activities – 501(c)(6)
Schedule D – Supplemental Financial Statements – 501(c)(3) and (6)
Schedule G – Supplemental Information Regarding Fundraising or Gaming Activities – 501(c)(3)
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Form 990-EZ and Form 990
Schedule I – Grants and Other Assistance to Organizations - 501(c)(3) and (6)
Schedule L – Transactions with Interested Persons - 501(c)(3) and (6)
Schedule O – Supplemental Information – 501(c)(3) and (6)
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When to file Form 990
The Form 990 (990, 990-EZ, 990-N) is due “…. by the 15th day of the 5th month after the organization’s accounting period ends.”
If your chapter operates on a calendar year, the return is due by May 15th. If you operate on a fiscal year end of September 30, the return is due February 15th.
If you can’t complete the return by that date, file for an extension. Use Form 8868 to request an automatic 3 month extension of time to file.
Failure to file – Code Section 6652(c)(1)(A) – gross receipts under $1M- $20/day or 5% of gross receipts up to $10,000
If gross receipts greater than $1M- $100/day up to $50,000
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Reinstatement of Tax Exempt Status
• Group exemption not an option – entity must file as a stand alone
• Retroactive reinstatement and reduced User Fee – expired December 31, 2012. User fees now $400 - $850 depending on gross receipts
• What to file for reinstatement:– Form 1023 (educational foundation) or 1024 (chapter) – Prior three years tax returns– Declarations and other supporting documentation
• New Determination Letter issued – new date for tax-exempt status – there may be a “taxable” gap
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ACCOUNTING OPERATIONS
• Each chapter and educational foundation is a separate and distinct legal entity. Therefore:– Separate bank accounts– Separate financial reporting– No commingling of funds
• When can the two meet in the middle?– Intercompany transactions
• Internal Controls – keeping the books clean– Revenues deposited timely, intact, and in the proper account– Disbursements by check– Approval processes– Board oversight– Accounting and Finance Policy Manual
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Contract Review and Execution
AFCEA Governance, By-Laws, Article XII, Section 5:
“No Chapter shall have signatory authority to obligate AFCEA International or the Chapter on any contractual obligation in
excess of $25,000. Any contract with a value or expense in excess of $25,000 must be reviewed and executed by AFCEA International in a manner consistent with the AFCEA
International Bylaws and Policy.”
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Contract Best Practices
• The contract must name the chapter as the executing party
• Review terms and conditions
• Check deposit amounts for reasonableness and due dates
• Force Majeure provisions
• Termination provisions
• Refunds of deposits
• Always buyer beware
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Contract Best Practices
• Management Services Agreements:
– Be clear with the terms of the agreement– Renewal Clause – automatic? Long term? – Terms defining a transition plan to a new service provider– The Chapter cannot delegate or assign fiduciary or management decision
making responsibilities – Data and Intellectual Property – web hosting, access to data, ownership of
data, requests for information– Provider cannot execute agreements for the chapter
• CPA Firms can be engaged for write up work, financial statement preparation and tax return preparation. The same terms apply to these agreements.
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The Bottom Line
Stating the obvious – this is complicated
Your chapter board and your treasurer are responsible for the tax filings and the integrity of the financial operations, internal controls, and financial reporting. The IRS will work with you on tax issues but they are also looking for compliance with the tax codes. Non-profit’s are a target of opportunity for the IRS.
Your treasurer should have a financial background in order to report to the board. This includes ensuring timely tax filings. Solicit a CPA for the board – many will volunteer their time and maybe services as well.
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