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Financial Best Practices

Financial Best Practices. 2009 Leadership Conference October 30, 2009 Harrisburg, PA. Not-for-Profit vs. Tax Exempt. Not-for-Profit = no net proceeds to individuals in control Tax Exempt designation by IRS Twenty-five possible classifications 501(c)(3) – Charities

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Financial Best Practices

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  1. Financial Best Practices 2009 Leadership Conference October 30, 2009 Harrisburg, PA

  2. Not-for-Profit vs. Tax Exempt • Not-for-Profit = no net proceeds to individuals in control • Tax Exempt designation by IRS • Twenty-five possible classifications • 501(c)(3) – Charities • 501(c)(6) – Business leagues (professional associations) • May still owe some taxes on unrelated business income • File IRS Form 1024 to obtain status 2

  3. Incorporate or Not? • Limited liability • Incorporation governed by State Law • Unincorporated professional association 3

  4. Employer Identification Number (EIN) • Tax Identification Number for non-persons (associations, corporations, etc.) • 25-1542364 • File Form SS-4 with IRS to obtain • Form W-9 4

  5. Form W-9 5

  6. Liability Insurance • Errors & Omissions (E&O) liability insurance – protects volunteer leaders • Incorporation is a prerequisite to obtaining E&O insurance • SHRM endorses 6

  7. Accounting & Finance • Cash basis or Accrual basis • Cash basis is most common • Fiscal year = Calendar year? • Document, Document, Document 7

  8. Financial Statements • Statement of Financial Position (Balance Sheet) • Statement of Activity (Income Statement) • SFAS 116 • Deals with contributions, particularly restricted funds • Example: Scholarship donations • SFAS 117 • Deals with presentation, particularly for restricted funds • Also requires a functional allocation of expenses • Budget 8

  9. Accounting Systems • Quicken • Microsoft Money • Several on-line systems available for small non-profits 9

  10. Controls • Approval of disbursements • One or two signatures on checks? • Reconcile bank statements regularly • Audit annually 10

  11. Tax Filing • Federal • Gross Receipts < $25K – not required • $25K <= Gross Receipts <$100K – Form 990EZ • $100K <= Gross Receipts – Form 990 • Pennsylvania – BCO 10 & BCO 23 11

  12. www.Efile.form990.org On line expert system for filing federal and state forms Like TaxCut or TurboTax Free if gross revenue is less than $100,000 There are many other free, on-line systems for filing Form 990. Look on the IRS website (www.irs.gov) for a list Tax Filing 12

  13. Form 1099 Misc to individuals if Paid >= $600, and A person (not a corporation) Payroll (if employees) FITW FICA OASDI FICA HI SITW UI Local Withholding Tax Filing 13

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