AFCEA International Chapter Accounting and Tax Update 13 May 2013 AFCEA EAST 2013
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
TAXES • IRS Filing requirements now in place for all non-profit entities. • Loss of exempt status – automatic with 3-year non-filing of returns • What to file: • Form 990 N – e-postcard • Form 990 – EZ • Form 990 • IRS Publication 557 – Tax-Exempt Status of Your Organization – everything you wanted to know about filing requirements and tax exemptions!!
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
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.
Form 990 - EZ Form 990 – EZ can be used based on the following: Gross receipts less than $200,000 and total assets less than $500,000 Prior gross receipts and total assets amounts were much higher – increased compliance movement is towards the Form 990.
Form 990 Use this form if 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)(6) Other Schedules – depends on the whether – whether or not they are applicable to the organizations’ operations
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.
The Bottom Line Stating the obvious – this is complicated Your chapter board and your treasurer are responsible for the tax filings. The IRS will work with you, but they are looking for compliance as well. Non-profit’s are the next target of opportunity for the IRS. Your treasurer should have a financial background in order to report to the board how the finances really are. This includes compliance with tax filings. Solicit a CPA for the board – many will volunteer their time and tax return preparation.
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.”
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