Dulin, Ward & DeWald, Inc.

Don’t Forget About the Small Business Health Care Tax Credit

2012-01-18T06:55:00.014-05:00

Posted by: Carrie Minnich

The IRS began sending out postcards in April 2010 to small employers notifying them of the new small business health care tax credit. The credit helps small businesses and tax-exempt organizations afford the cost of insurance for their employees.

To be eligible for the credit the employer must
• Pay at least 50% of the health insurance premiums for its employees (based on the single rate)
• Have less than 25 full-time equivalent employees
• Pay less than $50,000 in average annual wages

The maximum amount of the credit is 25% of the premium costs beginning in 2010 for tax-exempt employers and increases to 35% on January 1, 2014. The credit is phased out for organizations with average wages between $25,000 and $50,000 and with full-time equivalents between 10 and 25. For tax-exempt entities, the credit is also limited to the amount of the employer’s payroll taxes paid during the calendar year in which the tax-exempt entity’s tax year begins. Payroll taxes include the amount withheld from employee wages for income tax withholding and Medicare and the employer’s share of Medicare.

Form 8941, Credit for Small Employer Health Insurance Premiums must be filed to claim the credit. The amount of the credit from Form 8941 is then recorded on line 44(f) on Form 990-T, Exempt Organization Business Income Tax Return.

Are You Eligible?

1. Does your organization pay at least 50% of health insurance premiums for employees?
*If yes, continue to step 2.

2. Calculate the number of full-time equivalents.
Number of full-time employees (employees working at least 40 hours per week) _________
Number of full-time equivalents (total hours of part-time employees divided by 2,080 hours) _________
Total full-time equivalents _________
*If the total is less than 25 continue to step 3.

3. Calculate the average annual wages of employees.
Total annual wages paid to employees divided by the number of employees in step 1
*If the result is less than $50,000 then you may qualify for the tax credit.

After you have determined that you may qualify for the credit, use the information calculated above to complete Form 8941 or contact your tax advisor for assistance.

Payroll Tax Cut Extension

2012-01-04T06:55:00.010-05:00

Posted by: Carrie Minnich

Congress passed a two-month payroll tax cut extension at the end of December. The extension continues through February 29, 2012 the reduced payroll tax rate for employee Social Security of 4.2 percent that has been in effect for 2011. The lower rate; however, only applies to the first $18,350 of an employee’s wages. $18,350 is two-twelfths of the Social Security wage base of $110,100. This prevents the shifting of salary to the first two months of the year to take advantage of the lower rate. An additional income tax equal to 2 percent of the amount of wages over $18,350 but limited to $110,100 is imposed for those employees earning more than $18,350 in the first two months. The additional income tax would be recaptured on the employee’s 2012 individual tax return if the payroll tax cut is not extended for the remainder of 2012.

We will have to wait until the lawmakers return from their holiday recess to see if agreement can be reached to extend the payroll tax cut through the rest of 2012.

Due Date Extension

2011-12-29T06:55:00.008-05:00

Posted by: Carrie Minnich

The IRS has extended the due date for certain tax-exempt organizations. Organizations that file Form 990, 990-EZ, 990-PF or Form 1120-POL that are due (either original or first extended due date) on January 17, 2012 or February 15, 2012 have been extended to March 30, 2012. The IRS’s e-file system that processes tax-exempt returns will be off-line in January and February, which led to the extension. The extension does not apply to those organizations required to file Form 990-N.

Below is chart showing the normal filing dates for the 990 series of forms. Organizations specifically affected by the extension are those with year ends of August and September. Those organizations with year ends of May or June may also be affected if they have filed extensions.

2012 Standard Mileage Rates

2011-12-28T06:55:00.002-05:00

Posted by: Carrie Minnich

The IRS has released the standard mileage rates for 2012. Beginning on January 1, 2012 mileage rates are as follows:

55.5 cents per mile for business

23 cents per mile for medical or moving purposes

14 cents per mile for charitable purposes

The mileage rate for business and charitable purposes was not changed from the last update that took place on July 1, 2011. The medical and moving rate decreased .5 cents.

Contribution Substantiation

2011-12-21T06:55:00.003-05:00

Posted by: Carrie Minnich

In order for a donor to take advantage of a contribution on his 1040 as a charitable deduction, he is required to maintain a bank record (bank statement, canceled check or credit card statement) or written communication from the donee documenting the donation. The documentation must show the date paid, the name of the charity and the amount of the donation.

It is the donor’s responsibility to obtain a contemporaneous written acknowledgement from the donee for single donations of $250 or more. Contemporaneous simply means the documentation must be obtained by the donor before the donor files his tax return for the year he is taking the deduction. In addition to the written documentation requirements noted above, the written acknowledgement must also state whether the donee organization provided any goods or services in return for the contribution.

If any goods or services were provided, a quid pro quo contribution exists. Under a quid pro quo contribution, the written documentation must include a good faith estimate of the value of the goods or services provided to the donor. The written acknowledgement requirement is also lowered to more than $75 instead of $250 for quid pro quo contributions. It is the donee organization’s responsibility to provide a written acknowledgement for quid pro quo contributions. A penalty of $10 per contribution (maximum of $5,000 per fund raising event or mailing) will be imposed on the donee organization for each quid pro quo contribution of more than $75 that it fails to make the required disclosure for.

It is good practice for nonprofit organizations to provide each donor making a contribution of $250 or more with a written acknowledgement to lessen the burden on their donors. Many nonprofits make it a practice to provide thank-you letters to donors which provide the necessary information for the donor.

DWD Contributes to Marion Nonprofit

2011-12-19T06:55:00.011-05:00

Posted by: Carrie Minnich

On behalf of our clients this holiday season, Dulin, Ward & DeWald has made a contribution to St. Martin Community Center in Marion, Indiana.

St. Martin Community Center is committed to making Grant County a better place to live. By providing those in need with basic necessities, including food and clothing, St. Martin takes an important step towards the larger goal of decreasing the effects of poverty.

Volunteers at St. Martin’s Kay’s Kitchen serve lunch Monday through Saturday. All those who come to Kay’s Kitchen will receive a free hot meal regardless of ability to pay. No person will be turned away.

St. Martin’s also operates a Kid’s Café through a partnership with Second Harvest Food Bank and the Grant County Boys' and Girls' Club that provides free meals and snacks to low-income children during the school year. Kid’s Café also provides a safe place, where under the supervision of trustworthy staff, a child can be involved in educational, recreational and social activities.

“It was so kind of you to remember the poor in our community. Your gift will help feed many people a free hot meal at Kay’s Kitchen. We are now feeding over 5,000 people a month at Kay’s Kitchen and 1,400 children at the Boys’ and Girls’ Club each month.” - Teresa Campbell, Director of St. Martin Community Center.

Liz Gutierrez from Dulin, Ward & DeWald with

Teresa Campbell, Director of St. Martin Community Center

DWD Contributes to Local Nonprofit

2011-12-12T10:37:00.001-05:00

Posted by: Carrie Minnich

On behalf of our clients this holiday season, Dulin, Ward & DeWald has made a contribution to a local nonprofit, the Associated Churches Food Network.

Associated Churches Food Bank is an “emergency food bank” offering families food once a month at no charge through a network of 28 local food pantries in churches and social agencies. Pantries provide a five-day supply of food to prepare balanced and nutritious meals as recommended by the Department of Agriculture nutrition food chart. Clients must abide by the guidelines of the Food Bank Systems.

“As of the end of October we were serving 1,500 more families per month than we were in January. Meanwhile our largest food drive, Stamp Out Hunger, brought in 87,000 fewer pounds of food than 2010, government funding has been reallocated for harder hit areas and also for housing needs, grants continue to be received but often at a reduced amount, and food and fuel prices fail to go down to any marked degree. All these factors have resulted in incredibly challenging times for the Associated Churches Neighborhood Food Network and makes us appreciate every single gift we are blessed to receive. Many thanks to DWD for your recent donation! It will help us purchase food to ensure balanced meals for those who are hungry.” -Charlene Rorick, Communications Coordinator at Associated Churches

"When I think of your gift, and your intent to use your budgeted client gift funds to provide basic emergency food relief - I am deeply moved. These are "holy" funds that will give hope and encouragement into dark places. Please know that our gratitude runs deep, especially when you see the children's faces with the week supply of good food you provided. Thanks for being a blessing in our community. " - Roger Reece, Executive Pastor, Associated Churches

Dulin, Ward & DeWald staff Amanda Gerber, Carrie Minnich, and Susan Berghoff

with Rev. Roger Reece (Executive Pastor of Associated Churches)

Disaster Recovery Plan

2011-12-07T06:55:00.006-05:00

Posted by: Carrie Minnich

Disasters can take many forms, from a hurricane, a flood, or the avian flu, to a power outage or a computer system crash. Such disasters can strike at any time which makes having a disaster recovery plan so important. Disaster recovery is the process of resuming the organization’s activities after a disruptive event. Having a plan of action to respond to such events will enable personnel to act quickly and appropriately during a time of disruption. A disaster recovery plan includes how employees and volunteers will continue to carry out the organization’s mission.

The First Step: Determine What is Most Important to Protect
The first step in creating a disaster recovery plan is to determine what items in the organization are most important to protect; what applications are necessary in keeping the organization operating. Protecting people should be of foremost importance. Without its employees and volunteers, an organization’s mission cannot be carried out. After protecting people, other important assets are financial data, databases, contracts, insurance files, client files, and human resource files.

The Second Step: Documentation
The second step in disaster recovery planning is documentation. The current systems in place should be documented. Systems documentation should include: procedures for the accounting system and software; how data files are backed up; the schedule for data file back ups; and where the back up disks or tapes are stored. In addition, a listing for alternative resources should be maintained. These include safety and community services that might be needed; temporary alternative office sites; and any equipment and supplies that would be needed for recovery operations. Key contacts should also be documented. The key contact list should include contact information for employees, volunteers, board members, insurance companies, key vendors, and key agencies.

The Third Step: Distribute the Recovery Plan
Another important step of planning for disasters is to share non-confidential disaster recovery information with each employee that will help each one learn his or her responsibilities should a disaster strike. Copies of the fully documented plan should also be stored at an off site location.

The Final Step: Regularly Review and Update the Disaster Recovery Plan
Finally, all disaster recovery plans should be reviewed and updated on regular bases so that any necessary changes made. Over time, changes in personnel and procedures will occur. The disaster recovery plan should be updated with these types of changes.

Most disasters cannot be anticipated. However, preventative measures can be taken to guard against the effects of an unexpected disaster.

De Minimis Fringe Benefits

2011-11-23T06:55:00.015-05:00

Posted by: Susan Berghoff

A de minimis benefit is one that, considering its value and the frequency with which it is provided, is so small it to makes accounting for it unreasonable or impractical. These benefits are excluded from an employee’s income under IRS code section 132(a)(4). Items that are considered de minimis include:

• Controlled, occasional employee use of photocopier
• Occasional snacks, coffee, doughnuts, etc.
• Occasional tickets for entertainment events
• Holiday gifts
• Occasional meal money or transportation expense for working overtime
• Group-term life insurance for employee spouse or dependent with face value not more than $2,000
• Flowers, fruit, books, etc., provided under special circumstances
• Cell phones provided for noncompensatory business reasons

A benefits frequency and its value should always be considered when determining whether a benefit is de minimis. A de minimis benefit is usually always given infrequently. It also must not be a form of disguised compensation.

Cash Benefits
Cash is generally intended as a wage, and usually provides no administrative burden to account for. Cash therefore cannot be a de minimis fringe benefit.

The one exception to this rule is giving an employee occasional meal or transportation money to enable him/her to work overtime. The benefit must be provided so that employee can work an unusual, extended schedule. The benefit is not excludable for any regular scheduled hours, even if they include overtime. The employee must actually work the overtime.

Meal money calculated on the basis of number of hours worked is not de minimis and is taxable wages.

Gift Certificates/Gift Cards
Cash or cash equivalent items provided to an employee by the employer are never excludable from income, except as noted above. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable as wages to the employee.

A gift certificate/gift card that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.

Achievement Awards
Special rules apply to allow exclusion from employee wages of certain employee achievement awards of tangible personal property given for length of service or safety. These awards

• Cannot be disguised wages
• Must be awarded as part of a meaningful presentation
• Cannot be cash, cash equivalent, vacation, meals, lodging, theater or sports tickets, or securities.

In addition, there are other requirements specific to achievement and safety awards and there are dollar limitations that must be met. See the Taxable Fringe Benefits Guide or Publication 535 for more information.

How are de minimis fringe benefits reported?
If the benefits qualify for exclusion from wages, no reporting is necessary. If they are taxable wages, they should be included on Form W-2 and subject to income tax withholding. If the employees are covered for social security and Medicare, the value of the benefits is subject to withholding for these taxes also. You may optionally report any information in box 14 of Form W-2.

Keep these rules in mind when considering gifts or bonuses for your employees and volunteers.

Due Date

2011-11-09T06:55:00.016-05:00

Posted by: Carrie Minnich

The deadline to file Form 990 for nonprofits with a fiscal year ending June 30, 2011 is quickly approaching. These returns are due November 15, 2011 but may be extended for an additional 3 months (extending the due date to February 15, 2012) without showing cause by filing Form 8868. The extension must be filed by November 15. An additional 3 month extension (extending the due date to May 15, 2012) may be requested on Form 8868 if the organization can show reasonable cause why the return cannot be filed by the extended due date.

Do you know which type of return you are required to file?

990-N
• Gross receipts normally $50,000 or less
• Must be filed electronically

990-EZ
• Gross receipts less than $200,000 and total assets less than $500,000

990
• Gross receipts $200,000 or more or total assets of $500,000 or more

990-PF
• Private foundations

Most section 509(a)(3) supporting organizations and section 527 (political) organizations are required to file Form 990 or Form 990-EZ. These organizations cannot file 990-N.

If you are required to file one of the above returns and are an Indiana nonprofit, you are most likely also required to file the Indiana state return NP-20, which is also due November 15. The Indiana Department of Revenue recognizes the IRS extension, Form 8868. To extend the state return, forward a copy of the federal extension to the Indiana Department of Revenue by the original due date.

Are Your Organization's Personnel Files Adequate?

2011-10-26T06:58:00.000-04:00

Posted by: Carrie Minnich

A personnel file should be maintained for all employees of your organization. These files hold all of the important documentation relating to the individual’s employment with the organization. A file should be kept for as long as the individual is an employee with the organization and depending on the item maybe longer. All personnel files should be kept locked in a file cabinet and made available to only individuals who have a legitimate business reason to see them.

Items to include in a personnel file include the following:
 Written job description
 Application
 Offer of employment
 Background checks
 IRS Form W‐4 (Employee’s Withholding Allowance Certificate)
 State WH‐4 (State of Indiana Employee’s Withholding Exemption and County Status Certification)
 Signed acknowledgement of receipt of employee handbook
 Emergency contacts
 Performance evaluations
 Documentation for any payroll deductions (retirement, insurance, charitable contributions, etc.)
 Documentation of pay rate and any change in pay rate

There are also items that the organization needs to maintain for each employee that should be kept separate from the personnel file. These include Form I‐9. A Form I‐9 must be completed for all employees to ensure that the employees are legally authorized to work in the United States. Government agencies are allowed to review Form I‐9s and if the forms are kept in the personnel files they would have access to the additional information in the employee’s file which they do not need to see. Medical records should also be kept separate from the personnel file due to HIPPA and other legal restrictions. Medical records include insurance applications, medical leave documents, etc.

How is Your Nonprofit Doing?

2011-10-12T06:55:00.000-04:00

Posted by: Carrie Minnich

Ratios are used regularly to determine profitability, liquidity, debt, and the overall financial condition of a corporation. Industry benchmarks are used to determine how the corporation is stacking up to its competitors. In the nonprofit world; however, results aren’t as straightforward and benchmarks are harder to come by.

As of 2009, there were more than 1.5 million nonprofits registered with the IRS. The National Taxonomy of Exempt Entities has classified all these nonprofits into 26 broad groups ranging from arts, culture and humanities to the environment to religion. With that many different types of nonprofits having numerous missions, it’s not hard to see why there is no such thing as an average nonprofit with an average current ratio or accounts payable aging ratio.

So why should you care about ratios in a nonprofit organization? Because ratios can be helpful in evaluating your nonprofit if used properly. Ratios are not reserved for just accountants and auditors. The Executive Director, the Chief Financial Officer, accounting staff, board members, internal auditors, external auditors, funders, and donors all should use ratios to some degree to determine the health of the organization and if it is meeting its mission. In order to use ratios effectively here are three points to keep in mind.

1. Select Reasonable Ratios. There are many different types of ratios that measure all kinds of activities. You should select the ratios that would be beneficial to your organization. If the organization has little or no debt, would a debt ratio really be any help in evaluating the organization? Don’t try to calculate every ratio you can think of. Choose a selection of ratios to use that would be reasonable indicators of your nonprofit’s performance.

2. Start at Home. The best benchmark for your nonprofit organization is itself. Look at your organization’s history. Unless there has been a major event, you should see a trend over time for the organization. How do the current year results compare with prior years’? Are they consistent? If not, did something happen that would cause the result to be skewed? You may be able to compare your organization to other organizations of similar size in the same geographic location. Be sure that the organizations you are comparing to have similar missions and programs, as well as having a similar number of years in existence. If the organizations aren’t similar, then the comparison won’t be useful.

3. Expect, Compare, Question. In order to determine if the ratio result is good or bad, an expectation has to be developed. Based on the organization’s history and the current financial and economic conditions what should the result be? Did the organization lose a major funder that would cause support to drop? Did the organization make a major building repair that would create higher than normal expenses? Once the ratio has been calculated compare it to past years’ results. Are they consistent? Is the outcome reasonable given the facts and circumstances? If not, you should question why there is an inconsistency and seek an explanation.

Should Your Organization be Paying Sales Tax?

2011-09-28T06:55:00.004-04:00

Posted by: Carrie Minnich

One benefit of being an Indiana nonprofit organization is being exempt from paying sales tax on tangible personal property. But the fact that the organization is incorporated as a nonprofit corporation or has received an exemption from income tax from the IRS does not necessarily mean that it is automatically exempt from paying sales tax. In order to take advantage of this benefit, there are a few requirements for the nonprofit organization to meet.

1. Only nonprofits organized for charitable, literary, civic, religious, educational, scientific or fraternal purposes are exempt from paying sales tax. Business leagues, licensed hospitals, cemetery associations, monasteries, churches, parochial schools, convents, pension trusts and labor unions are also exempt.

2. The organization cannot be operated predominately for social purposes.

3. Complete and file NP-20A, Nonprofit Application for Sales Tax Exemption. This form should be filed with the Indiana Department of Revenue within 120 days after the organization is established. According to the Indiana Department of Revenue, the organization is considered established when it receives its employer identification number (EIN). The organization must attach a copy of its federal determination letter to form NP-20A. There is no fee for this form.

4. File annually Form NP-20, Indiana Nonprofit Organization’s Annual Report with the Indiana Department of Revenue.

5. Complete Form ST-105, General Sales Tax Exemption Certificate and provide this form to each vendor. Vendors are required to collect sales tax on all sales unless the vendor can establish that the purchase will be used by the purchaser for an exempt purchase. Form ST-105 provides support for this requirement.

6. The purchases must be used for the same purpose as that for which the organization is exempt. No purchases can be made for the private benefit of any individual.

7. The organization needs to make the purchase. In other words, employees cannot make exempt purchases with their personal credit card. Individuals are not exempt organizations and may not purchase property free of sales tax. The purchase needs to be made with the organization’s credit card or billed to the organization and paid with a check from the organization in order to be exempt from sales tax. This technicality is often overlooked by many organizations and vendors.

During the current economic conditions in which nonprofits have experienced a decrease in much needed funding, it is important for the organization to avoid spending precious dollars on sales taxes if it does not have to.

Cell Phones

2011-09-16T06:55:00.001-04:00

Posted by: Carrie Minnich

The IRS has recently released new guidance for cell phones which applies to all tax years after December 31, 2009.

When an employer provides a cell phone to an employee primarily for noncompensatory business reasons, neither the business nor the personal use of the phone results in income to the employee. In addition, no recordkeeping of the usage of the phone is required.

Also, employer reimbursements of employee-provided phones for bona fide business use are not taxable to the employee in most instances.

Nonprofit Unemployment Basics

2011-09-14T06:55:00.001-04:00

Posted by: Carrie Minnich

• Like other employers Indiana nonprofits are subject to state unemployment tax; however, 501(c)(3) organizations are exempt from federal unemployment tax.

• The Indiana Department of Workforce Development requires nonprofit organizations employing 4 or more individuals for some portion of a day in each of 20 different weeks during the calendar year to pay Indiana unemployment tax. There is no minimum dollar amount required.

• Employees working for a nonprofit that has less than 4 employees are not entitled to collect unemployment.

• Once an organization becomes a qualified employer, it will continue to be required to pay unemployment. The organization may be able to discontinue paying unemployment if the number of employees drops below 4 by writing a letter to the Department of Workforce Development stating this fact.

• Nonprofits may choose to be a reimbursable employer. Instead of making regular premium payments, the organization reimburses the fund for benefits paid to former employees. To become a reimbursable employer, the nonprofit must provide a copy of its IRS 501(c)(3) exemption letter and complete DWD Form 1065, Election to Pay. Once a nonprofit becomes a reimbursable employer, the status remains in effect for 2 full calendar years.

Health Care Cost Disclosure

2011-08-31T06:55:00.020-04:00

Posted by: Carrie Minnich

Beginning in 2011, employers will have the option to report the cost of employer sponsored health coverage on Form W-2. The Affordable Care Act is giving employers a chance to update their payroll systems before the Act requires the disclosure in 2012. Those employers that issue 250 or more W-2s for 2012 in 2013 will be required to disclose on the employee’s W-2 the cost paid by the employer and the employee for health care coverage on the employee’s W-2. Employers that issue less than 250 W-2s in 2012 are not required to make the disclosure but have the option to. Beginning in 2013, for W-2s issued in 2014, all employees will be required to include the healthcare cost on W-2s. The cost of healthcare to be disclosed on the W-2 is not taxable, as it has been in the past. The amount is for informational purposes only to inform employees of the cost of their health coverage.

Summary of Healthcare Cost Disclosure

Who?
All employers, including nonprofit organizations, churches and government entities. Federally recognized Indian tribal governments are excluded.

What?
The cost of coverage under a group health plan that the employer makes available to the employee that is non-taxable to the employee (or that would have been non-taxable if the coverage were employer-provided). Cost includes both the portion paid by the employer as well as the portion paid by the employee.

When?
2011 W-2s issued in 2012 – Optional for all employers.
2012 W-2s issued in 2013 – Required for all employers issuing 250 or more W-2s and optional for employers issuing less than 250 W-2s.
2013 W-2s issued in 2014 – Required for all employers.

Where?
Box 12 of Form W-2 under code DD (Cost of employer-sponsored health coverage)

Why?
To provide useful information to employees on the cost of their healthcare.

Although the disclosure is not required in 2011, this might be a good time to start thinking about how to track healthcare costs for your organization.

Online Banking

2011-08-17T06:55:00.002-04:00

Posted by: Carrie Minnich

Online banking is easy and cheaper than traditional banking. Many organizations have already made the switch from paper bank statements to electronic. Some are also taking advantage of paying bills online through their bank’s website. However, if your organization is engaging in online banking, you need to have a written policy to make sure proper controls are in place.

One of the main controls that should be addressed in a written policy is who has access to the organization’s online banking. Only individuals approved by the board should have access to the account. Often times a bank will have various levels of authorization. Some users may be able to only view the current account balance, others may be only able to view transactions, while others may be able to view and print transactions and balances. The board should decide who needs to have access to what information and set up authorized users with the bank. In addition, the policy should define who is authorized to make payments online and how these payments will be approved. The policy should also state who is able to add vendors to the approved vendor list, as well as how these additional vendors are approved.

Other items that should be included in the policy are:
• Who can make and approve fund transfers
• Who can make and approve wire transfers
• Who can initiate and approve a stop payment
• Who is responsible for obtaining the monthly bank statement for the reconciliation
• Who is responsible for reviewing the monthly bank statement
• Who can open new accounts
• Who is authorized to add/delete users of the online system
• Password requirements – number of characters, required characters, and how often they should be changed

DWD Participates in Day of Caring

2011-08-08T07:54:00.002-04:00

Posted by: Carrie Minnich

DWD participated in the 19th annual United Way Day of Caring on Thursday, August 4th. After attending the kick-off breakfast at Headwaters Park, DWD employees headed out to Early Childhood Alliance to spruce up the administrative location with landscaping, cleaning and painting. The weather was perfect to be outside giving back to the community.

The Day of Caring began in 1993 with 250 volunteers and has grown to over 1,200 in 2011. Volunteers spend the day working on various service projects at local nonprofits and organizations. DWD has participated in the Day of Caring from its inception and has done everything from painting houses (inside and outside) to cutting down trees and mulching. To learn more about the United Way go to http://www.unitedwayallencounty.org/.

Fraud Happens

2011-08-03T06:55:00.001-04:00

Posted by: Carrie Minnich

All organizations are subject to fraud risks. To help protect itself from fraud, an organization should understand the specific risks that apply to that organization. A fraud risk assessment should be performed by the organization and updated periodically. The risk assessment process identifies risks and the organization's response to the risks. While preventive measures such as this do not prevent fraud from occurring, they do reduce the possibility of fraud within the organization.

What is risk? Risk is anything that prevents the organization from accomplishing its mission and can be found in every area of an organization - income, expenses, fixed assets, personnel, etc. A risk assessment includes looking at the incentives, pressures and opportunities to commit fraud within the organization. The assessment should also consider areas where controls are weak or there is a lack of segregation of duties, and the possibility of override of controls by management.

Who's responsible? The board of directors, management, and staff are all responsible for managing risk. The board of directors is responsible for making sure management designs effective risk policies. They need to understand the organization's risks and set the appropriate tone at the top for ethical behavior. Management is responsible for designing and implementing controls to address the identified risks of the organization. Staff are responsible for reading and understanding policies and to have a basic understanding of fraud in order to report instances.

The Plan. Most organizations have already started addressing risks within the organization by performing background checks on new employees and implementing codes of conduct and whistle-blower policies. A risk assessment should be a part of the organization's plan to deter fraud. An effective plan evaluates the organization's risks, develops a strategy for dealing with the risks, and provides for continual monitoring of the plan. Some questions to ask to get started are:

• What areas are susceptible to fraud?
• What areas are susceptible to other types of risks (natural disasters, loss of funding, loss of volunteers, etc.)?
• Is the organization willing to accept any of these risks?
• What controls are in place to deter fraud from occurring?
• If an instance of fraud is alleged, how will it be addressed?
• What punishment will be issued to the wrongdoer?

No system can provide absolute assurance against fraud but a risk assessment can reduce the likelihood of fraud occurring by reducing the opportunity for it. In spite of everything, fraud happens.

FASB ASC Updates

2011-07-20T06:55:00.006-04:00

Posted by: Susan Berghoff

There were 29 updates to the accounting standard codification (ASC) issued in 2010 and five so far in 2011. How does an accountant/bookkeeper in a small non-profit keep up to date on all the changes in the accounting literature without spending a lot of time and money?

Go to Asc.fasb.org (FASB Standards Issued in 2011) and look at the new or updated codifications that have been issued. You do not have to have a membership to this website to see or read the updates.

Open the update and scroll down to the paragraph titled “Who is affected by the amendments in this update?” You can then make the determination as to whether this update is something you should read further. There are some updates that may not be applicable.

If the update does affect your organization, make sure you note its effective date. This is in a paragraph titled “When will the amendments be effective?” Be careful, some effective dates are for periods beginning on or after …, and others are for periods ending on or after…. It also will let you know if early adoption is allowed.

By including this important step in the organization’s policy and procedures manual you can prove to your auditor, board or funding sources that you believe in keeping your financial staff up to date on these important changes.

990 Reporting Issues

2011-07-06T06:55:00.002-04:00

Posted by: Carrie Minnich

Although the revised Form 990 has been out for three years now, there appears to still be some confusion on completing the form properly. The July 2011 issue of The Tax Adviser addresses eight common reporting issues that occur in completing the redesigned Form 990.

1. Identifying the president as both an officer and a key employee
Only one title should be selected in Part VII, Section A, column C.

2. Reporting only salaries as compensation expense
All forms of salary and benefits should be included on Part IX, line 5.

3. Improperly reporting compensation reported in a prior Form 990
Schedule J, Part II, column F should include the total amount of the current year’s W-2 that was reported on the prior year’s Form 990 as deferred compensation.

4. Failing to include the annual actuarial increase of defined benefit plans
Any annual increase in the actuarial value of a defined benefit plan should be included in Part VII, Schedule J.

5. Reporting only unrestricted income
All income from all sources should be recorded on Form 990.

6. Reporting support payments to a related organization as “other expense”
A support payment should be recorded as a grant as opposed to other expense.

7. Misidentifying the proper interested person
The name of any interested persons involved in a business transaction with the nonprofit must be disclosed in Schedule L, Part IV. There is still some discussion as to how specific the disclosure must be.

8. Showing details of related transactions with a 501(c)(3) parent organization
Only transactions with Section 512(b)(13) controlled entities must be reported on Schedule R, Part V, line 2 if they meet the noted criteria in the Form 990 instructions.

To read the entire article by Michelle Michalowski, CPA click here - New Form 990: What's Confusing Filers?

Mileage Rate Increase

2011-06-30T06:55:00.002-04:00

Posted by: Carrie Minnich

The IRS increased the standard mileage rate for business use from 51 cents per mile to 55 ½ cents per mile, effective July 1, 2011. The medical and moving rate was increased to 23 ½ cents per mile. The mileage rate for services to charitable organizations remains at 14 cents per mile.

Automatic Revocation of Tax Exemption

2011-06-28T10:30:00.000-04:00

Posted by: Susan Berghoff

On June 9, 2011 the Internal Revenue Service announced that it had released a listing of about 275,000 organizations that automatically lost their tax-exempt status due to not having filed the required annual reports in the past three years.

If your organization was listed or received a notice from the IRS saying its exempt status was revoked, there is more to getting the exemptions back than just filing the missing returns. The organization must reapply by filling out IRS Form 1023 – Application for Recognition of Exemption under Section 501(c)3 of the Internal Revenue Code or IRS Form 1024 – Application for Recognition of Exemption under Section 501(a), depending on the type of tax exemption it originally had. The appropriate form is required even if your organization did not have to file it originally. There is also a fee that needs to be paid ranging from $400-$850. Currently the IRS is processing forms received in December 2010.

The IRS has issued guidance on how organizations can apply for reinstatement of their tax-exempt status. If your organization is considered a small organization, one that normally has annual gross receipts of not more than $50,000 in their most recently completed taxable year, it may qualify for reinstatement retroactive to the date of the automatic revocation and be able to pay only $100. See IRS Notice 2011-43 for additional information.

If your organization does not qualify as a small organization IRS notice 2011-44 explains how to apply for reinstatement. The reinstatement will only be retroactive if you can show reasonable cause for failing to file the returns. Otherwise, it will be effective the date the organization filed its new form 1023 or 1024.

The IRS notices can be found by visiting http://www.irs.gov/.

Charity Gaming Requirements

2011-06-22T14:04:00.000-04:00

Posted by: Carrie Minnich

Charitable gaming is a popular method for nonprofits to create revenue to support their purpose. Organizations need to be careful as to the type of charitable gaming that is being conducted. Some popular types of gaming can lead to unrelated business income tax (UBIT) and additional reporting requirements.

Unrelated Business Income Tax (UBIT)
All income resulting from gaming activities conducted by a nonprofit organization is subject to UBIT except for bingo. Bingo games are defined as games of chance in which players place markers over randomly called numbers on prenumbered cards. Wagers are placed, winners are determined, and prizes are distributed in the presence of all persons making wagers.

Examples of gaming that is subject to UBIT includes pull tabs, raffles, 50/50 raffles, and lotteries, among others.

Other Tax Reporting Considerations
Depending on the gaming activity conducted and amount of winnings involved, organizations may be subject to additional taxes and reporting. The organization may be required to pay wagering excise tax and occupational tax, as well as to issue Form W2-G or Form 1096 to the winner.

Indiana Gaming Requirements
The State of Indiana has its own requirements on organizations conducting gaming activities. According to the Indiana Gaming Commission, any activity where people pay for a ticket and a prize is awarded requires an organization to apply for a charitable gaming license if the total value of all prizes awarded is more than $1,000 for a single event or $3,000 during a calendar year. The financial results of the activity are also required to be reported to the Indiana Gaming Commission within a specified amount of time after the completion of the event. Forms are provided by the Indiana Gaming Commission for such reporting.