CPA's & Consultants Providing Business Insight To Churches & Ministries

Intermediate Sanctions (2 of 2)

Intermediate Sanctions allow the Internal Revenue Service (IRS) to assess excise taxes on excess benefit transactions that occur between a disqualified person and a 501(c)(3) or 501(c)(4) tax-exempt organization.

What is an excess benefit transaction?

An excess benefit transaction occurs when the value of the benefit to the disqualified person exceeds the fair market value of the services rendered. Examples of potential excess benefit transactions include, but are not limited to:
o Unreasonable compensation,
o Personal use of church property,

Ordinary and Necessary Expenses (1 of 2)

In light of the current spotlight on televangelists let's review appropriate expenses and required documentation/substantiation.

For an expense to be an appropriate expense for a ministry, the expense must be ordinary and necessary, which in general requires a showing that the expense was incurred principally for and has a reasonably close relationship to the tax-exempt purpose of the church or ministry.

Additionally, proper documentation must be made for the expenditure. For meals, the following should be recorded:

> the amount and a description of each separate expenditure;

Contributions/Event - (1 of 4)

The following was a recent question we received via e-mail and we want to share the common situation with you.

Introduction: Contributions may be the most gracious form of expression that a donor can provide a church/ministry to aid in its vision. Yet, with gracious offerings can come many challenges when attempting to account for the funds. Most ministries solicit contributions through a variety of avenues each offering it’s own set of challenges in how the revenues and expenditures should be treated.

The following example is a scenario that many ministries and churches encounter:

Designated Funds vs Restricted Funds

So what defines a designated fund/contribution? Shouldn't accounting be simple? Isn't it basic math (one plus one equals two)?

The difficulty lies in the terminology or meaning of words. The manner in which the word designated is used can cause significant differences in how churches account for a transaction.

Not all designated funds are accounted for as restricted funds. Accounting standards state only third party designated funds are to be accounted for as restricted funds. Internally designated funds, such as board-designated funds, are accounted for as unrestricted funds.

Preparing for the Audit (1 of 2)

Churches/Ministries can do a lot of things to prepare for an audit. This preparation can greatly decrease audit time and therefore decrease the related audit fees.

Are WE Closed Yet?? (1 of 5)

Many of us understand that once a month/quarter/year a business, ministry or church will need to do an assessment of its activity and the stewardship of that activity. This is considered a monthly/quarterly/yearly closing of the financial records, which is a review or overview of the books, to ensure that they are complete and all information is recorded correctly. In addition, it gives an analysis on how well an organization has done during the month/quarter/year. A similar assessment was performed in the Bible regarding the story of the talents as follows:

IRS Releases Final 2008 Form 990 for Tax-Exempt Organizations - (2 of 2)

Charities and other tax-exempt organizations are required to file certain informational returns with the IRS. Earlier in 2007, the IRS released a proposed draft of modifications to the Form 990 and asked for public comments relating to the draft. In late December the IRS issued an updated version of Form 990, and provided transition relief so that small exempt organizations will have time to adjust to the new form.

Basis of Accounting for Non-Profit Entities - (1 of 4)

Small non-public entities prepare financial statements for a variety of reasons. Usually, it is done at the request of third parties (banks, potential investors or other interested parties) or simply for internal monitoring purposes. The basis of accounting that an entity uses to prepare its financial statements generally is determined by the needs of the users.

W-2 and Form 941 Reconciliation

It's that time of year and churches and ministries are preparing and filing the end of year payroll reports. If you are having trouble reconciling the W-2s with Form 941, start and perform a reconciliation quarter by quarter. Then a determination of when/where the discrepancy. A form is attached for your use, Download Form Here.

If you have any questions, contact us.

Bogus E-Mail

Straight from the IRS hotline:

The IRS has seen several variations of a refund-related bogus e-mail which falsely claims to come from the IRS, tells the recipient that he or she is eligible for a tax refund for a specific amount, and instructs the recipient to click on a link in the e-mail to access a refund claim form. The form asks the recipient to enter personal information that the scamsters can then use to access the e-mail recipient’s bank or credit card account.