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AFCEA International
Chapter Accounting and Tax Update
3 October 2014
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PROCEDURES FOR REINSTATEMENT OF TAX EXEMPT STATUS
Streamlined Retroactive Reinstatement Process – Small Organizations
•Requirements include:– Eligible to file either Form 990-N (e-postcard) of Form 990-EZ for the
past 3 years– No prior revocation of tax exempt status– Apply within 15 months from the Date of Revocation
•Steps:– Complete application – Form 1023 or Form 1024– Include User Fee - $400
No penalties applied for failure to file if the retroactive reinstatement is approved and Form 990-EZ is filed for the 3 missing years.
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PROCEDURES FOR REINSTATEMENT OF TAX EXEMPT STATUS
Retroactive Reinstatement Process – Not a Small Organization
•Requirements:- No prior revocation of tax exempt status - Apply within 15 months from the Date of Revocation
•Steps:– Complete application – Form 1023 or Form 1024– Include User Fee - $850– Provides “Reasonable Clause Statement” – Section 8.01 – Files properly completed annual paper returns for the three year period
the organization failed to file– Includes a statement with the application confirming that is has filed the
annual returns for the three years in question• If approved, late filing penalties waived when properly completed
and filed Form 990’s are submitted
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PROCEDURES FOR REINSTATEMENT OF TAX EXEMPT STATUS
Retroactive Reinstatement Process – Past 15 Months
•Steps:– Complete application – Form 1023 or Form 1024– Include User Fee - $850– Provides “Reasonable Clause Statement” – Section 8.02– Files properly completed annual paper returns for the three year period
the organization failed to file– Includes a statement with the application confirming that is has filed the
annual returns for the three years in question• If approved, late filing penalties waived when properly completed
and filed Form 990’s are submitted
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PROCEDURES FOR REINSTATEMENT OF TAX EXEMPT STATUS
Reasonable Cause Statement
Section 8.01:“… an organization must establish reasonable cause with respect to its
failure to file a required Annual Return or notice for at least one of the three consecutive years in which it failed to file.”
Section 8.02:“… an organization must establish reasonable cause with respect
to its failure to file a required Annual Return or notice for all three years that it failed to file such Annual returns or notice.”
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OTHER TAX REMINDERS
• 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
• Miscellaneous fun facts: – 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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ACCOUNTING OPERATIONS
• The chapter and chapter educational foundation are separate and distinct legal entities. Therefore:– Maintain separate bank accounts for each entity– Prepare separate financial statements and tax returns for each entity– Do Not commingle the funds
• When can the two entities meet?– Intercompany transactions – chapter donates to the educational
foundation
• Internal Controls – keeping the books and keeping them clean– Revenues deposited timely, intact, and in the proper account– Disbursements by check, don’t pre-sign, maintain control – Approval processes – board, president, treasurer– Board oversight – critical – you can’t delegate fiduciary responsibilities– Implement an Accounting and Finance Policy Manual
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ACCOUNTING OPERATIONS
• Financial Statements– Audit or Review – Board decision– Supporting documentation – maintained by the Treasurer– Statements prepared monthly, reported at every meeting – Cash and bank reconciliations - monthly
• Insurance Coverages– AFCEA Policies and coverages– Supplemental Chapter coverages
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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 all terms and conditions
• Check deposit amounts for reasonableness and due dates
• Force Majeure provisions – are there escape clauses?
• Termination provisions – re-booking or re-selling space
• Refunds of deposits
• Always buyer beware
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• Management Services Agreements:
– Be clear with the terms of the agreement– Control – always, always, with the chapter – 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, use AFCEA web hosting services – 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.
Miscellaneous Operating Issues
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• Policies to implement:
– Use of Lists and e-mails – for chapter operations only• Not for 3rd party marketing or prospecting
– Hotel / Meeting Planner Points – for chapter use– Contract oversight and authorizations to execute– Relationships – direct or indirect – maintain independence
• Engage leadership as “consultants”
AFCEA By-Laws, Article II, Section 3: Core Values, Ethics – Insist on the highest ethics in everything we do.
Chapter Officers Handbook, Chapter 1, Section 1.2, Core Values, Ethics – Insist on the highest ethics in everything we do.
Miscellaneous Operating Issues
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The Bottom Line
Former Treasurer, non-profit, stole $40,000 – 960 hours of community service
Former Treasurer, non-profit, stole $89,000 – 6 months in jail and probation
Former Treasurer, non-profit, stole $129,000 – 5 years in state prison, 2 years probation
Former Treasurer, non-profit, stole $115,000 – 3 months in prison and probation
Former Treasurer, non-profit, stole $19,000 – 30 days in prison, 8 months house arrest and probation
Where’s the Board? Where’s the oversight?
Your Chapter Doesn’t Need A “Former Treasurer”
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The Bottom Line
The chapter board and 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.
“The chapter Treasurer is responsible for collecting, disbursing and managing the chapter’s funds. The Treasurer should be prepared at all times to submit a complete and accurate statement showing the current financial status of the chapter. The Treasurer is responsible for filing the annual Form 990 for the chapter and the chapter educational foundation, if applicable.”
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NOTHING BUT OCTOBER
