Help with setting up accounts for a non-profit. (follow up)

Q.  Currently, our donations from individuals are going into the main "Undesignated Funds" account, and the donations from churches are going into separate sub-accounts for each church. Sometimes individuals will request that their donation go towards the building fund, scholarships, etc, and those are put into their own separate income accounts. Churches rarely designate where the funds should go, they just go into the general funds.

Should all the donations go in the same "Donations" income account? Or should we do "Individual Donations" and "Church Donations" accounts? Should we do a sub account for designated funds, or leave those funds in their separate accounts as they are currently? Or should we set up the building fund, scholarships, etc, as classes within the individual donations account? We would be needing the easiest way to see the total amount of funds received.


A. Your un-designated funds would be the General Fund Account. Each donor does not need their own income account, nor does the donor type need it's own account because you will be able to generate future reports for any income account, and limit them to a Donor (Church, individual, etc) name and or/ by Donor type, which you have already created.

Your income accounts might look like this...

Camp Income
General Donations

I recommend creating the restricted funds income accounts using the "Other Income" account type. Such as...

Building Donations
Scholarship Donations

This way they will still appear on your annual P&L but will appear separately from general income & expenses at the bottom of the report.

Create expense accounts for the restricted funds as well. You can also create sub accounts for more detail. For example, you might create Architect, Permits & Plans, Build-out, etc. as sub accounts under a Building Project expense account. Create these using the "Other Expense" account type so that these expenses will appear at the lower part of the report along with the restricted income.

You also want to create liability accounts for items like the Building Fund and Scholarship Fund, etc.

At the end of the fiscal year the income total for the year will need to be moved out of Retained Earnings and  into these restricted liability accounts with a single journal entry. Create these accounts as "Equity" type accounts.

Under these Equity accounts create sub-accounts called "Funds Distributed". This is where you will move the expense total for the year out of retained earnings, again using a journal entry.

This will allow the balance of the restricted funds to appear on your balance sheet in the equity section. Recording transactions in the income and expense accounts first will also allow you to pull detailed reports of the income and expenses at any given point later on.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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Ten Tips for Deducting Charitable Contributions

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. If you made qualified donations last year, you may be able to take a tax deduction if you itemize on IRS Form 1040, Schedule A.
The IRS has put together the following 10 tips to help ensure your contributions pay off on your tax return.

1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.
2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.
3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
4. Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.
5. Clothing and household items donated must generally be in good used condition or better to be deductible.
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given.
7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
8. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.
10. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 
Links:

• Search for Charities or download Publication 78, Cumulative List of Organizations
• Publication 526, Charitable Contributions (PDF 178K)
• Publication 561, Determining the Value of Donated Property (PDF 101K)
• Form 1040, U.S. Individual Income Tax Return (PDF 176K)
• Schedule A, Itemized Deductions (PDF)
• Form 8283, Noncash Charitable Contributions (PDF)
• Instructions for Form 8283, Noncash Charitable Contributions (PDF)

YouTube Videos:
Charitable Contributions:  English  |  Spanish  |  ASL
Haiti Earthquake Donations:  English  |  Spanish  |  ASL 

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.  

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How Do I Record A Pre-Payment From My Customer In Quickbooks

You have two options depending on how you wish to have the information appear on your balance sheet.

Method #1

The simplest way is to enter the payment in the Customer menu under "Receive Payments".  If there are invoices already entered for this customer and you do not want to apply this prepayment to those invoices, just un-check the invoice that Quickbooks auto-applied the payment to.

After you uncheck this option the Overpayment note at the bottom of the screen will disappear.  Click Save & Close and an option box will pop up on the screen.  Since this is a prepayment will want to the select OK which will save the payment to the Customers account as an un-applied payment.

Entering the pre-payment using this method will have the effect of reducing the accounts receivable balance in the Assets portion of your balance sheet.

If you need to see which customers have un-applied payments posted to their accounts you can run the A/R Aging Detail report under the Customers & Receivables section of the Reports menu.  Any un-applied payments will appear as credits (minus) on the report.

In addition, by using this method you can apply the prepayment to any Job associated with this customer by double clicking on the payment in the Customer Center and selecting the invoice(s) to apply it to.  All Jobs for a Customer will appear for a payment posted just to the Customer and not to a specific job.

Method #2

If you wish to post your Customer's prepayments to a liability account that will appear in the liabilities sections of your Balance Sheet you can do this using a Sales Receipt to record this transaction.

Step one is to create an account on your chart of accounts for the liability such as Customer Deposits.  Use the Other Current Liability account type when setting this up.  Next you will need to create an Item in the Item list to direct to pre-payment to this liability.

From the Item button on the Item list select New.  Choose the "Other Charge" Item type.

Enter the appropriate name and description for the item, choose the non-taxable tax code and select the account the you created in the chart of accounts for this liability.

 Create a sales receipt for the customer using the Sales Receipt form.  Use the Item that you created in the item list and enter the amount of the payment.

  In this way you can record the payment number the payment method, and because you are using a Sales Receipt and not an invoice the funds appear as a balance in the liabilities section of the balance sheet rather than reducing the Accounts Receivable balance on the balance sheet.  Once this Sales Receipt is created you can see the transaction on various Customer reports.  However, it will not appear in any Accounts Receivable reports.

When you are ready to apply this prepayment to a customer invoice you will need to do a journal entry to move this amount into accounts receivable.  Simply debit the Customer Deposits account and credit Accounts Receivable.  Include this Customer name in the Customer/Job column of the journal entry.  If you use Jobs under your Customer register, the journal entry to credit accounts receivable must be attached to the "Job" (in the Customer/Job column) that is being invoiced. 

To apply this prepayment to an invoice, open the invoice by double clicking on it in the Customer Center and click the Apply Credits button.  Once the available credit has been selected choose Done.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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Paying A Bill UsingTwo Separate Forms of Payment

"I have entered a bill that now needs to be paid. The bill however is made up of two payments. One being petty cash and the other from the business bank account. On the pay bills screen I can't seem to see a way to enter the two amounts seperatly, it only has the option to pay the whole bill as one payment. Which will cause problems when I come to reconile."

In Quickbooks you'll have to enter each payment separately. First create the payment from the Pay Bills screen for the check. After you select the bill you are paying you can change the Amount To Pay column to reflect how much the check is for. Either print the check, or assign the check number if you have already written it. Then repeat the process if your Petty Cash is set up in the Chart of Accounts as a "Bank" account, and choose the the PC bank account for your payment method.

Or use a journal entry to debit Accounts Payable (attach this debit to the Vendor name) and credit Petty Cash for the amount of the payment. Once you do this journal entry you will have an available credit to apply to the bill in the Pay Bills window.

 Return to the Pay bills window, select the bill you are applying the payment to and you will see an amount equal to the Petty Cash payment in the Available Credit section of the Pay Bills window.  You will not the this amount until you have actually marked the Bill to pay.

Then simply select the Set Credits button and you can apply the payment in the Apply Credits window.  If there is only one credit available to use, Quickbooks will select it automatically, then check Done.

You will be returned to the Pay Bills window.  Choose Pay Selected Bills then Done in the Payment Summary window.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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Five Tips to Avoid Tax Time Stress

Filing your tax return doesn’t have to be stressful.  The IRS has put together five stress-relieving tips to help you.
1. Don’t Procrastinate Resist the temptation to put off your taxes until the very last minute. Rushing to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error. 
2,. Visit the IRS Website In 2009, more than 296 million visits were made to IRS.gov.  Make 1040 Central your first stop to learn the latest news and find answers to your questions.
3. File Your Return Electronically Last year, two out of three tax returns were filed electronically. More than 800 million tax returns have been processed safely and securely over the past 20 years. Use e-file and direct deposit to get your refund in as few as10 days. E-filed returns have a much lower error rate. Taxpayers receive a fast acknowledgement that the IRS received the return, a service not available to paper filers. You can e-file through your tax preparer or commercial software. Or, you can use Free File, a service offered by the IRS and private sector partners to prepare and e-file your federal return for free. Again, see IRS.gov for more information.
4. Don’t Panic if You Can’t Pay If you cannot pay the full amount of taxes you owe by the April 15th deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise.
More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov.  To find out more about this simple and convenient process type “Online Payment Agreement” in the search box on the IRS.gov homepage.
5. Request an Extension of Time to File – But Pay on Time If the April 15 clock runs out, you can get an automatic six-month extension of time to file until October 15. However, this extension of time to file does not give you more time to pay any taxes due. If you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an Estimated Tax Penalty. To obtain an extension, just file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The easiest way to file a Form 4868 is through Free File at www.irs.gov/freefile. Form 4868 is also available at IRS.gov or you can call 800-TAX-FORM (800-829-3676) and have a paper form mailed to you.

Links:

• Official Payments Corporation
• Link2Gov Corporation
• Electronic filing
• Free File
• Electronic payment options
• Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF) 

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.  

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TITLE MATTERS: Who Owns the Car?

If your company is paying for a car, make sure you title the car in the company's name.  I the company makes the payment but the title is in your own name, the IRS may deny the business depreciation deduction.  Your company may also lose deductions for other auto expenses such as insurance, gas & maintenance.

If you are a sole proprietor this does not apply.  You and your business aren't separate entities.

Even if the car is in the company's name, if you use it for personal driving of any kind you still have to keep track of your mileage to determine what portion of the vehicles expenses will be deductible on your taxes.  Keep accurate records that can be physically presented if you are audited.

Take the first step with your vehicle title, as well as other business assets, or or you may have an uphill battle.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.  

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Five Important Tax Credits

You might be eligible for a valuable tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable, which means you might receive a refund rather than owe any taxes at all. Here are five popular tax credits you should consider before filing your 2009 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).
5. The Health Coverage Tax Credit pays up to 80% of the health insurance premiums for eligible Trade Adjustment Assistance recipients and Pension Benefit Guaranty Corporation payees. You can complete IRS Form 8885, Health Coverage Tax Credit to claim the credit on your tax return. To determine if you’re qualified, or to find out how to receive the HCTC each month, visit IRS.gov and search for “HCTC.”

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications and additional information available at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).
Links:

• 1040 Central
• Publication 596, Earned Income Credit (EIC) (PDF 281K)
• Publication 972, Child Tax Credit (PDF 128K)
• Publication 503, Child and Dependent Care Expenses (PDF 167K)
• Saver's Credit
• Health Coverage Tax Credit
• Form 1040 Instructions (PDF 1,101K)

YouTube Videos:
Earned Income Tax Credit - English | Spanish | ASL

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.  

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Ten Facts about Mortgage Debt Forgiveness

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 
Links:

• Form 982
• Form 1099-C

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.  

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