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The link to the article below was published on the National Council of NonProfits’ website. It contains lots of facts about the Small Employer Health Credit and how to claim the credit, which is applicable to both for-profit and nonprofit entities with 25 or fewer full time employees.
Small Employer Health Credit
If you have questions about this credit or need assistance in claiming it, contact Schutte & Hilgendorf, a full service CPA firm, providing auditing, accounting and tax services for individuals, small businesses, non-profits and homeowners associations throughout Yavapai County and Northern Arizona. Call us at 928-778-0079 or email info@prescottaccountants.com
The following article, written by Juliana Kreul and published in WebCPA on October 31, 2011 is a very thorough explanation of how thousands of non-profits lost their exempt status in 2011. It also includes recommendations for Organizations in this position to get reinstated with the IRS. The process is lengthy, but well worth the effort if your Organization has found itself with this predicament.
CLICK HERE: Revocation of Non-Profit Status by the IRS
For assistance with filing past 990s and questions related to revokation and reinstatement for exempt organization, contact Schutte & Hilgendorf, a Prescott CPA firm, specializing in providing audit, accounting and tax services to non-profits in greater Northern Arizona. We are located in Prescott, Arizona at 3140 Stillwater Drive. Phone #928-778-0079. Visit our website at www.prescottaccountants.com.
The attached article was written by John E. McEnroe, Jr. and was such a great summary of steps that every Non-Profit should follow, we thought we’d give John credit here and share the article on our website. We found the article when searching for information on the little-mentioned topic of Non-Profit Arizona Registration with the Arizona Secretary of State.
We have observed that many of our non-profit charitable clients are not aware of the registration requirement with the AZ Secretary of State before accepting any charitable donations. Many Non-Profits feel that receiving the IRS determination letter for a 501(c)(3), incorporating through the AZ Corporate Commission, and registering with the AZ Department of Revenue satisfies all setup requirements. Apparently, not so. This doesn’t seem to be widely enforced by the Secretary. An annual renewal is also required every September. Although free, if filed late, there is a $25 fee.
Click on the link below for a copy of the very informative Non-Profit Registration and Reporting Requirements article:
NPO Registration and Reporting_2010
Click here for a link to the Registration Form for the AZ Secretary of State:
SOS Reg Form
Please call Schutte & Hilgendorf, CPAs with any questions related to this article or any non-profit related audit, accounting or tax question. Schutte & Hilgendorf is a Prescott CPA firm specializing in providing audit, tax and accounting services to non-profits, for-profits, and homeowners associations. We also provide tax planning and preparation, bookkeeping, and QuickBooks consulting to individuals and small businesses. We service the greater Yavapai County and Northern Arizona Region. Call us at 928-778-0079 with any of your accounting, auditing or tax needs. Check the rest of our website for constant updates at www. prescottaccountants.com
Exempt Organizations Annual Reporting Requirements – Annual Electronic Notice (Form 990-N) for Small Organizations: Information Reported
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The e-Postcard is easy to complete. All you need is the following information:
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Organization’s legal name –
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Any other names your organization uses – If the organization is known by or uses other names to refer to the organization as a whole (and not to its programs and activities), commonly referred to as Doing-Business-As (DBA) names, they should be listed.
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Organization’s mailing address – The mailing address is the current mailing address used by the organization.
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Organization’s website address (if you have one).
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Every tax-exempt organization must have an EIN, sometimes referred to as a Taxpayer Identification Number (TIN), even if it does not have employees. The EIN is a unique number that identifies the organization to the Internal Revenue Service. Your organization would have acquired an EIN by filing a Form SS-4 prior to requesting tax-exemption. The EIN is a 9-digit number and the format of the number is NN-NNNNNNN (for example: 00-1234567).
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If you do not know your EIN, you may be able to find it on the organization’s bank statement, application for Federal tax-exempt status, or prior year return.
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Please note that the EIN is not your tax-exempt number. That term generally refers to a number assigned by a state agency that identifies organizations as exempt from state sales and use taxes.
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If you do not have an EIN, see the Instructions for Form SS-4 for different ways to apply for an EIN. DO NOT use the EIN of a parent or other organization.
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Name and address of a principal officer of your organization –
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Usually president, vice president, secretary, or treasurer – often specified in the organization’s by-laws.
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Organization’s annual tax year –
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Like any taxpayer, exempt organizations must keep books and reports and file returns based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months that can be either calendar year or fiscal year and is often specified in the organization’s by-laws.
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Answers to the following questions:
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Page Last Reviewed or Updated: September 21, 2011 |
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Schutte & Hilgendorf, CPAs, a Prescott accounting firm, specializes in auditing, accounting and tax preparation and planning for non-profit Organizations throughout Yavapai County and Northern Ariziona. Should you need assistance with filing a non-profit information return (990) or notecard, please call us at 928-778-0079. We can e-file 990-e postcards (990-N) for you from our office for a nominal fee. Call us today!
Small businesses whose books are audited—by a hired certified public accountant, not the Internal Revenue Service—improve their chances of getting a loan, and at far better terms, than businesses with less scrutinized financial statements, a new study shows.
Yet even as owners continue to struggle with tight credit, few can afford the time, effort or cost of preparing complex financial statements, let alone having them audited, small-business owners, lenders and accountants say.
“Banks love when you have audited financials because they view it as a form of insurance,” says Buzz Rose, a certified public accountant in Pittsburgh. “But audits have become very expensive and to have one done ‘just in case’ would seem to be a waste of time and money.”
But the benefits might outweigh the costs.
Based on data from more than 10,000 closely held companies—about half of which have less than 500 employees—a study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses. For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000.
A small-business audit costs anywhere from $5,000 to $75,000, depending on the size of the company, the complexity of its data and other factors—typically double the cost of a financial statement review, the next highest level of CPA-verified assurance after an audit.
An audit provides third-party assurance that a company’s financial statements are correctly prepared and based on verified business data, while a review shows the statements are at least internally consistent with data provided by management.
“There appears to be a very real cost benefit to getting an audit, beyond the obvious value of having your financial statements in order,” says Michael Minnis, a Booth School assistant professor of accounting who led the study. The Booth School study is expected to be published in the Journal of Accounting Research in May.
Similarly, a joint study last year by Michigan State University and Indiana University found small businesses with audited financial statements were “significantly less likely” to be denied credit from banks.
David Leuthold, chief executive of Century Negotiations Inc., a North Huntingdon, Pa., consumer-debt settlement firm, says he started having his books audited annually in 2005 to double-check his own bookkeeping, paying about $8,000 an audit. The move paid off when he applied for a $100,000 line of credit the following year.
“The bank required audited financial statements,” says Mr. Leuthold, whose company made $8 million in revenue last year. Even without audited books, he believes the bank might have approved the loan, though at less favorable terms. “We had what they wanted, so it was definitely worth it,” he says.
Still, for many small businesses seeking a loan, lenders say an audit is costly and unnecessary.
“Audits provide good information. The more concrete information a lender can get, the better,” says Tom Burke, the director of Wells Fargo’s Small Business Administration lending division. But he questioned the necessity of audits for every business.
Mr. Burke says a business with less than $1 million in annual revenue can ask a CPA to prepare a compilation, which is a cheaper, unaudited financial statement based on recorded sales, inventory and other data. Since owners often use these statements to manage daily operations—and they’re prepared by CPAs—lenders have some assurance of the statements’ accuracy in making loan decisions.
“I’d hate to see people taking steps that aren’t necessary, or that they can’t afford,” Mr. Burke says.
Small-business accountant David Wilke, of Carnegie, Pa., says he helps borrowers and lenders negotiate loan terms based on mutually acceptable levels of assurance, ranging from compilations to audits. He says a CPA “adds value by determining what a bank wants and what a business can provide at an early stage,” rather than trying to convince every client to get audited.
Mr. Rose, the accountant in Pittsburgh, says it’s only worth going through an audit—which can require days and even weeks of a manager’s time—when a business owner has a loan in hand that’s contingent on providing audited financial statements.
Audited or not, less than a quarter of businesses with fewer than 500 employees keep financial statements of any kind, according to the Federal Reserve Board’s National Survey of Small Business Finances.
“There’s a lot of criticism that it’s expensive and difficult to prepare and audit your financial statements,” says Teri Yohn, an Indiana University associate professor of accounting who sits on the Financial Accounting Foundation’s blue-ribbon panel on private-company accounting standards. “But there are clearly benefits.”
Schutte & Hilgendorf, PLLC, a Prescott based CPA firm provides audits and reviews to small businesses, government entities, non-profit organizations, and homeowners associations. We also provide tax preparation and planning services, QuickBooks consulting and training and payroll and sales tax services to individuals and small businesses. Contact us for pricing or more information about how we can help you!
How many non-profit boards hire an outside auditor?
Eighty-four percent of the respondents of a recent BoardSource governance survey say that they annually hire an auditor to conduct an external financial audit. Smaller organizations are less likely than large organizations to hire an auditor.
Here are five key ways to maximize the audit process:
Be sure the board is in the audit driver’s seat. The nonprofit board has the responsibility to oversee the audit process. This includes assessing the financial controls, policies, procedures, and condition of the organization and overseeing the external auditor.
Review the auditor’s independence. The board should be certain that the auditor is independent and objective in performing duties.
Choose your auditor carefully. Even with rigorous efforts by professional bodies governing the practice of Certified Public Accountants to improve the quality of audits, not all audits are created equal.
Invest your audit dollars wisely. While it is important to be certain the audit fees are reasonable in light of the quality and value of an audit, focusing too much attention on cost can be detrimental to the health of the audit and ultimately to the organization.
Properly use your audit committee. The audit committee should be the fulcrum of the financial reporting function. Start with an independent audit committee. The committee members should not be members of the nonprofit’s staff. Invite staff members to committee meetings to answer questions and to provide information.
Excerpted from the Maximizing the Audit Process by Dan Busby.
Should you have questions regarding this post or any other accounting or auditing needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
Many more tax-exempts can file e-Postcard instead of Form 990 for 2010 under new rule
Rev Proc 2011-15, 2011- IRB, IR 2011-3
In a Revenue Procedure, IRS has raised the annual gross receipts threshold at which tax-exempt organizations (other than private foundations and Code Sec. 509(a)(3) supporting organizations) must file Form 990, Return of Organization Exempt from Income Tax, from $25,000 to $50,000, for tax years beginning on or after Jan. 1, 2010. Thus, under this new rule, most tax-exempt organizations whose gross annual receipts are normally $50,000 or less can file the simpler Form 990-N (Electronic Notification e-Postcard).
Background on tax-exempts’ filing requirements. Under Code Sec. 6033(a), most tax-exempt organizations, other than churches, must file with IRS an annual Form 990, Form 990-EZ (Short Form Return or Organization Exempt From Income Tax), or Form 990-PF (Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation). Under the discretionary authority in Code Sec. 6033(a)(3)(B), IRS provided that exempt organizations, other than a private foundation, whose annual gross receipts aren’t normally in excess $25,000 do not have to file Form 990, but instead can file the simpler Form 990-N, the e-Postcard which only requests eight items of information items. (Rev Proc 83-23, 1983-1 CB 687) IRS provides similar exceptions for tax-exempt foreign (Rev Proc 94-17, 1994-1 CB 579) and possession organizations (Rev Proc 2003-21, 2003-1 CB 448).
Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends.
RIA observation: Non-church exempt organizations that fail to file for three consecutive years automatically lose their tax-exempt status. In an effort to help them keep their status, IRS offered a one-time, two-part filing relief program in July of 2010 to bring small organizations back into compliance, see Federal Taxes Weekly Alert 07/29/2010.
New simpler reporting rule. Rev Proc 2011-15, Sec. 3.01, provides that a exempt organization (other than a private foundation or a Code Sec. 509(a)(3) supporting organization) that normally has annual gross receipts of not more than $50,000 (as described in Rev Proc 2011-15, Sec. 4) isn’t required to file an annual return under Code Sec. 6033(a) , i.e., Form 990. Rev Proc 2011-15, Sec. 4, provides that the annual gross receipts of an organization are normally not more than $50,000 if:
· in the case of an organization that has been in existence for one year or less, its gross receipts, including amounts pledged by donors, are $75,000 or less during its first tax year;
· in the case of an organization that has been in existence for more than one year, but less than three years, its average annual gross receipts for its first two tax years are $60,000 or less; and,
· in the case of an organization that has been in existence for three years or more, its average annual gross receipts for the immediately preceding three tax years, including the tax year for which the return is filed, are $50,000 or less.
In addition, Rev Proc 2011-15, Sec. 3.02, provides that a tax-exempt foreign organization or a U.S. possession organization (other than a private foundation or a Code Sec. 509(a)(3) supporting organization) isn’t required to file an annual return under Code Sec. 6033(a) if:
(1) it normally doesn’t receive more than $50,000 in annual gross receipts from sources within the U.S.; and
(2) it has no significant activity (including lobbying and political activity and the operation of a trade or business, but excluding investment activity) in the U.S.
If at any time an organization ceases to meet the conditions set out in Rev Proc 2011-15, it must file an annual return on Form 990 for the year in which it first ceased to qualify for relief under Rev Proc 2011-15 and for all later years in which the organization doesn’t qualify. (Rev Proc 2011-15, Sec. 3.04)
Tax-exempt organizations exempted from filing an annual return under Rev Proc 2011-15 must submit a Form 990-N e-Postcard annually in electronic format. By submitting an e-Postcard, an organization acknowledges that it isn’t required to file a return because its annual gross receipts are normally not more than $50,000. (Rev Proc 2011-15, Sec. 3.03) Further, Rev Proc 2011-15 doesn’t affect an organization’s obligation under the Code to file any tax or information return other than Form 990. For example, if an organization earns sufficient gross unrelated business income, it is still required to file of Form 990-T, Exempt Organizations Business Income Tax Return. (Rev Proc 2011-15, Sec. 5)
Rev Proc 2011-15, Sec. 1, provides that it doesn’t apply to organizations exempt from income tax under Code Sec. 527 (i.e., political organizations).
RIA Research References: For tax-exempt organization’s annual return Form 990, see FTC 2d/FIN ¶ S-2801; United States Tax Reporter ¶ 60,334; TaxDesk ¶ 688,001.
Source: Federal Tax Updates on Checkpoint Newsstand tab 1/14/2011
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
Charitable Tax Credit
An individual income tax credit is available for contributions that provide assistance to the working poor. Below, you will find a link for recent changes in the law that impacts both taxpayers and charitable organizations. For a publication to assist taxpayers, a current list of Qualifying Charitable Organizations, and forms and instructions for a Charitable Organization to be added to the list.
For a list of current Qualifying Charitable Organizations click on the following link: Working Poor_Certified Orgs_2010. A list of Umbrella Organizations is found at the very end on the last page of the list.
Provided by the Arizona Department of Revenue web page http://www.azdor.gov/TaxCredits/CharitableTaxCredit.aspx as of 3/26/10
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.
The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.
A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.
(From IRS Issue Number IR-2010-010)
Contact us today for assistance filling the appropriate return for your tax-exempt organization.
Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.
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Schutte & Hilgendorf PLLC
3140 Stillwater Drive
Prescott, AZ 86305
Phone: 928-778-0079
Fax: 928-778-0261
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