Year-End Checklist
Many accounting tasks occur once a year, such as annuity adjustments, pledge write-offs, and accruals. Create a checklist to help ensure all needed accounting tasks for year-end are taken care of. Start at the top of your trial balance and create a task to ensure that each general ledger account balance is reviewed, and any third-party support is requested. For example, any life insurance policies owned by the community foundation, request an updated Cash Surrender Value and make the appropriate adjustment. Even if the community foundation does not currently have an annual audit, it’s good to start the practice now so that the first audit is less daunting.
Tip: If you’re a CommunitySuite user, consider using the Tasks feature to create your Year-End Checklist and assign it to staff as appropriate.
Policies
Use the summer months to revisit your policies and procedures and make sure they are updated. Oh, and if you haven’t looked at your segregation of duties and confirmed permission settings in your accounting system, this is another great time to do it, and document it too! I attended a Continuing Education webinar recently, and this IRS Governance checklist was mentioned and suggested as a tool to ensure your organization is compliance to maintain their tax-exempt status. https://www.irs.gov/pub/irs-tege/governance_check_sheet.pdf
Expenses
Expenses should be recorded when incurred, and not based on invoice date or the date you cut a check to the vendor. For example, if a vendor performed services in December but did not invoice you until January 1, the expense should be recorded to 2019 and the community foundation will have an outstanding account payable as of 12/31/2019. Also, if the community foundation is aware of an expense but has not received the invoice from the vendor, the Community Foundation should estimate the amount of the expense and record it to 2019.
W-9s
If you have not obtained a W-9 from your vendors, now would be a great time, so all information is complete on your 1099s. Often, a vendor will have a DBA “Doing Business As” name but the legal name will be different, and you will want to issue the 1099 with the legal name. A good practice, if you are not currently collecting W-9s, would be to collect W-9s for any new vendor before you make your first payment to them.
W-9 Instructions – IRS Link: https://www.irs.gov/pub/irs-pdf/iw9.pdf
Tip: CommunitySuite users, consider uploading the vendor’s W-9 to their vendor profile and marking the “Need 1099” box once you have received their W-9 and confirmed they are a 1099 vendor. (Curious about CommunitySuite? Check out our solutions designed specifically for community foundations here.)
With a little preparation, more time can be spent with your donors and families, and not on pesky accounting tasks.
Constructive Receipt of Donations
The IRS states that donations are constructively received when they are postmarked, not the date of the check. So, donations received the first few days of the New Year are probably postmarked with a 12/31 date or earlier, and thus should be considered a 2018 donation. Keep the envelope, or scan along with the check, for support to show the appropriate year of the donation.
IRS Guidance: https://www.irs.gov/pub/irs-pdf/p526.pdf (See page 13 for Timing of Contributions Guidance.)
1099s
If the community foundation paid certain vendors at least $600 in 2019, a 1099 should be issued to the vendor and a copy submitted to the IRS by January 31, 2020. For example, payments for professional services provided by attorneys or accountants are applicable 1099 events. Also, payments for rent and other contract services are 1099 events. Also note that although a majority of activity goes into Box 7, expenses such as rent goes into Box 1. The link to the IRS instructions is included below for reference, as the criteria for when to issue a 1099 can be very specific to the transaction.
1099 Instructions – IRS Link: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
Tip: CommunitySuite users can click on the Reports link in the Core section, then select the Vendors Paid Report. From the drop-down menu select 2018; the report is already sorted by amounts paid for a quick review. Before you run the report, double-check that you have set the 1099 box field in the appropriate expense accounts in your Chart of Accounts so that 1099 box information is included in the Vendor Paid Report.
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