Strategy and planning play a critical role in ensuring your not-for-profit’s financial goals align with the organization’s mission statement. As your not-for-profit prepares for 2020, here are essential financial planning items to consider:
Annual Reporting Requirements:
- Verify that your state registrations are up-to-date and current. Review annual filing deadlines for each state you must file in and check the status of your organization in each state.
- Meet with your state and local tax accountant to ensure you are up-to-date on new state tax laws that may affect your organization.
- Request that your revenues be reviewed for state tax implications, such as Washington state’s Business and Occupation tax. For example, not-for-profit organizations have no blanket exemption for B&O taxes in Washington state, and your sources of revenue should be analyzed to determine taxability.
- Form 1099-MISC, Miscellaneous Income is required for not-for-profit organizations that meet the dollar thresholds set forth by the IRS (see IRS instructions). There is no exemption for not-for-profit organizations to file Form 1099s. Remember to analyze your expenses for potential 1099 filings that meet the thresholds and request Form W-9s from vendors early. A Form 1099-MISC with an amount in Box 7, Non-employee Compensation is due to the IRS and vendor by January 31, 2020. Forms with amounts in any other box are due February 28, 2020 (if filed by paper), and March 30, 2020 (if filed electronically).
- Check in early with your auditor and tax accountants to set timelines and gather documents requested. You can look to your prior list of requested documents to understand what your accountants will need.
- Form W-2s are due to employees and the IRS by January 31, 2020. Remind your employees to verify their legal name and address in your payroll system to ensure accurate 2019 Form W-2s are filed.
- If you must file the Affordable Care Act forms 1094/1095-B and C, review the forms before their due date of February 28, 2020, for accuracy.
- Distributions from retirement plans may require filing Form 1099-R. Check with your retirement plan provider and your payroll team to ensure timely and accurate filings. Form 1099-R is due February 28, 2020 (if filed by paper) and March 30, 2020 (if filed electronically).
- Check that your payroll system is up to date with 2020 tax rates before processing your first payroll with a pay date in 2020.
- New employees starting in a pay period where the pay date is in 2020 must file the new Form W-4. Employers may request new W-4s from all employees; however, an employer may not make this a requirement if the employee started before the pay period and already has a Form W-4 on file. Remind your Human Resources team that new hires may need extra time to prepare their Form W-4.
- Review your current budgeting tool and whether it is working for your organization. There may be other budgeting tools that prove more useful.
- Review your budget to actuals for year-end and note variances that exceed thresholds. Consider how this will affect your 2020 budget. Consider any new programs during the new year and any programs that are no longer in existence.
- Review your historical cash cycle to determine patterns for planning in 2020.
- Review federal and state tax changes that may affect your expenses, such as payroll taxes.
- Establish and fund your reserves for the year.
Financial Statement Reporting:
- Review your year-end financial statements. Does the structure of the financial statements make sense for your organization? Does your statement of activities and statement of financial position paint the story your organization wants to tell?
- Review your statement of functional expenses to determine if any changes need to be made to expense allocations between management and general, fundraising, and program.
- Consider your financial statements in relation to the ease of preparation of your Form 990 or Form 990-PF.
- Consider additional reports that your board of directors may want during the new year, such as an executive summary explaining variances throughout the year or a snapshot of your current financial position.
Following through on these steps will place your organization in a strong position as you enter 2020. If you have any questions regarding your new year planning, contact a Clark Nuber professional.
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