Florida 4-H Annual Financial & Tax Reporting Guide Required Procedures to Maintain Tax Exempt Status for Your County 4-H Program

Transcription

1 Florida 4-H Annual Financial & Tax Reporting Guide Required Procedures to Maintain Tax Exempt Status for Your County 4-H Program For County 4-H Agents And CEDs 2018 Edition

2 { Legend Accompanying document in Appendices and on Florida 4-H website More information available online An Equal Opportunity Institution. U.S. Department of Agriculture, Cooperative Extension Service, University of Florida, IFAS, Florida A&M University Cooperative Extension Program, and Boards of County Commissioners Cooperating. 2

3 TABLE OF CONTENTS Let s Review o Overview of Annual Financial & Tax Reporting Procedures Annual Financial Review Year-End Reporting IRS Form 8821 IRS 990-series Tax Return o Why It s Important o Before You Begin Where to Find Assistance Timeline and Deadlines Fiscal Year and Deadlines Tax Forms online Let s Get Started o Conducting your Annual Financial Review Overview Who is Responsible for What? Financial Review vs. Audit Who Conducts the Financial Review? What Accounts are Reviewed? What Accounts are not Reviewed? How Do I Review Accounts? How Do I Prepare My Reviewers? What Documentation is Required? What Do I Keep and What do I send to 4-H Business Services? What Do I Do if Things are Found to be Wrong? 3

4 o Step-by-Step Guide to Completing the Year-End Report Overview 1. General Information 2. Updating Bylaws 3. Financial Information 4. Updating Membership Roster 5. Verifying Tax Information 6. Statements and Signatures County 4-H Foundations Reporting o Completing the IRS Form 8821 Overview Common Myths about the IRS 8821 Parts of the Form o Filing an IRS 990 Tax Return Overview Which 990 Should I file? How Do I Determine Gross Income? Things That Are Not Gross Income The IRS 990-series Forms Reminders New this year, 4-H Business Services will submit the 990 to the IRS for your association! County 4-H Foundations with 501(c)3 Status o Overview o How Does the Process Differ from Associations? o Timeline & Deadline 4

5 County 4-H Associations and Foundations Resources Go to > hover over 4-H Professionals (blue ribbon at top) > click on Evaluation and Reporting > Tax Reporting drop down to Tax Reporting Guide. There you will find the following resources: Please be sure to use the documents that were attached to your End-of-Year Reporting sent out the week of August 20, These documents will be updated on the web-site soon. IRS 4-H Group Exemption Letter This letter is proof that your County 4-H Association is an IRS approved 501c3 under the Group Exemption of the University of Florida. County 4-H Tax and Other Issues FAQ As FAQ implies, these are the most common questions and answers that may arise for county 4-H associations and foundations. Annual 4-H Financial & Tax Reporting Guide This is where you ll find this booklet Tax Calendar Checklist This provides important dates and suggestions on when your county should be reviewing the annual finances, reporting and submitting the IRS Form 990. County 4-H Association Year-End Report County 4-H Association Annual Reporting Excel version (will make some calculations for you) This workbook contains the 4 forms listed below: Organizational Info Account Info Financial Info Member Roster (Association Members) These forms may be completed in Excel, printed, signed and ed to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services, along with required documents listed on the forms. OR: County 4-H Association Annual Reporting PDF version If Excel isn t convenient for you, just print this PDF version. It has the same forms as listed above in the Excel version. Just complete the forms, have them signed then along with required documents to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services. 5

6 IRS Form 8821 This form on the resource website has the Appointee already prefilled for you. The form just needs to be completed, signed and ed along with the Annual Year-End Report (it is important that you use the prefilled form on the resource website as the IRS has a specific way this form has to be completed). IRS Form 990-Series Returns and Instructions There are instructions and links to the various IRS webpages on the resource website for: IRS 990-N (E-Postcard) IRS 990-EZ IRS 990 Full Form 6

7 Let s Review In May, 2014, the University of Florida filed for federal income tax exempt status on behalf of the 67 county subordinate groups. The County 4-H Associations were granted tax exempt, 501c3 status in November, 2014 under the University of Florida group exemption. The Letter of Determination can be found on the tax resources website. The County 4-H Associations were organized solely to support the UF/IFAS Extension Florida 4-H Youth Development Program. To maintain our group exemption, and to continue providing your County 4-H Association with tax exemption, there are a few basic steps that you will have to complete each year. None of these steps should be new for your county 4-H program. Overview of Annual Maintenance #1 - Annual Financial Review At the end of your fiscal year, which is August 31 st. You will need to conduct a financial review of all accounts held under the name and tax ID of your County 4-H Association. #2 - Year-End Reports For both the IRS and 4-H s records, you will have to complete the year-end reporting forms. These forms include very basic information, such as: changes to your bylaws, a roster of Association members, banking and financial information, etc. #3 - IRS Form 8821 Essentially a permission slip for the University of Florida to review your County 4-H Association s annual tax returns, this one-page form must be completed each year. #4 IRS 990-series Tax Return Finally, you will need to complete the appropriate 990- series tax return for your Association. Which 990 return you file is dependent on your Association s gross income. 7

8 Why It s Important These steps are important not only to maintain our taxexempt status, but also to maintain internal control over 4-H funds. This gives volunteers and donors confidence that 4-H club funds and contributions are being properly handled and expended. It is the Extension professional s obligation to donors and other stakeholders to ensure that Associations are managing 4-H s funds properly, and to demonstrate oversight of these accounts. An added bonus is that we will be able to determine the total amount of contributions to the Florida 4-H program statewide. Before you Begin Where to Find Assistance Remember that there are people here to assist you in this process. First and foremost is your Regional Specialized 4-H Agent (RSA). The five RSAs will be able to answer most questions, particularly related to financial reviews and the year-end forms. The 4-H State Headquarters will provide support for the RSAs, and to individual counties when necessary. Timeline and Deadlines The financial review and 990-series tax return will likely take the most time to complete. So, please plan accordingly. For a suggested timeline for completing each step, please see the Tax Calendar Checklist located at the following link: Here are a few things to remember: The annual maintenance packet, including the 990-series tax return, must be submitted to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services within 60 days from the end of your fiscal year. Please note that 501(c)3 Foundations may have a different deadline. Please see the section on County 4-H Foundations with 501(c)3 Status. NOTE: The IRS requires the 990 be filed by the fifteenth day of the fifth month following the end of your fiscal year. However, to ensure that every county completes the 990 tax 8

9 return on time, and so the University of Florida can complete its own filing requirements on time, 4-H has set a deadline of 60 days from the end of your fiscal year. Fiscal Year and Deadlines All County 4-H Associations have a fiscal year of September 1 through August 31. Your deadline is listed below: Fiscal Year - September 1 st through August 31 st Association Deadline to submit to 4-H Business Services: October 31 st Tax Forms Online These forms and other resources are included in the appendices and online at: Let s Get Started Below you will find step-by-step instructions for each of the four steps outlined above. There are additional resources in the appendices of this manual. #1 Conducting Your Annual Financial Review Overview The financial review will likely be the most time-consuming portion of this process. However, almost all other information will be derived from this important first step. Establishing a system for conducting a financial review in your county will make future years less difficult. Who is Responsible for What? The review process involves the County Extension Director, County 4-H Agent(s), 4-H Association members, and the reviewer or reviewing committee. 9

10 The County Extension Director is ultimately responsible for all funds in a given county Extension program. However, responsibility for overseeing the review is generally delegated to the County 4-H Agent(s). The 4-H Agent should work with the Association members to select an appropriate reviewer or reviewing committee, and the selection should be approved by the CED. The Association should be responsible for gathering information necessary to conduct the review, and preparing any report requested by the 4-H Agent or reviewer. These reports should be submitted to the 4-H Agent and reviewer(s) for financial review; findings should be reviewed and approved by the CED, and then returned to the 4-H Agent. The county 4-H agent will be responsible for submitting the appropriate report(s) for each County 4-H Association within 60 days of the end of its fiscal year, or at an earlier date established by the 4-H Agent and CED to the University of Florida in care of Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services. Most County 4-H Associations will conduct a financial review, which is an internal process used to review financial statements, fund balances and assets, and to make recommendations for the improvement of the accounting system. An audit is a more formal and rigorous process, typically conducted by a credentialed outside agency. It is up to individual county agents to decide if an audit or financial review will be carried out. Counties with larger cash flows and more complex accounting may choose to conduct an audit. All counties will at least conduct a financial review. 10

11 Who Conducts the Financial Review? Reviews can be conducted by an individual or a group that is chosen by the county 4-H agent in cooperation with the Association members, and approved by the CED. It s imperative that this person or group not include the treasurer or the assistant treasurer of the Association, nor any other signatory on any account being reviewed. The person or group does not necessarily need to be a CPA or hold any accreditation, but must possess the skills necessary to reasonably carry out the task. Examples of potential volunteers include: past treasurers of advisory committees, other Extension volunteers with bookkeeping skills, or a local CPA who performs pro bono work for non-profits, etc. The Association may also choose to employ a CPA to conduct an audit. What Accounts Are Reviewed? All county 4-H programmatic funds should be on deposit in a banking or investment account opened under your County 4-H Association s name and tax ID. So, this financial review should cover all accounts associated with your Association s tax ID. Below are a few scenarios: #1 All of my 4-H funds are in one Association banking account. You only have one account to review, and only need file one IRS 990. #2 My Association has several banking accounts for different purposes, as well as several investment accounts. You have several banking accounts and several investment accounts to review individually. Therefore, you must combine their total gross income and total assets to complete the year-end report and ONE appropriate IRS 990- series tax return. #3 I have several banking accounts under my Association, and I also have a 4-H Foundation that uses my Association s 11

12 tax ID through a fictitious name registration and it has several accounts, too. Well, you have several banking accounts for your Association to review individually, as well as several Foundation accounts to review individually. Therefore, you must combine their total gross income and complete ONE year-end report and ONE IRS 990-series tax return. #4 I have an Association with one or more banking accounts, and I have a County 4-H Foundation that has received 501(c)3 status from the IRS. You will complete two completely separate financial reviews: one for your Association, which includes the yearend report and IRS 990 tax return; and another for your Foundation that also includes a year-end report and IRS 990 tax return. Please see the section for 501(c)3 Foundations. #5 I have clubs that derive their tax exemption from the local Association. See answer #3 above. What Accounts Are Not Reviewed? This guide is primarily concerned with the University of Florida GEN subordinates, and other 4-H affiliated groups, such as 501(c)3 Foundations. Therefore, accounts held under a tax ID not included in the GEN would not be reviewed as a part of this guide, nor would accounts held by groups that do not use the 4-H name and emblem. Examples include: Extension Advisory accounts and Board of County Commissioners accounts. 12

13 How Do I Review Accounts? Florida 4-H doesn t prescribe any one way to conduct a financial review because of the variety of account arrangements employed by counties. Instead, we offer basic criteria for you to meet in a way that makes sense for your county. At minimum, your financial review should check the following items for each account: Beginning balance Total of various types of income Total of various types of disbursements Ending balance Ensure all monthly statements match records, verify deposits and disbursements Disbursements should match accompanying paperwork, such as internal forms or invoices Evidence that balances have been reconciled with printed bank records A statement from the reviewer that the records have been reviewed and found to be handled in accordance with the organization s established policies, or a statement listing any discrepancies and recommendations for correcting them Signature of reviewer(s) You may also choose to have a reviewer include suggestions for improvement in record keeping. How Do I Prepare Reviewers? Provide your reviewer(s) with a brief overview of 4-H and your system of accounting as appropriate. What Do I Keep and What Do I Send to the 4-H Business Services? County Extension Offices should hold their review records for ten (10) years for all accounts reviewed, including the account and summary reports listed above and copies of supporting documents, such as bank statements, ledgers, receipts, checks, etc. Copies of IRS 990-series tax returns should also be kept for ten (10) years. Counties should send the following items to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services each year. 13

14 Annual Reports: Organizational Info Bylaws if changes made during reporting year Copy of IRS Form 990 Copies of any 1099s and 1096 for prior calendar year Signed Financial Review Account Info Copies of all bank and investment statements at year-end (August 31 st ) Financial Info Association Member Roster What Do I Do If Things Are Found to be Wrong? Occasionally, reviewers will uncover items as innocuous as small discrepancies in accounting, or as serious as fraud or theft. In cases of discrepancies or accounting errors, make note of the findings in the report and then correct your books. If a systemic problem is found, take steps to prevent problems from occurring in the future. In the case of more serious issues such as fraud or theft, the appropriate action should be taken to determine the party responsible, and take corrective or, possibly, legal action. In these sorts of cases, you should consult with your County Extension Director and your 4-H RSA. 14

15 #2 Step-By-Step Guide to Completing Your Year-End Report Overview The Year-End Report is a simple questionnaire consisting of four forms with a few required attachments. Its purpose is to verify that the basic requirements for maintaining your inclusion in the GEN have been met. This allows the University of Florida to demonstrate the supervision and control the IRS requires of central organizations. Various parts of the Organization Information form: I. General Information: This section should list your County Association name, legal address, EIN, and contact information. II. III. IV. Bylaws: In this section, you must certify that no changes have been made to the bylaws in the past year; or, if there were changes made, attach a current copy with changes noted. Memorandum of Agreement: This section is to verify that your County Association has a written MOA with the UF/IFAS County Extension Service and whether or not it has been amended during the current reporting period. Membership Information: The IRS requires us to keep record of the members of our subordinate groups. You will need to list all members of your County 4-H Association and any offices that they may hold. Attach a copy of the Member Roster. V. Tax Information: NEW THIS YEAR! DO NOT FILE THE 990 WITH THE IRS!! It is now necessary for you to submit your annual reports to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services for review before the 990 is submitted to the IRS. IRS Form 990N: If your association is required to submit a 990N, your association s annual report will be reviewed at 4-H Business Services. If everything is in order, the 990N will be submitted to the IRS. A copy of the IRS confirmation of the 990N will be ed to you for your files. You will be contacted if more information or clarification is needed in order to file your association s 990N. 15

16 IRS Forms 990EZ and Full 990: If your association is required to submit a 990EZ or the full 990, you will send your association s annual report, as well as the completed and signed 990EZ990. Then if everything is in order, the 990EZ or 990 will be submitted to the IRS. You will be contacted if more information or clarification is needed in order to file your association s 990. If you have a qualified accountant or tax preparer completing your association s 990, you will still be required to have the 990 reviewed by 4-H Business Services prior to the 990 being submitted to the IRS. Once you ve received approval, your accountant can submit the 990 to the IRS or if you prefer, 4-H Business Services will submit the 990 to the IRS. VI. Financial Information: This section certifies that basic money handling policies are being followed and that a financial review has been carried out. All necessary forms, including the IRS 8821, are submitted with Year-End Reporting to the 4-H Business Services. Statement of Continued Inclusion and Signatures: This section requires the County Association chairperson, county 4-H agent and CED to sign, stating that all requirements for inclusion have been met. 16

17 Various parts of the Account Information form: Bank/Investment Accounts: These sections are where you will list the name of the institution and the account number for each bank and investment account that is held under the EIN of your County 4-H Association. The form has sections for three accounts. If you have more than three accounts, you ll need to copy the forms as many times as necessary to enter list all of the accounts. Ending Balances: These sections are where you ll enter the balance of each account as of the end of the year (August 31 st ). You ll enter the type of account, whether the account is a checking, savings or investment account. You ll enter the names of the persons that are responsible for signing on the account. You ll submit copies of the bank and/or investment account statements as of year-end with your Year- End Reporting to the 4-H Business Services. Various parts of the Financial Information Form: This form encompasses ALL of the combined totals of your bank and investment accounts. Beginning Balance as of September 1 st : This is where you enter the combined total of all banking and investment accounts as of the beginning of the year. Income: This section will be the combined totals of all various types of income from all banking and investment accounts received into your County 4-H Association throughout the year (September 1st through August 31st). Expenses: This section will be the combined totals of all various types of expenses from all banking and investment accounts disbursed from your County 4- H Association throughout the year (September 1st through August 31st). Ending Balance as of August 31 st : This total will be the beginning balance, plus all income, minus all expenses. The amount should equal the amount of all combined banking and investment accounts. This should also be the same amount that you listed as the Combined total of balances in accounts as of 8/31 on the Account Information form. The number of clubs and the total amount that belongs to Clubs: Of the total amount listed under 17

18 Ending Balance, enter the amount that belongs to clubs that is held within your County 4-H Association. Capital Assets valued at $5000 or more: This section is where you will list any land, buildings, vehicles, farming equipment, etc. that is owned by the County 4-H Association. Just an estimated value is sufficient. Reviewer s Statements: This section is to be completed by the person(s) that performed the financial review. They will attest that the accounts, statements and ledgers are complete, accurate and in balance. Reviewers will give any remarks or recommendations then sign the form. A signed copy of the financial review is to be submitted to 4-H Business Services with the Year- End Reporting. Various parts of the Member Roster Form: This form is to list all members of your County 4-H Association and any offices that they may hold. This form is to be submitted with your Year-End Reporting to the 4-H Business Services. County 4-H Foundations Reporting Some counties have a County 4-H Foundation that has been granted its own 501(c)3 status from the IRS. Because these organizations are separate legal entities from the County 4-H Associations, and derive their tax exemption from a different source, they will need to be reviewed separately, and complete a separate Year-End Report. Please see the section on County 4-H Foundations. Although the foundations still are required to submit an annual report, 4-H Business Services will not submit their 990. However, 4-H Business Services is happy to answer any questions related to the foundations. #3 Completing the IRS Form 8821 Overview The IRS Form 8821 is essentially a permission slip that allows the University of Florida to review your County 4- H Association s tax returns for a given year. This form must be completed every year. 18

19 Common Myths about the IRS 8821 I m not giving you my Social Security Number! The IRS 8821 is a dual-purpose form, which is used for both individuals and organizations. In this case, we re using it for your County Association, so please do not provide any personal information. Why does my husband or wife have to sign? The spouse does not sign. Again, because of the dual purpose of this form, it may ask for a spouse s signature. Since we re using it for an organization, only one officer needs to sign. The Agent or CED can just sign it, right? No. The IRS 8821 is proof that your County 4-H Association is granting authority to another organization to review its tax documents. Only an authorized member of the Association usually an elected officer can sign that authority over. Since no CED or 4-H Agent should be an officer of the County Association, they may not sign. T 19

20 #4 Filing an IRS 990-Series Tax Return Parts of the 8821 Form The easiest way to complete this form is simply to visit the resource website, download the form and complete with your County 4-H Association s information, as all information is prefilled. 1. Taxpayer Information: Fill in your County 4-H Association s legal name, principal address and EIN. 2. Appointee: This section should read (prefilled): University of Florida Janet G. Waters 1604 McCarty Dr (MCCD) Rm 1040 Gainesville, FL Tax Information: This section should read (prefilled): a. Should read any and all tax information b. Should read 990 c. Should read 2012, 2013,2014, 2015, 2016, 2017 d. Should read all as related to this organization 4. Specific use not recorded on Centralized Authorization File: Skip 5. Disclosure of tax information: Box a should be checked and Box b Skip 6. Skip 7. Sign and date and print name Overview The IRS 990-series tax return is simply the tax return that all non-profit organizations file. The 990 consists of a core form and several schedules that may or may not apply to you. Each organization that files must complete the same core form, which includes a summary page that provides a snapshot of the organization s financial and operating information for the current and prior year. All form 990 filers will provide information about their program s services, accomplishments, compensation of any employees or officers, as well as information about governance practices and procedures and financial information. The IRS 990-series tax return is more than simply reporting financial information; it is the way in which the IRS checks that an organization is fulfilling its mission as a non-profit entity. 20

21 Which 990 Should I File? Every organization must report its gross income each year regardless of what that amount is. The amount of gross income determines which return your County Association should file. 990-N: Gross Income < $50, EZ: $50,000 < Gross Income < $200, : $200,000 < Gross Income How Do I Determine Gross Income? There s a fair amount of confusion about how to arrive at this number, but it s simple. The IRS actually uses the term gross receipts. It s determined by the total dollars received by the organization, which could be in the form of donations, registration fees, investment earnings etc. This number will be listed under Combined Total Income on your Financial Information Form, which is part of the Year-End Reporting packet. Things that are Not Gross Income Here are some numbers commonly confused with gross income: Total Assets: For our purposes, assets are most easily described as funds kept year to year. For example, if you have a $20,000 scholarship fund, those dollars would be counted among the County 4-H Association s total assets, but not reported on the 990 every year. They would only be reported the year they were received. Profit: Many people believe you only need to report the dollar amount left after expenses have been paid, or profit. This is not the case. 4-H is a not-for-profit organization, and all income must be reported. The IRS 990-Series Forms Links to the IRS 990-series webpages are located on the support website, along with instructions for their completion. Because most County 4-H Associations annually have gross receipts that are less than $50,000, most associations will only need to file the IRS 990-N e-post card, which is only available online. 21

22 County 4-H Associations with large revenue and/or complex accounting systems should consult a local CPA to assist with completing its tax return. Remember to use your own County 4-H Association name and tax ID number when completing the form. County 4-H Foundations with 501(c)3 Status Overview A County 4-H Foundation that has attained its own taxexempt status from the IRS is considered a separate legal entity, and therefore requires a separate financial review, IRS 8821 and IRS 990-series tax return. Where County 4-H Associations must complete annual reports and tax returns to maintain their inclusion in the University of Florida s GEN, these County 4-H Foundations complete the process to: 1. Demonstrate adherence to 4-H policies and procedures to maintain use of the 4-H name and emblem, and the continued permission to raise funds for 4-H. 2. Continue their incorporated status with the Florida Division for Corporations. 3. Maintain their federal income tax-exempt status with the Internal Revenue Service. 22

23 How Does This Process Differ from a County Association s? The process for County 4-H Foundation is nearly identical to that of the County 4-H Associations. It will still require the following steps: 1. Conduct an annual financial review of all accounts 2. Complete the Year-End Reports and submit to 4-H Business Services 3. File an IRS File an IRS 990-series tax return And this additional step: 5. File and pay annual incorporation fee to Florida Division of Corporations What Forms Do I Need to Send to the 4-H Business Services? Please send a copy of the following forms to Janet G. Waters janet.waters@ufl.edu at UF/IFAS Extension Business Services: 1. Annual Year-End Reports for County 4-H Foundations Organization Information Form Account Information Form Financial Information Form Board of Directors Roster As well as the following: Updated Bylaws (if any) Changes to MOA (if any) Bank and/or investment statements at fiscal yearend. Copy of Florida Department of Corporations Annual Report Board Directory 2. IRS Form 8821 (need to use the same prefilled form as the associations) 3. IRS 990-series tax return (copy) See Step-By-Step Guide to Completing Your Year-End Reports for County 4-H Associations beginning on page 15 Timeline & Deadline Some County 4-H Foundations do not follow the same September 1 August 31 fiscal year as all County 4-H Associations. To determine your deadline for filing with 4-H Business Services, please calculate 90 days from the end of your fiscal year. Foundations are given an additional 30 days to file on the assumption that most 501(c)3 Foundations will have greater assets and more complex accounting. 23