Faith-Based Accounting

Are you at risk of losing your tax exempt status?

Tax exempt organizations are required to file an annual return with the IRS.  If the organization fails to do so for three consecutive years, the exempt organization automatically loses its exempt status.  The IRS announced today one-time relief benefits for Form 990-N and Form 990-EZ filers that have failed to file for the previous three years.  

Please note that the relief does not include organizations that are required to file a Form 990.  To read more about this one time exemption, click here.  The IRS provided a list of organizations that are at risk of automatic revocation.  You can view the list here. 

If you need help with your annual filing requirements, please contact us.  We will walk you through the process and help you stay in compliance.

NACBA - It's On To Orlando!

The National Association of Church Business Administration hosts its annual conference next week in Orlando (July 19-23).  Always lots interesting conversation and insightful presentations at these annual gatherings!  I encourage you to attend Verne Hargrave's presentation on Church Fraud.  What he has to say will scare you to death, but also give you the tools to greatly reduce fruad risk.

NACBA website  www.nacba.net

Verne's websites www.pskcpa.com

    www.weedsinthegarden.com

Knowledgable Advice at Your Fingertips!

I was looking at The Church Law Group's website, and once again I'm impressed by the depth of service they offer.  In particular, I like the benefits their member churches receive.  See

http://www.churchlawgroup.com/benefits.html

Here at PSK, we have have come up with a similar service.  Churches and ministries can have ready access to our expertise on an ongoing basis: PSK's Optimize Program - POP.  POP membership brings you and your church the assurance that you have our expertise available whenever you need it - at a moment's notice!  Just go to our website and click on the large POP icon.  I think you'll be glad you did!

www.pskcpa.com

Pennies From Heaven (Or at least from Washington)

Gary Steele, with our affiliated company Payroll Partners, has alerted us to an interesting opportunity.  If your church or organization has hired new employees recently, you may be eligible for a tax refund!  At our church breakfast last Thursday Gary told us the following:

"If you aren’t aware the HIRE Act was signed into law by President Obama March 18, 2010. Most tax reductions laws are a credit to Income Tax and therefore do not apply to churches. This one, however, does apply to churches because it is actually a reduction in the 6.2% Employer matching OASDI payroll tax (commonly referred to as FICA).  To qualify, an employer only has to have any employee hired after 2/3/2010 who did not work more than 40 hours in the 60 days immediately prior to his or her hire date to sign a W-11 IRS form to certify that fact. If this is done, then the Employer 6.2% matching QASDI tax is not paid on that individual for the remainder of 2010."

 

For more information you can access a PDF at  http://www.payrollpartners.com/Portals/0/HIRE%20Act%20Information%20file.pdf that details the new law

 

 

If you think this might apply to you I would recommend you contact Gary at:

 

Gary Steele

Payroll Partners

3001 Medlin Dr Suite 125

Arlington TX 76015-2370

817 226-8111

817 467-9994 fax

Gary@payrollpartners.com

 

 

Masters Degree in Church Management!

The University of Dallas just announced a new concentration in its Masters in Pastoral Ministry program - in Church Management!  Now, this isn't a Masters degree in Church Management itself, but a concentration in Church Management in the context of a Masters degree in religion/theology.

Another indication that church denominations are recognizing the need for quality training that combines business expertise with a passion for ministry.  And I think that's great!!

http://www.udallas.edu/.  Just click on the following tabs - Academics; School of Ministry; and Our Graduate Programs

Failure to File Form 990 for 3 years = No longer tax exempt

As you may know, the IRS revamped the Form 990 a few years ago.  During this process a law was passed that requires an automatic revocation of tax exempt status for failure to file form 990, 990-EZ, 990-N or 990-PF for three consecutive years.  Did you get that?  You will lose your tax exempt status if you do not file your annual return three years in a row?  If you do lose your status, you have to start the application process again.  The IRS cannot reverse the revocation. 

So let's review the rules on who must file.  Most tax exempt organizations must file an annual return (except for these organizations).  Here are four types of returns - 990, 990-EZ, 990-N, and 990-PF.  The following thresholds are for the tax year 2009.  The 990 must be filed if the tax exempt organization has gross receipts equal to or greater than $500,000 OR total assets equal to or greater than $1.25 million.  The 990-EZ can be filed if the tax exempt organization has gross receipts equal to or less than $500,000 OR total assets equal to or less than $1.25 million.  The 990-N must be filed if the tax exempt organization has gross receipts equal to or less than $25,000.  Private foundations must file a 990-PF regardless of financial activity.

The 2010 tax year thresholds drop to $200,000 for gross receipts and $500,000 for total assets.  The 990-N threshold increases to gross receipts equal to or less than $50,000.  This can be confusing so I recommend you use the IRS charts.

Here is where this might affect you or someone you know.  The 990-N is a relatively new form and small organizations simply may not be aware of the new filing requirements.  Another example includes organizations with volunteer officers that rotate frequently.  It is important that all tax exempt organizations, regardless of size have a process in place to ensure annual compliance.  As you can see, annual compliance has become critical. 

You can find more information on the annual filing requirements here.  PSK is here to help.  Please call to schedule an appointment if you need help with your organization’s annual filings.

 

Best intentions + no action = Disaster!

Flipping through a magazine, I came across this picture.

The intent was very clear except, the fence was no protection from a chainsaw.

 

Looking beyond the appearance of protection, one could see these once beautiful trees had been stripped of their branches and cut into two to three foot chunks, strewn in every direction, nothing pretty about it; once a picturesque display of natural beauty was now only a heap of kindling ready for the fireplace.

         

I was left wondering, “Is this what you call protection?” A fence and a sign were not enough to protect this forest area – they only offered the appearance of security. The intention to protect was meaningless when there was no action taken to follow through with security processes.

 

Too many churches invest valuable time and financial resources to develop sound policy and control manuals, only to render them worthless when they place them on the shelf and never use them.

 

Adequate protection does begin with evaluating the church as a whole and developing procedures and policies that are in alignment with the purpose and goals of the church. It is also necessary to evaluate and revise policies periodically and communicate to the church staff the importance of implementing any new revisions. This will offer security to the church and protection for its staff. 

     

Any church can put well meaning policies and procedures in place, but just like the fence and the sign, policies and procedures left unused or not updated, are nothing more than a security blanket.

 

ox⋅y⋅mo⋅ron - a figure of speech, by which a locution produces an incongruous, seemingly self-contradictory effect…

This past week I received an interesting email.  A Christian bookseller was offering The Left Behind series; Collector’s Edition.  That got me to thinking. (Which at times can be a very dangerous concept!)  As a young boy I was thrown out of many Sunday School classes for asking questions like this:

Isn’t this an oxymoron?  I mean, if it is true (as the Left Behind Series teaches) that soon we will all be “raptured” out of this present world, why would we want to be collecting much of anything?  Oh well, just wondering…

Speaking of collecting, one thing I have noticed is that most churches are habitual collectors. At least when it comes to documents.  Often we are asked by our church clients how long they should keep documents.  When we press the question, we often learn that the church keeps virtually everything.  In fact, it is not uncommon to find a church with offering envelopes dating back more than ten years!  On the other hand, we often discover that the corporate minute books of the same church cannot be located or have not been updated in years! What this tells us is that many churches are confused about what documents are important and what are not.   

Document management is crucial.  Keeping items too long can provide information that can only do one thing; hurt the church.  Conversely, not keeping or failing to update permanent records can have the same effect.

Every church must make document retention a priority.  A starting point is the development of a comprehensive document retention and destruction policy.  If your church does not have one, may I recommend you start the process soon?

If you have any questions, please do not hesitate to contact me at verne@pskcpa.com.  Also, if your questions concern corporate documents (minutes, by-laws, etc.) you might want to contact our friends at the Church Law Group (www.churchlawgroup.com)

The Ultimate Cost of Church Embezzlement

The severity of a fraud incident is usually measured in one way – How much money was lost?  When presenting fraud case studies to church groups I have noticed a common reaction: the larger the dollar loss, the louder the gasps from the audience.  While it cannot be denied that in some cases the economic impact of embezzlement can cripple, or in some cases, result in the death of a congregation, the dollar loss is often the least of the church’s problems.

In the church environment, the real cost of economic fraud has little to do with lost funds.  In fact, most churches can replace stolen money with insurance claims. (Or perhaps a great sermon series!)  The real cost of an incident comes in the aftermath, when the church body learns they have been betrayed.  Loss of trust can, and often does, outweigh the dollars lost to an embezzler.

One of my most unpleasant tasks has been to report embezzlement findings to a congregation.  It is not a great deal of fun to stand on a sanctuary platform, accompanied by attorneys and law enforcement officials, and explain what has happened.  The pain in the room is so thick you can cut it with a knife.  Emotions rage out of control: anger, grief, betrayal, despair and discouragement.  In the worst of cases some congregations cannot adequately address the situation and church members leave in droves.  Some churches don’t survive. 

But, even this may not be the ultimate cost of fraud.  Some people, letting discouragement get the better of them, not only leave the victimized church, but leave the faith altogether.  And seekers, those contemplating following Christ, may abandon their search because of the ugly scene.  This is a cost that cannot be calculated. 

 P.S. – Fraud prevention is a team sport and churches wishing to defend themselves against fraud should develop a fraud prevention team.  Competent accounting and legal counsel should be included on the team roster. If you would like PSK to be a member of your team, or if you simply have a question about any of this, feel free to contact me at verne@pskcpa.com.  As for legal counsel you might want to contact the Church Law Group. (www.churchlawgroup.com)

sanc-tu-ar-y; noun – a sacred or holy place; a place of refuge

Last week, at the end of a long day in New York City doing all of the things tourists do, I plopped down on a bench at the last of our touristy destinations – The Top of the Rock.  The view, I hear, is just as good as that from the Empire State Building, without the two hour wait.

While perusing a map of the NYC skyline a woman sitting next to me at the other end of the bench asked, “Do you speak English?”  My response? “Being from Texas, not very well, but I’ll do my best to help you.”  This came after three days of receiving amusing looks from waiters and hotel clerks after opening my mouth.  The common refrain was “You’re not from New York are you?”  In the City I looked like everyone else but sounded totally different.

My pronounced Southwestern drawl was not the only difference I noticed between New York and North Texas, where I live.  You have to look very closely because they are hidden by the immense skyscrapers and the multitudes rushing past them, but churches are numerous in NYC.  Having acquired an interest in touring churches this past summer in Europe, I cannot resist venturing into older churches.  My wife and I did this several times in New York and I was struck by something about these churches that was far different from home.  Every church we visited, without exception, was open to the public.  Inside, among the beauty of these sacred places, individuals sat silently praying.

In contrast, many of the churches where I live are locked tight, accessible only after pushing an intercom button and obtaining clearance that you have “business” there.  And even after gaining admittance, the visitor is given access solely to the business office.  The place of sanctuary, a place to pray, a place of refuge has been closed off.

Oh, I know the reasons and they do make sense from a risk management perspective.  And I do believe that proper risk management is an important element of good stewardship.  But, perhaps we forget down here in the Bible Belt that the Church is (or should be) in the risk taking business.

My question: Is there not a way we can do both, manage risk while at the same time providing refuge to a world that is hurting?