Form 990 and QuickBooks for receipts and expenditures reported on multiple lines

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Adam H. Kerman

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Jul 17, 2021, 6:15:22 PMJul 17
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In keeping an organization's books in QuickBooks desktop, I try to do as many
entries as possible keeping in mind where they must be reported on the
tax return. Any of you who might do this must have noticed that
QuickBooks doesn't exactly meet the bookkeeping needs of a nonprofit and
there's plenty to muddle through.

There was an in-kind contribution: A volunteer paid a contractor
out-of-pocket instead of requesting a check for the contract. There is
no question that this was an ordinary business expense of the
organization. Note that the instuctions state contributions don't
include unreimbursed expenses of a volunteer but refer the taxpayer
to Publication 526 for explantions of expenses deductible as charitable
contributions, including out-of-pocket expenses when volunteering.

I interpret this as a reference to a volunteer's unreimbursed personal
expenses and not a volunteer paying for a business expense.

In Part VIII Statement of Revenue, All Other Contributions are reported
on Line 1f. Noncash contributions included in 1f are reported on 1g.

Let me emphasize that a noncash contribution is reported on BOTH 1f and
1g. 1g isn't aggregated with other lines but if it exceeds a threshold,
there is another schedule to report such contributions upon.

I created an Income account mapped to 1f with subaccounts for cash
(unassigned) and noncash contributions (mapped to 1g).

In running an income tax detail report in QuickBooks, I noticed that the
cash contributions showed up as Unassigned and not in 1f, because the
parent account doesn't include any amounts in Unassigned subaccounts.

Aargh.

I had to merge the entries in the two subaccounts into the parent
account. That gets everything reportable on 1f into the account mapped
to 1f.

What to do about 1g?

I created two new subaccoutns, Noncash contra-income (unassigned) and
Noncash contributions (mapped to 1g).

The in-kind contribution is now reported in the account mapped to 1f,
the subaccount mapped to 1g, and reversed in the contra-income account.

It's entered three times in the books!

There are other lines on the tax return in which the same revenue or
expenditure gets listed in multiple places. This is how to generate an
Income Tax Detail report that's helpful when preparing the tax return.

If anyome is doing this in a more straightforward way, please let me
know.

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ira smilovitz

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Jul 20, 2021, 2:04:38 PMJul 20
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I don't have an answer for you, but note that there is a special QB version for non-profits. I would expect that it might be better suited to handle this sort of situation.

Ira Smilovitz, EA
Leonia, NJ

Adam H. Kerman

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Jul 20, 2021, 8:04:59 PMJul 20
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>I don't have an answer for you, but note that there is a special QB
>version for non-profits. I would expect that it might be better suited
>to handle this sort of situation.

When installing QuickBooks Premiere Windows desktop version, one may choose
an "industry". "Nonprofit" is one choice. It just renames a few things,
otherwise the calculations are all the same. The "Retained Earnings"
account is renamed "Unrestricted Net Assets", and the reports have
different headers. Your contributors are "customers", which isn't
renamed. The balance sheet is Statement of Financial Position.

I've got assets in there carried at both book and market value, stuff I
used to carry on a spreadsheet outside QuickBooks but the reports are
laid out more neatly and there's less explaining to others.

[For those unfamiliar with nonprofit bookkeeping and reporting on the
tax return, assets are carried at market value and not book value.]

And I've got an account Unrealized gain or (loss) as an offset, and I'm
always fussing about whether that's Equity or Other Income. I need a proper
Statement of Activities, which includes the change in market value of
securities, so to get this to show up on one report it has to be
"income" or I have to remember to modify the Statement of Financial
Income and Expense to turn it into a Statement of Activities before I
distribute it.

The tax return has a line for Unrealized Gain or (Loss).

I've specifically got the Chart of Accounts set up for functional
expenses and natural expenses and how revenues and expenses are reported
on the tax return. Functional expenses are a requirement unique to nonprofit
accounting.

Also, nonprofits have two kinds of Equity, down from three, but
QuickBooks can handle that.

The bookkeeper for every small nonprofit that uses QuickBooks goes
through stuff like this.
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