<\/p>\n
<\/p>\n
<\/p>\n
It’s time to begin closing out the year for your church or nonprofit! Take a moment to review the year end checklist below that will outline the necessary steps to ensure a seamless transition into the new year with your accounting, payroll, budgets, donations, reimbursements, and more.<\/p>\n
<\/p>\n
![\"Sale](\"https:\/\/www.freechurchaccounting.com\/images\/xsaletags.jpg.pagespeed.ic.kiVEzzoKBO.jpg\" "\\"Sale")
<\/div>\nCoupon!<\/span><\/p>\n Here is a 10% discount code for all the ebooks, spreadsheets, and packages on this site:\u00a0<\/span><\/p>\n FCA<\/b><\/span><\/p>\n Note<\/b>: click on “PACKAGES<\/b>” in the top navigation bar for a list of all of the ebook and spreadsheet packages on this site!<\/span><\/p>\n<\/div>\n<\/div>\n \n<\/div>\n <\/p>\n As the year end draws near, one of my initial tasks is to generate a report from all my clients’ accounting files that provides a summary of the year’s transactions “by account.” Here are a few key areas I focus on:<\/p>\n 1. Gift Cards:<\/b> I check for any gift cards purchased for staff, gifts, prizes, or charitable purposes, as these must be “tracked”! We try to monitor these purchases right away so we can set them up in a “cash on hand” account within the accounting system. We treat the original purchase of the cards as a “transfer” from the bank account to the new “Gift Card” register. Each time a card is used or given away, we need to manually enter the “expense” … until that “cash on hand” account is zeroed out. Lisa London, my co-writer on our How-to book for churches<\/a>, has a great article on how to handle gift cards<\/a> on her “accountant beside you” site AND provides a free log that you can use to track those gift cards!\u00a0<\/p>\n 2. Potential 1099 payments<\/b>: I’ll delve deeper into this more below, but it’s important to note that there is a specific form required for payments to independent contractors that exceed $600. Guest speakers are a prime example of individuals who might need a 1099-NEC form.<\/p>\n Starting in October, we pull “vendor summary” reports to identify who may require 1099s and ensure we have their W-9s. I export this report to Excel, sort it from highest to lowest, and remove entries under $600 for the year. Next, I refine the list by eliminating corporations and nonprofits (who do not need 1099s). We then proceed to collect W-9s for those who qualify. After closing the books for the previous year, we revisit this report in January to verify totals and check if any independent contractors have reached or exceeded the $600 threshold.<\/p>\n NOTE<\/b>: Do not issue 1099s for recipients of benevolence payments! However, ensure that these payments are well-documented and disbursed in accordance with the\u00a0guidelines of your benevolence fund<\/a>!<\/p>\n 3.\u00a0Investigate Negative Amounts<\/b>: In the “transaction by account” report, I look for and examine any negative amounts. Refunds are typically posted back to the expense account associated with the original transaction, so not all negatives are problematic. However, we often find instances where a “check” has been mistakenly applied to the wrong account, either income or expense. Address these issues before closing the books for the year. If an error occurred in a past month with reports already issued, a journal entry may be necessary to adjust your totals.<\/p>\n Any negatives found in the Balance Sheet or Statement of Activity should always be investigated and corrected if needed. QuickBooks Online users should note that there should never be a balance in the equity account labeled “Opening Balance.” If you find one, seek guidance online on how to resolve it before finalizing the books!<\/p>\n <\/p>\n Bookkeeping for Churches Package<\/span><\/b><\/span><\/p>\n A set of 4 ebook that covers the following topics…<\/b><\/p>\n <\/div>\n <\/p>\n <\/p>\n 4.\u00a0<\/span>Determine housing allowance:\u00a0<\/b>Designate<\/span> the housing allowance for ministers <\/a>for the upcoming year …before this year end<\/b>.<\/p>\n If you already have a housing allowance set up for your minister, you Note: Even if you have included the wording \u201cf<\/em>or current year and all future years<\/em>\u201d or something similar, you still need to review and approve it every year and show that approval in your minutes. Most minister\u2019s housing expenses do not remain the same every year so many times adjustments need to be made.<\/p>\n<\/div>\n<\/div>\n <\/p>\n 5.\u00a0New W-4:<\/b>\u00a0REMIND your employees<\/span> on or before January 1st that they may want to complete and sign a new W-4 … if their filing status has changed due to marriage, divorce, or dependents (child turned 21, birth, adoption, etc.<\/em>), If none of these situations apply, the form you have on file is typically fine for the upcoming year. However, if you’re implementing a new payroll system, it may be advisable to obtain a new W-4 from everyone.<\/p>\n 6. Employee Classification<\/b>: Ensure that you accurately identify any worker who should be classified as an employee. The beginning of the year is an ideal time to make these classifications. See this article on Misclassification of Workers<\/a>. Remember, if you are usure if your worker(s) would be classified as an independent contractor or not…it is better to error on the side of caution and classify them as an employee. Also…if you see that you have incorrectly classified a worker as an independent contractor, you can take advantage of the Voluntary Classification Settlement Program <\/a>to reclassify that worker as an employee for employment tax purposes for future tax periods with partial relief from federal employment taxes.<\/p>\n See this page for more 7. 1099 Prep<\/b>: Review all payments made to service providers such as <\/p>\n If you paid them $600 or more collectively throughout the year and they are not a corporation, you will be required to\u00a0file a 1099<\/a>\u00a0and provide the independent contractor with a copy. AND…don’t forget…you have to file those before Jan 31st! NOTE: the new form for those types of payments is the 1099-NEC<\/a>.<\/p>\n Also remember that you may have to file a 1099-MISC for those rent payments you paid the landlord…if they are not<\/b> a nonprofit or corporation!<\/p>\n The Church Accounting: How To Guide<\/a><\/b> devotes a whole section of the book to payroll for churches. It covers payroll terminology and forms and then takes you through the steps necessary to set up a payroll, calculate and file the necessary taxes and forms, and even details how to handle the minister’s payroll. It also includes sections on filling out IRS forms: 1099-Misc, 1099-NEC, and 1096.<\/p>\n If you have QuickBooks or are considering using it in the future, go ahead and purchase the QuickBooks for Churches<\/b> and the How To Guide<\/b> combo for a complete package on setting up and administering a payroll using QuickBooks.<\/p>\n QuickBooks for Churches & Church Accounting Combo Bundle<\/a> <\/b><\/p>\n<\/div>\n<\/div>\n <\/div>\n 8. Annual contribution statements:<\/b> Donors are required to obtain a written acknowledgment from a charity for any individual contribution of $250 or more before they can claim a charitable contribution deduction on their federal income tax return. However, many donors may not realize that they need to secure and retain a “contemporaneous (made at the time or shortly after an event occurs<\/em>) written acknowledgment”\u00a0 from the church or nonprofit – IRC 170(f)(8)(A) … before filing their taxes<\/b>.\u00a0<\/p>\n In order for a donation receipt to be considered “contemporaneous” the written acknowledgment must generally be obtained by the donor no later than the date the donor files the return for the year the contribution is made.<\/p>\n Therefore, it\u2019s crucial to inform your donors now! Display this information on the bulletin board, distribute handouts, use bulletin inserts, and remind them not to file their taxes (if they intend to claim charitable contribution deductions<\/em>) until they have received their annual contribution statement. Provide them with a date they can expect to receive it, such as January 31. Note: Due to recent tax laws, fewer taxpayers are claiming charitable contributions, but there is a movement to allow all taxpayers to claim a tax credit for these contributions, making the tracking of donors and donations essential.<\/p>\n With the rise in online giving this year, I want to emphasize one more point about sending out annual contribution statements. If you’ve recorded your online donations in your tracking software, ensure that you credit each donor for the full amount of their donation. Some churches I worked with this year were unaware that, even when a donor pays the processing fee, you must record the entire donation on their giving record. For instance, if Mary Smith donated $100 and also covered the $3 processing fee, you should record $103 on her donation record, not just $100.<\/p>\n 9. Early and more frequent giving statements:\u00a0<\/b>Consider sending out quarterly giving statements or a December statement including their current donation balance along with a “gentle” reminder for year-end giving.<\/p>\n Include a return envelope or a link to your online giving page to facilitate their response. People often feel more generous during the holidays and are likely to evaluate their year-end giving options.<\/p>\n 10. Recognition of donations:<\/b> Donors If a check is received in the offering on or after January 1st<\/b>, even if it was backdated for December of the prior year, it will not be included in their prior year annual contribution letter.<\/p>\n However<\/b>, if the donation is mailed, all checks received in January of the new year that was dated and the envelopes\u00a0 were postmarked in December of the prior year<\/b> … will be deductible for that prior year, even if received in the new year.<\/p>\n <\/p>\n Donation Guidelines Package<\/b><\/span><\/p>\n A set of 4 ebook packages that covers many of the following topics…<\/b><\/p>\n <\/div>\n <\/p>\n <\/p>\n 11.\u00a0Appreciation Gifts:<\/b>\u00a0This time of year often brings opportunities to present gifts to our volunteers and staff in celebration of Appreciation, Thanksgiving, Christmas, and more. However, when these gifts are given to employees, they may be considered taxable income, so it\u2019s essential to manage these carefully and document them as required.<\/p>\n An exception to this rule includes:<\/p>\n These regulations also apply to volunteers if their gifts total $600 or more within a calendar year. In this case, you may need to report the total on a 1099-NEC, as the IRS views these “gifts” as compensation for their services to your organization.<\/p>\n Refer this article on\u00a0Staff Gifts<\/a>\u00a0for more information.<\/p>\n 12.\u00a0Reimbursements:<\/b>\u00a0\u00a0If you have an\u00a0accountable reimbursement plan<\/a>\u00a0in place (which you definitely should, regardless of your organization’s size<\/em>), ensure that all reimbursement claims are submitted before the year’s end. This is also a great time to review all reimbursements made by your church or charity to staff, volunteers, or board members throughout the year.<\/p>\n Verify that each reimbursement is supported by a receipt and qualifies as a nontaxable reimbursement. If you have not received a receipt or supporting documentation from the recipient, or if the reimbursement does not align with your accountable reimbursement guidelines and IRS regulations, further review may be necessary, and you might need to add the amount to the recipient’s reported taxable income. Additionally, ensure your accountable reimbursement plan is updated, particularly for amounts like mileage rates that may require adjustments before year-end.<\/p>\n NOTE<\/b><\/span>: Do not give the rest of the monies in your reimbursement funds to your minister or any other employee as it will make all the year\u2019s reimbursements unaccountable. All reimbursements would then be required to report in box 1 of their W-2!<\/span><\/p>\n<\/div>\n<\/div>\n 13. Review, update, and adopt policies and procedures<\/b> such as<\/p>\n See how to create or update your policy and procedures manual! <\/a><\/p>\n <\/p>\n The Policies and Procedures Package<\/a> includes an ebook on Receipts and Reimbursements that explores the management of receipts and supporting documents. <\/span><\/p>\n Additionally, it provides insights on establishing and managing an efficient accountable reimbursement policy.<\/span><\/p>\n Includes a sample of a resolution you can use to present to the board to set up and approve an accountable reimbursement plan.<\/span><\/p>\n .<\/p>\n<\/div>\n<\/div>\n <\/div>\n <\/p>\n This ebook is included in the Policies and Procedures Package<\/a>. However, you can purchase it by itself for only $7.95<\/b><\/span> by clicking the ADD TO CART button below!<\/span><\/p>\n <\/div>\n <\/p>\n The Receipts and Reimbursements ebook is also part of a larger “<\/span>Policies and Procedures<\/span><\/a>” Package” that is packed full of valuable information and for a limited time you can purchase all 5 ebooks and 8 policy templates for only $32.80<\/b><\/span><\/span><\/p>\n<\/div>\n<\/div>\n <\/div>\n <\/p>\n <\/div>\n \n<\/div>\n <\/p>\n I included some accounting “reviews” at the start of this article. Here are additional year-end tasks to ensure your accounting is prepared and ready for the upcoming year!<\/p>\n 14. Ensure that all revenue and expenses are recorded before closing the books<\/b>. This includes transactions such as donations, other revenue, reimbursements, purchases, and payroll (taxes, retirement, flex spending, and insurance<\/em>).<\/p>\n 15. Generate annual reports<\/b> to verify accuracy.<\/p>\n 16. Reconcile all bank and credit card account balances<\/b>, as well as your Petty Cash and PayPal accounts. Don\u2019t forget to align your accounting records with your donation tracking software, especially if you use tools like QuickBooks or Planning Center. Refer to this article on Financial Statements Preparation<\/a> for bank reconciliation tips.<\/p>\n 17. Confirm any fund balances<\/b> that will be carried into the next year.<\/p>\n 18. Ensure all your bank account signatories are current.<\/b><\/p>\n 19. Prepare your <\/b>budget<\/b><\/a> for next year! Review your budget assumptions and adjust them based on any new financial information or strategic plans. This will help ensure your budget is realistic and aligns with your organization’s goals.<\/p>\n 20. Assess your fixed assets<\/b> and perform an inventory check. Update your records to include any new purchases, sales, or disposals that occurred during the year.<\/p>\n 21. Evaluate your internal controls<\/b> and make necessary improvements to safeguard your financial assets and ensure compliance with relevant regulations. Review this article on internal controls for a church or nonprofit<\/a>.<\/p>\n 22. Conduct a financial health check<\/b> by analyzing key financial ratios and metrics. This can provide insights into areas where your organization can improve efficiency and financial performance.<\/p>\n 23. Prepare for an external audit if required<\/a>. Gather all necessary documentation and ensure your records are in order to facilitate a smooth audit process.<\/p>\n By addressing these year end accounting tasks, you’ll be well-prepared to close out the year confidently and start the new year with a clear financial roadmap. Remember, staying organized and proactive in your accounting practices can save time and prevent headaches down the line.<\/p>\n <\/p>\n Spreadsheet Package<\/span><\/b><\/span><\/p>\n The Spreadsheet Package includes:<\/b><\/p>\n PLUS\u00a0a Word document with 3 examples of contribution statements for cash, non cash, and quid pro quo donations that you can customize for your own use!<\/p>\n<\/div>\n <\/div>\n \n<\/div>\n <\/p>\n 24. Transitioning to a new year is also the perfect time to change to a new church accounting software<\/b>. If you are in need of church accounting software at a great price, try out Aplos<\/a>!\u00a0\u00a0<\/p>\n QuickBooks Online<\/a><\/span> is another great option for church … especially if you can get a file through TechSoup<\/a>! However, since this software is essentially created for “for profits” … consider hiring a knowledgeable accounting firm to set it up for you and even teach you have to use it effectively!\u00a0<\/p>\n <\/p>\n![\"Year-End](\"https:\/\/www.freechurchaccounting.com\/images\/xYearEnd3.jpg.pagespeed.ic.7sCfGmQJt_.jpg\" "\\"Year-End")
<\/div>\n\n
![\"Bookkeeping](\"https:\/\/www.freechurchaccounting.com\/images\/xBFCPackageCover.png.pagespeed.ic.m6Vjw5EWWW.png\" "\\"Bookkeeping")
<\/a><\/div>\n<\/div>\n<\/div>\n![](\"https:\/\/www.freechurchaccounting.com\/images\/xpaypalbuybutton.png.pagespeed.ic.s2SdZf6zbo.png\")
<\/a><\/div>\n<\/div>\n<\/div>\nYear End Employee Follow-up
<\/h2>\n
\nneed to review it, adjust it (if applicable<\/em>), and get it officially approved and documented before the year end. <\/p>\n![\"When](\"https:\/\/www.freechurchaccounting.com\/images\/x2020W-4.png.pagespeed.ic.LFg8GMYOoS.png\" "\\"When")
<\/div>\n
\ninformation on determining whether or not your minister should be
\nconsidered an employee<\/a>.<\/p>\n\n
![\"How](\"https:\/\/www.freechurchaccounting.com\/images\/church-QBs.jpg\" "\\"How")
<\/a><\/div>\n<\/div>\n
\n\n<\/div>\nYear End Reminders<\/h2>\n
![\"Year-End](\"https:\/\/www.freechurchaccounting.com\/images\/xwhitefiguredontforget.jpg.pagespeed.ic.LQmcRwhqjK.jpg\" "\\"Church")
<\/div>\n
\nmust give their contribution checks on or by December 31st to be
\nincluded in the church\u2019s prior year\u00a0written acknowledgement of their
\ncontributions<\/a>. <\/p>\n\n
![\"Donation](\"https:\/\/www.freechurchaccounting.com\/images\/xDonaton-Guidelines-Package-cover.png.pagespeed.ic.ldy0gq0yWa.png\" "\\"Donation")
<\/a><\/div>\n<\/div>\n<\/div>\n<\/a><\/div>\n<\/div>\n<\/div>\n![\"How](\"https:\/\/www.freechurchaccounting.com\/images\/xbluegiftboxsilverbow.jpg.pagespeed.ic.lBBA9zXmsP.jpg\" "\\"How")
<\/div>\n\n
\n
![\"PP](\"https:\/\/www.freechurchaccounting.com\/images\/xPP-Book4-ARP-cover.png.pagespeed.ic.QXKPDsBv2k.png\" "\\"PP")
<\/a><\/div>\n<\/div>\n
\n![](\"https:\/\/transactions.sendowl.com\/assets\/external\/v2\/add-to-cart.png\"\/)
<\/a>
\n\n<\/div>\n<\/div>\n![\"PP](\"https:\/\/www.freechurchaccounting.com\/images\/xPP-Package-cover.png.pagespeed.ic.Ad4-2NtjRd.png\" "\\"PP")
<\/a><\/div>\n<\/div>\n<\/a>\n<\/div>\n<\/div>\nYear End Accounting Tips<\/h2>\n
![\"Year](\"https:\/\/www.freechurchaccounting.com\/images\/xaccountingbinders-sm.jpeg.pagespeed.ic.-ML4uddjOR.jpg\" "\\"Year")
<\/div>\n\n
![](\"https:\/\/www.freechurchaccounting.com\/images\/xspreadsheetPackage2sm.jpg.pagespeed.ic.2KUVMNzhBk.jpg\")
<\/a><\/div>\n<\/div>\n<\/div>\n
\n<\/p>\n<\/a><\/div>\nChanging Software at Year End<\/h2>\n
![\"Changing](\"https:\/\/www.freechurchaccounting.com\/images\/xchoosingsoftwaresm.jpg.pagespeed.ic.GVT3tWXkUj.jpg\" "\\"Changing")
<\/div>\n