Seven Essential Year-End Planning Tips for Your Nonprofit

“Year-end planning for nonprofits is not just about closing the books; it's about setting the stage for a stronger, more impactful future.” - Rolanda S McDuffie CPA

Introduction:

Master your nonprofit's year-end planning with 7 essential tips for 2024.

From financial reviews to Form 990 prep, learn everything you need to keep your tax-exempt status secure and your organization compliant.

Is your nonprofit ready for year-end tax planning? Let's face it - December can feel like a whirlwind of activity for any organization. But taking time now to review your tax situation can save you headaches (and maybe even money) down the road.

1. Review Your Donation Records

Think of your donation records like a detailed diary of your organization's generosity story. Now's the perfect time to:

• Make sure you've sent acknowledgment letters for all donations over $250

• Double-check that your record-keeping matches your bank deposits

• Verify that you have proper documentation for non-cash donations

• Review any unusual or large donations to ensure proper handling

2. Track Your Unrelated Business Income

Did your nonprofit make money from activities unrelated to your mission this year? Maybe you sold advertising space or rented out your facilities? Here's what you need to know:

If you earned more than $1,000 from unrelated business activities, you'll need to report it on Form 990-T. Don't wait until the last minute to calculate these numbers - gathering this information now gives you time to consult with tax professionals if needed.

3. Evaluate Your Payroll Compliance

Year-end is the perfect time to ensure your payroll house is in order. Key areas to check:

• Employee versus contractor classifications

• Proper withholding for all employees

• Documentation for any minister's housing allowances

• Compliance with state and local payroll requirements

4. Review Program Expenses and Documentation

Take a close look at how you've categorized your expenses throughout the year. Are you properly tracking:

• Program service expenses

• Administrative costs

• Fundraising expenses

Remember, donors (and the IRS) want to see that most of your money goes toward your mission. Having clear documentation of your program expenses helps tell that story.

5. Review Your Financial Transactions and Statements

Now is the time to take a deep dive into your financial records. Think of this like giving your organization's financial health a thorough check-up. Here's what you should examine:

Financial Statements:

• Compare your actual income and expenses to your budget

• Review your statement of financial position (balance sheet)

• Analyze your cash flow statement

• Check your statement of activities (income statement)

Transaction Review:

• Look for any unusual or large transactions

• Verify that restricted funds were properly used

• Ensure all transactions are properly categorized

• Double-check that bank reconciliations are complete

• Review credit card statements and documentation

• Confirm that all grant money was spent according to requirements

Watch for these red flags:

• Missing receipts or documentation

• Incorrect expense classifications

• Unexpected variances from your budget

• Unusual patterns in spending or income

• Transactions without proper authorization

6. Check Your Public Support Test

If you're a 509(a)(1) public charity, now's the time to calculate your public support percentage. You need to maintain at least 33⅓% public support to keep your status. If you're close to the threshold, you might want to:

• Review your funding sources

• Plan diversification strategies for the coming year

• Consider whether you need to adjust your fundraising approach

7. Prepare for Form 990 Filing

Get a head start on your Form 990 by gathering key information now:

• Update your board member list

• Review your mission statement

• Compile program accomplishments

• Gather financial reports

• Document significant changes in programs or operations

Looking Ahead: Smart Planning for the New Year

While you're reviewing this year's information, think about next year too. Consider:

• Setting up better tracking systems

• Planning regular financial reviews

• Scheduling check-ins with tax professionals

• Creating a calendar of important tax deadlines

Don't Do It Alone

Remember, year-end planning isn't just about compliance - it's about setting your nonprofit up for success. If you're feeling overwhelmed, consider working with a nonprofit specialist. We can help you:

• Identify potential issues before they become problems

• Plan strategically for the future

• Stay compliant with changing regulations

• Maximize your resources for your mission

Please click the link below to schedule a no cost consultation to discuss your nonprofit's needs https://calendly.com/rolandamcduffiecpa/20-min

Your Next Steps

Take action now to ensure a smooth year-end season:

1. Schedule a year-end financial review

2. Gather your important documents

3. Make any necessary last-minute adjustments

4. Plan your first-quarter filing strategy

Remember: Good planning isn't just about avoiding problems - it's about creating a strong foundation for your nonprofit's future success!