Below is a To Do list for churches and nonprofits that you can and should start on right now. I know that December and January is 2 of the busiest months of the year for us church and nonprofit administrators, so write down your To Do checklist now and make sure you don't miss any of the important tasks due before January 31st!
(Joining my monthly newsletter mailing list will help keep you informed each month=)
JAN 31st: As in years past ...you should furnish Form W-2 to employees who worked for you during the past year by Jan 31st.
Note! Your transmittal form W-3 (cover page for all your W-2s) is due the end of January as well...even if you file electronically! (This should be a top priority in your January to do list!)
JAN 31st: Furnish Form 1099-NEC to individuals that you paid amounts $600 or more to last year for performing a service for your church or nonprofit. File and provide that form to the recipients by Jan 31st. The regular 1099-MISC is due February 28, if you file on paper, or March 31, if you file electronically.
Note! Because of the different due dates and the confusion it has cause since the passing of the PATH act in 2015 that brought about that earlier due date for the 1099-MISC ... the IRS is replacing the 1099-MISC box 7 with a totally separate form titled: 1099-NEC.
Note: The start of this year is the best time to determine if your worker should be classified as an employee or independent contractor.
Penalties for misclassifying a worker as an independent contractor are very stiff and strictly enforced so now is as good of time as any to make sure every one of your workers are properly classified. See this article on the Misclassification of Workers.
Tip: A warning flag that may draw the IRS's attention is an individual receiving only one 1099-NEC from the organization for more than one year.
Jan 31: Send out contribution statements! Remember... a donation is recorded when received ...even if the check is dated for the previous year. The only exception to that rule is if you receive a check in the mail and it and the envelope is dated Dec 31st or before.
Also, know what "donations" to include in that statement...
Dec 31: Review and approve your pastor's compensation package. See this Year-End Checklist for important factors to remember when reviewing or setting up this package.
Review and adjust your minister's housing allowance. Even if you already have a housing allowance set up for your minister, you need to review it and adjust it if applicable before the end of the year.
Dec 31: No matter what time of the year it is...if you don't have an Accountable Reimbursement Plan SET ONE UP!!!
With the new tax laws and the loss of the ability for your employees/ministers to claim unreimbursed employee "business expenses", it is imperative that you have an Accountable Reimbursement Plan set up! Even if you do not "reimburse" employees for expenses...you should have an accountable reimbursement policy if your employees use the church or nonprofit's credit or debit cards.
The Church Accounting: How To Guide 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, 1099-NEC, and 1096.
If you have QuickBooks or are considering using it in the future, go ahead and purchase the QuickBooks for Churches and the How To Guide combo for a complete package on setting up and administering a payroll using QuickBooks.
Ministers--your estimated taxes are due for the fourth quarter (Oct – Dec) of last year. You can usually skip this fourth quarter payment if you intend to file your return and pay all the taxes due by January 31. Read More!
Don’t forget your federal (Form 941) and state’s employers quarterly report if applicable. Some state employer forms are due earlier than the 941…so check with your state’s tax commission and see if and when your state quarterly report is due. Read More!
Send out annual contribution statements to your donors on or before January 31. Make sure you let your donors know that they should not file their federal income tax return before they receive a written acknowledgement of their contributions from the church....especially if they are claiming charitable contributions tax deductions!
So put on your December to do list to post a notice on the bulletin board telling donors NOT to file their personal income tax returns until they receive their annual giving statement if they plan on claiming charitable contributions as a tax deduction.
Other ways to inform your donors is to send out letters, include a notice in your December newsletter, post on your website, etc. Read More!
Church Accounting Package
A set of 4 ebooks that covers the following topics...
If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.
Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)