There is a lot of information here to help you with your project's bookkeeping. Read all of the information here or use the Quick Links to go to a specific topic.
IMPORTANT REMINDERS FOR ALL SEEDS PROJECTS
Bookkeeping for Your Project
Paying for Services or Labor Requires an IRS Form
Annual Accounting Report
Documents and Forms You Can Download
Summary of Good Advice - to make your bookkeeping and reporting as simple as possible.
If you use software to record all your income and expenses and keep computer copies of your donation and reimbursement receipts, you will have everything you need to email us for your annual accounting report. All you need to do is email us your files. Easy!
We suggest that you
- Use bookkeeping software like Quicken, QuickBooks, or MSN Money.
- Include memos to explain your expenditures and income. (Read our Accounting Guidelines.)
- Keep computer copies of all reimbursement and donation receipts.
- Don't wait until the end of the year to update your records. (Use the software to do this monthly.)
Get Help If You Need It
- If you have questions about how to do your bookkeeping review our Accounting Guidelines AND read all of the information provided below.
- If you are still unsure then get help from a knowledgeable bookkeeper.
- Don't contact us to learn how to keep your records or use your software. We do not provide any technical or bookkeeping support.
Keeping Good Records is Important
You need to keep records of
- Every project expenditure and deposit. This is your transaction journal. (In January you will send us copies of last year's transaction journal.)
- Reimbursement Receipts (You will send us copies of all of reimbursement receipts.)
- Donation Receipts (You will send us copies of all donation receipts over $250.)
- Bank Statements
Store all these records for at least 4 years before deleting.
How to Record Your Expenses and Income
- Clearly identify the source of your income and the nonprofit purpose of every expense.
- Read our Accounting Guidelines for a more complete explanation of how to keep your transaction journal.
- Look at this example of good transaction records in A sample scanned checkbook register. Notice that
- The nonprofit nature of each expense is recorded as a memo.
- Most of the entries are reimbursements to an individual but show WHY the reimbursement was necessary.
- Item 232 is an example of a donation from this project to another nonprofit organization.
- Item 234 is an example of a normal business expense for this project.
Use Computer Files for All of Your Records
- Save time by using bookkeeping software. You can set most software to download your banking transactions automatically. After you enter explanatory memos, if you have a similar entry the software will fill in the memo too.
- If you don’t use bookkeeping software you can still use your computer for your bookkeeping records. Scan your checkbook register into your computer or use Excel or other spreadsheet software to record your transactions. Be sure to include identifying memos for every entry.
- Create your donation and reimbursement receipts using your computer.
- Label 5 bookkeeping folders to make yearly reporting simple.
For 2010 you would have
your files in these folders:
- "2010 Transaction Journal" (You will send us one email attaching each file in this folder.)
- "2010 Reimbursement Receipts" (You send us another email attaching each file in this folder.)
- "2010 Donation Receipts Over $250" (You send us another email attaching each file in this folder.)
- "2010 Donation Receipts $250 and Under" (You don't send us these but you still need to keep the records.)
- "2010 Bank Statements" (You will send these to us if we do not receive them directly from your bank.)
Scan All of Your Records if You Are Not Creating Them Using Software
- If you do not use any software for your transactions or receipts, use a scanner to create electronic versions of
- Bank Statements
- Transaction journal entries
- Reimbursement receipts
- Receipts for donations of over $250.that can be emailed as attached files.
- Please check your files after scanning to be sure that they are legible. If they are not legible we can’t accept them.
- Many business centers now offer excellent scanning services at reasonable prices.
If Your Project Has Very Little Financial Activity
Reimbursements are payments made by your project to an individual. Your project can reimburse anyone for the exact amount that they have spent - from their personal funds - for a valid project expense. That person needs to send you a Reimbursement Form so you have a record of the expenditure.
- Reimbursements are NOT payments to staff or other workers for their services or wages.
- Reimbursements cannot be made prior to the purchase; they are never advance payments.
- Prior to any reimbursement payment, the individual must fill out a Reimbursement Form for the expenditure.
- Use either our Expense Reimbursement Form in Excel or our Expense Reimbursement Form in Word for any reimbursements. (The Excel format makes multiple reimbursements easier to record. Use whichever format you prefer.)
- Keep a copy of every reimbursement receipt. You will send us copies of these every year.
Ask people to send you the reimbursement receipt as an email attachment, not a piece of paper. You need to store the receipts on your computer. If they send you paper you will need to scan that receipt so you can email them to us. Save yourself time, always use email.
How You Should Handle Reimbursements
This is an example for a reimbursement. Imagine that you decide to buy bookkeeping software for your project. Your friend, Gregory, works next to a good software store so you ask him to buy it for you. Gregory uses his personal credit card to buy the software for your project. Gregory wants your project to reimburse him for this purchase.
Here’s what should happen for Gregory to be reimbursed:
- Gregory uses software to fill out the
Expense Reimbursement Form in Word.
- He emails this as an attachment to you.
- Your project sends a check to Gregory for that amount.
- You note that check number on the receipt and store the reimbursement receipt in the this year's Reimbursement Receipts folder on your computer.
If Your Project Makes a Donation or Gifts Anyone
Your Seed Project may provide goods or services or funds to another nonprofit organization or to individuals if this is part of your project's Mission Statement. For example a project intending to emergency funds for victims of fire or flooding can gift a needy family with money to pay for temporary shelter.
- Donations and gifts from your project must correspond to your nonprofit purpose.
- These gifts need to be recorded as expenses for your project.
- Use our
Gift Acknowledgement Form and sample for donations made by your project.
Donation Receipts for Cash and for Non Cash Donations
Donors must have receipts for donations valued at $250 or more to take it as a tax deduction. We recommend that you give receipts for ALL donations. Use our sample donation receipts by going to
Donation Receipts or create your own including all of the information we show in our samples.
For every donation receipt, be sure to
- Make two copies. Send or give one to the donor and keep one (on your computer) for your records.
- Always number your donation receipts.
- Always record the name and the address of the donor.
- Never create a receipt for a donation valued over $1,000. These must be sent from The Seeds Project on your behalf.
- If it is not a cash donation, describe the items donated and their estimated value. For example, “10 shares of IBM stock currently trading at $43 per share, valued at $430 ” or “Gold wedding ring, value estimated by ABC Jewelry is $575".
- State that the donor did not receive any goods or services in return for their donation, or include an estimate of the value or any goods or services the donor received in return for their donation. For example, "Fundraising dinner donation of $150 - Dinner valued at $25.".
You Need to Contact Us About Some Donations
- Receipts for any donation valued over $1,000 must be sent to your donor by our Treasurer.
To request a receipt for any donation valued over $1,000, use our
Request to send your donor a receipt for a donation over $1,000.
- Grants and other large donations
- Large donors often require that our corporate office receive and acknowledge their donation. We then pass the funding to your project's account.
- If you receive the donation, send the check (or list of non cash items) to us with the donor’s name, address, phone number and email address.
- We will make the deposit to your account and send both you and your donor a copy of the receipt.
- We will personalize this letter with the names of the people listed as primary contacts for your project, thanking the donor on your behalf.
- Non Cash donations (boat, shares of stocks, house, etc.) valued at $5,000 or more must receive prior approval from the Board.
We require this because sometimes donated items are "white elephants" that would be an expense to us. For non cash
donations valued at $5,000 or more
- Send us an email describing what will be donated.
- Tell us what you intend to do with the donation (sell it now, sell it later, keep it to use for your project).
- Wait to receive approval before you receive the donation.
Be Prepared for Your Annual Accounting Report
Read Step One - Email Your Project's Accounting Records. (This is under our Annual Reporting tab.) You will send separate emails, one with each category of accounting files, to Accounting@SeedsProjectNonProfits.com.
- Be sure to include everything on theCheck list for your Annual Project Accounting Report
- We do not accept any reporting that is not sent via email. Your fee is the only item to be mailed.
- If needed please seek assistance from someone locally to scan and attach your files.
- Even if your project has no financial activity during a year, we still need a record of your inactivity for our files. We provide a short form to make this easier for you. Use the Inactive Seed Project Annual Accounting Report .
Payments of $600 or More for Labor or Services Requires an IRS Form
The Seeds Project will file an IRS form for your project if
- Your project pays any individual or company $600 or more for labor, services or rents.
- Your project pays $10 or more for royalties.
- Your project pays an employee at least $600.
Notify us whenever you have paid an individual or business at least $600, or pay any royalties.
You May Not Know That You Have an Employee!
Anyone you pay might be an employee, even if they have their own business or tell you they are independent contractors. We need to know if the person you paid is an employee based on the IRS definition of employee. We are required to withhold taxes and file a W-2 for them. And your project needs to enroll in our payroll program if you have any employees.
Please read the material below or go to www.IRS.gov. After reading this and visiting the IRS website, if you cannot determine the answer or are not certain
- Send an email to Accounting@SeedsProjectNonProfits.com.
- Put “Employee or Independent Contractor?” in your subject line.
- Describe the nature of the work relationship.
- Include a phone number for us to contact you in case we have questions.
The following information is from www.IRS.gov. It refers to your project as the "employer" or "business".
Independent Contractor or Employee?
How do you determine if a person is an employee or an independent contractor? The determination is complex, but is essentially made by examining the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.
There are three basic areas which determine employment status:
- Behavioral control
- Financial control
- Relationship of the parties
It is critical that you, the employer, correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.
Common Law Rules
Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
Who is an Independent Contractor?
People such as lawyers, contractors, subcontractors and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work, but do NOT control the means and methods of accomplishing the result.
Example: Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies that she obtained through advertisements. Vera is an independent contractor.
Who is an Employee?
Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.
Example: Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. She works 6 days a week, and is on duty in Bob's showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Bob. Bob also pays the cost of health insurance and group-term life insurance for Donna. Donna is an employee of Bob Blue.
If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes, below.
- A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
- A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
- An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
- A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson's principal business activity.
Social Security and Medicare Taxes
Withhold Social Security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply.
- The service contract states or implies that substantially all the services are to be performed personally by them.
- They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in transportation facilities).
- The services are performed on a continuing basis for the same payer.
Go to www.IRS.gov or call the number listed on that site.
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