From time to time, we share previous blog posts with enduring significance for nonprofit organizations. The following content was originally published on 12/6/17 and has been lightly refreshed.
Does your organization have a holiday wish list? From world peace to unrestricted funding, there are plenty of things you might put in a nonprofit letter to Santa. But don't forget that your bookkeepers, CPAs, and financial advisors have a wish list too! Bring your accountant a little joy this holiday season by helping to fulfill these simple requests.
A W-9 From Every Independent Contractor
The W-9 is a simple form, but it's an important one. When you ask a vendor to fill out a Form W-9, they are essentially providing you with their legal name, type of business incorporation, and federal tax ID number. This gives your accountant all the information they need to file 1099-MISC forms at the end of the year. Any organization paying a contractor more than $600 annually in labor or services is required to file a 1099-MISC with the IRS. There are exceptions and complications to this rule - for example, payments to corporations are generally not required to be reported. But it can be difficult to know how a vendor's business is structured for tax purposes unless you obtain a W-9 from them.
You might think you don’t need to obtain a W-9 if your payment is less than $600; however, that threshold is calculated annually, not per payment. Say your organization pays a contractor $500 in February. Since it’s under the threshold, you don’t bother obtaining a W-9. Then in December, you pay the contractor another $200, forgetting that you already paid them $500 earlier in the year. This puts their total annual payment at $700, and over the threshold for filing a 1099-MISC. The last thing your accountant wants during a busy holiday season is to realize they're missing crucial tax information for your vendors. And since 1099s are due by January 31st, there's only a limited window to track down the vendor and get the correct information. Give your accountant the gift of stress-free 1099 preparations by obtaining a W-9 from all your independent contractors and service providers up-front.
A Commitment To Strong Internal Controls
Nothing can cause greater damage to your nonprofit than fraud. Aside from the financial consequences, fraud can also cause serious harm to your organization's reputation. If your financial advisors tell you that your internal controls need strengthening, listen to them. No nonprofit accountant wants to see an organization fall victim to fraud.
Even in very small nonprofit organizations, there are many things you can do to lessen the risk of fraud. You can segregate fiscal duties, set up a standardized approval process for payables, maintain clear accounting records, and reconcile your accounts regularly. By following common-sense rules for fraud prevention, you'll be sure to keep a smile on your accountant's face all year long.
Nonprofit Leaders Who Aren’t Afraid To Ask Questions
Nonprofit finance isn’t easy – and no one understands that better than the accounting professionals at Altruic Advisors. But if your board isn't investing the effort in reviewing your financial statements, or if your management is uncomfortable using the tools at their disposal, your nonprofit will suffer for it. You can't make informed decisions without a clear understanding of the information in front of you.
Many nonprofit leaders and staff members are hesitant to bother their accountant with questions. But if something is unclear or confusing, we would rather address your concerns right away instead of letting the problem fester and grow. Don't be afraid to ask questions, take the initiative, and demand transparency and clear communication from your accounting team. That's a gift that everyone will benefit from!