It’s February 15th here in our accounting office. We are in the Northeast suffering a bad winter. We've lost power for three days, had three days of lost employee time due to State of Emergency closings, and I just realized as the Treasurer of a local non-profit here in our town…our 990 is due today!
Frustrated with myself at forgetting this due date I mumbled to myself, "Who picked a fiscal year end of October 31st anyway!"
It dawned on me perhaps a lesson in fiscal year ends is in order.
The IRS gives the following definitions of calendar versus fiscal year-end:
A calendar tax year is 12 consecutive months beginning January 1 and ending December 31.
A fiscal tax year is 12 consecutive months ending on the last day of any month except December.
A review of the IRS database reveals many nonprofit organizations simply choose to have their fiscal year match the calendar year and end on December 31st. But for many this may not be the best decision.
Your fiscal year end date will determine when you must file your federal 990 and complete your state reporting obligations. The filing deadline for Form 990 is based on the end of your fiscal year; typically it’s the 15th day of the fifth (5th) month after your fiscal year ends. If your nonprofit’s fiscal year is the same as the calendar year, your due date is May 15th.
Treasurer’s Briefcase recommends the fiscal year should end, whenever possible, just before or during a period of relative inactivity. Your fiscal year end should parallel your organization’s program year. You never want one program year to fall into two fiscal years.
For example, if you are a Football Booster Club you would not want a fiscal year end in the middle of football season; for example October 31st. A youth baseball league would not choose a May year end, and if you’re a non-profit who has significant fundraising activities involving the Christmas holiday you wouldn't want a December year end.
This is the reason why you find most PTAs and PTOs choose June year ends. Attendance at their fundraisers and other events roughly follow the school year. This leads some non-profits who work with schools to select a fiscal year that ends in the summer in order to close out their books at a relatively slow time of the year.
Choosing a fiscal year end during a slow period allows the Treasurer to regroup and finalize the organization’s results. It also gives the board time to properly focus on recruiting the new board.
If upon reading this you realize your year-end is less than ideal, I have good news. It can be changed. See next week’s blog for instructions on how to accomplish this change...