In keeping an organization's books in QuickBooks desktop, I try to do as many entries as possible keeping in mind where they must be reported on the tax return. Any of you who might do this must have noticed that QuickBooks doesn't exactly meet the bookkeeping needs of a nonprofit and there's plenty to muddle through.
There was an in-kind contribution: A volunteer paid a contractor out-of-pocket instead of requesting a check for the contract. There is no question that this was an ordinary business expense of the organization. Note that the instuctions state contributions don't include unreimbursed expenses of a volunteer but refer the taxpayer to Publication 526 for explantions of expenses deductible as charitable contributions, including out-of-pocket expenses when volunteering.
I interpret this as a reference to a volunteer's unreimbursed personal expenses and not a volunteer paying for a business expense.
In Part VIII Statement of Revenue, All Other Contributions are reported on Line 1f. Noncash contributions included in 1f are reported on 1g.
Let me emphasize that a noncash contribution is reported on BOTH 1f and
1g. 1g isn't aggregated with other lines but if it exceeds a threshold, there is another schedule to report such contributions upon.I created an Income account mapped to 1f with subaccounts for cash (unassigned) and noncash contributions (mapped to 1g).
In running an income tax detail report in QuickBooks, I noticed that the cash contributions showed up as Unassigned and not in 1f, because the parent account doesn't include any amounts in Unassigned subaccounts.
Aargh.
I had to merge the entries in the two subaccounts into the parent account. That gets everything reportable on 1f into the account mapped to 1f.
What to do about 1g?
I created two new subaccoutns, Noncash contra-income (unassigned) and Noncash contributions (mapped to 1g).
The in-kind contribution is now reported in the account mapped to 1f, the subaccount mapped to 1g, and reversed in the contra-income account.
It's entered three times in the books!
There are other lines on the tax return in which the same revenue or expenditure gets listed in multiple places. This is how to generate an Income Tax Detail report that's helpful when preparing the tax return.
If anyome is doing this in a more straightforward way, please let me know.