Setting up AR to bill Preschool

[bjsbrown65]

The church does the payroll checks for PS staff and PS reimburses the Church. The church pays all the payroll taxes but the PS portion is included in their reimbursement. I want to set up AR for this purpose and have set up the liability accounts and created an invoice but am unsure what else needs to be done. As usual much thanks for any help. Still learning accounting

[wms7328]

I'm assuming from your question that the Preschool is not considered a separate entity with it's own Fed Tax ID. I would suggest that you set up a separate Accounting Fund for the PS, then you could post all the taxes to that fund along with any other income/expenses. If the PS then reimburses your church, you would show that as income to the PS fund and that would offset the tax expenses. This would keep the PS accounting somewhat separate from church funds but still be included in your asset (bank account) totals.

If the PS has it's own separate Tax ID, then I would think you would want to pay the taxes using that ID and show that on the employee's W-2's and file the 941 Tax reports for the PS under their number. Otherwise, the IRS might question why you have employees but don't file any tax reports for their withholding.

[bjsbrown65]

The PS is considered a part of the church and does not have a separate tax ID. I've been advised several ways to of handling the accounting from being told not to set up a separate fund to doing so. That's why I'm confused as to the best way to do it. Can you give me some specifics about how to go about setting up a separate fund but sharing the same bank account. They do have a separate bank account but the church doesn't manage it. At least not yet, maybe in the future everything will be joined. Thanks.

[NeilZ]

The PS is considered a part of the church and does not have a separate tax ID. I've been advised several ways to of handling the accounting from being told not to set up a separate fund to doing so. That's why I'm confused as to the best way to do it. Can you give me some specifics about how to go about setting up a separate fund but sharing the same bank account. They do have a separate bank account but the church doesn't manage it. At least not yet, maybe in the future everything will be joined. Thanks.

Its actually quite easy, however, you'd have to add in the extra accounts for preschool employees, any specific expenses for the preschool, and so on.

The entire process is covered in the manual, as well as the online help.

In accounting you'd create a new accounting fund using the Maintain Lists of Accounting Funds. There's some basic questions like the code you want to use and description, then it will ask you if you want to copy the account numbers and descriptions from the existing fund. In your case, it may not be a good idea. However, you can copy the existing accounts, then remove the ones that will not be used, and add those that you will need.

For instance, you may not need separate accounts for some utilities like gas or water, but you can use the one for phone. You can remove the accounts from the new fund that cover payroll for the pastor, and secretary, but add new ones for school employees. The only caveat is that they cannot have the same account number as an existing account. So if you remove the pastor expense account from the school fund with number 5010, you can't add back a number 5010 for the employees.

The only number that should be the same is the checking account, and some fund balance (equity) accounts such as Unrestricted Net Assets along with any group 3 & 4 accounts you want to use as headers for this fund.

So if you gave your preschool account the code PS, and your general is still 01, and your checking account has an account number of 1110-000, then when you reference the general account checking when writing a check you'd use 01-1110-000, but use PS-1110-000 when writing checks for the preschool.

If you have separate vendors for the church and preschool, its very simple to keep things straight by setting up the Checking and Expense accounts under the vendor record in the Accounts Payable module. If you use some of the same vendors, you can enter the vendor, and modify the vendor code to separate the Preschool from the Church.

Once its setup its actually quite easy to use. Here we have five separate funds, General, Building, Missions, Deacon's and Endowments. They all use the same checking account, and we pay bills out of four of them. We can pull separate reports for each fund, or pull a consolidated report showing overall income & spending.

The good news is that in Payroll (which I just tested), if you setup the new pay items with payroll expense accounts under the Preschool Fund (PS), The system will understand that you want the income to come out of the PS checking account number, not the General Fund number, and will create the transaction accordingly.

However, you'll only have to worry about pulling withholding taxes and so on from one set of liability accounts, and the system will use the General Fund accounts set up on the tax withholding items itself.

Since you use one Employer Identification Number (Tax ID), then having it put withholding into the same liability accounts would make it much easier for tax payments, as well as employer Social Security & Medicare payments. However, if the Preschool does maintain a separate expense for those payments you may have to create a separate employer liability pay item to cover those two areas. The good news is that the system will not balk at you assigning an expense for this from one fund, and using the liability account from another.
That said, I'm not sure the funds are actually transferred from one fund to the other when doing that.

I'll have someone from Powerchurch take a look at this to verify.