As far as the books - I wouldn't be too worried about doing everything to the same standards a professional accountant might. But I would want a good, clear representation with common sense disclosures that an audit committee could understand.
This does sound like you might be keeping two sets of financials during the overlap period as you spend down and close out the books for the old PTO. But I think you can do that at a level that's not too complicated.
You are going to need to be able to pull PTO, Inc.'s numbers for your annual IRS reporting, so you do want to be able to do that cleanly.
We made our transition in the spring so only had 2 or 3 months left in the school year. I think I did our internal reports for meetings/accomplishments the same as always but had multiple columns.
Activity | Old PTO $$ | New PTO $$ | Total Year $$
From a business point of view, we could continue thinking about the year as a whole, but I could quickly excerpt the new PTO financials pretty easily. I tend to use Excel, so I could also hide the Old/New and only print Total if I need to keep it simple.
I agree - call the IRS if you have any doubts after our advice. Having gone through the process and helped a few others, I found the key was operating in good faith. The IRS folks are very helpful.
I'd probably go with the "clean sweep" approach with your NEW organization having been created at incorporation.
The incorporation step legally creates a new entity. If your pre-incorporated PTO had been a 501(c)(3) and you incorporated, the IRS would have considered them two entirely different organizations and the 501 would NOT have transfered.
So to me, that means you are closing the old organization and creating a new one. As a new organization, you don't have history - only projections forward.
We didn't incorporate, but we did use the clean sweep approach when we filed for 501. The old org had been operating for about 15 years, but there were no solid records. I couldn't vouch for their financials or procedures. In my mind, we started from scratch. The IRS rep I spoke to said that was fine, and we had no problems getting approved.
Thank you for your advice, LUVMYKIDS. Once we incorporated , we were no longer the "old group" and I was hit with the reality that I may have had to switch gears immediately as of the incorporation date. I panicked! Thanks again.. I will open up a new bank account and call the IRS on some issues. Do you have any advice for how our internal "books" and treasurer reports are presented to the group? Do I report the financial situation as of our incorporation date even though money was spent from September to mid November when we incorporated? Thanks for your help!
You sound right on with your thoughts on transferring your funds from one account to another. That is how we handled it when we switched banks.
As for your IRS questions, you can call the IRS. If you have all the 501c3 paperwork, there should be an 800 number on it for questions. When I filed everything for our elementary group, I called them a few times. They were very helpful. If you call them, document who you talked to and the date and time, in case later you get some different info, but they should be able to answer your questions and you'll be getting the info straight from the proverbial horse's mouth!
