Political organization accounting and compliance are tricky, time-consuming, and extremely complicated. Only the best of the best can tackle it successfully.

Consequences of mistakes, missteps, and incomplete compliance include potentially huge financial penalties, onerous legal liabilities, and a ruined reputation. And, the pitfalls are extremely numerous, right down to the choice of political accounting software.
 
Following are thoughts from a political accounting software chief architect at software company ISPolitical:
 
Should you use QuickBooks for political accounting?
 
Political accounting is not the same as business or personal accounting. QuickBooks is meant for small business or personal accounting. It does that well. For political accounting, QuickBooks is a bad option.

Here are 5 reasons why off the shelf accounting tools like QuickBooks don’t work for political accounting…
 
Political accounting transactions are different. QuickBooks doesn’t support political accounting transactions like non-monetary in-kind contributions, conduits, enforceable pledge, auctions, or contribution splits…
 
Compliance reporting is the point of political accounting. You are required to disclose your campaign’s financial history with every governing agency. That disclosure must be in exactly the format the agency says. It must include all data the agency says…
 
With QuickBooks, you are on your own. QuickBooks cannot generate compliance reports.
​
Almost every agency restricts the amount of money donors can give your campaign. You need to keep track of how much a donor gives over time. These laws can be complicated…
 
Challenger Doug Applegate was in a tight race. Then, a disclosure report showed a $400,000 drop off in cash. His campaign used a filing application that couldn’t reconcile. A few big transactions were left out of the data imported into their filing tool. A quick reconciliation before filing would have caught this. There was a clamor in the local press. Even some national press picked it up. His defeat was one of the closest in the country. It’s possible that the bad press cost him the election…
 
The donor most likely to give you money is the donor that’s already given you money. Analyzing what you’ve accomplished with fundraising, keeping all your financial data in one place is critical for getting the most you can.

​Along comes the Federal Election Commission if you’re involved with a PAC or SuperPAC. That’s on top of the IRS and your state’s requirements.
 
It is, in the words of Teri Garr in the movie Young Frankenstein “a puzzlement.” The IRS has myriad requirements, your states add to the pile…and then you get the Federal Election Commission weighing in with considerable authority on PACs and SuperPACs.
 
Here’s some of what they have to say:
PACs include separate segregated funds (SSFs), nonconnected committees and Super PACs. 

SSFs and nonconnected committees

SSFs are political committees established and administered by corporations, labor unions, membership organizations or trade associations. These committees can solicit contributions only from individuals associated with a connected or sponsoring organization.  

By contrast, nonconnected committees — as their name suggests — are not sponsored by or connected to any of the aforementioned entities and are free to solicit contributions from the general public.

Super PACs (independent expenditure only political committees) and Hybrid PACs (political committees with non-contribution accounts)

Super PACs (independent expenditure only political committees) are committees that may receive unlimited contributions from individuals, corporations, labor unions and other PACs for the purpose of financing independent expenditures and other independent political activity. 

Hybrid PACs (political committees with non-contribution accounts) solicit and accept unlimited contributions from individuals, corporations, labor organizations and other political committees to a segregated bank account for the purpose of financing independent expenditures, other ads that refer to a federal candidate, and generic voter drives in federal elections, while maintaining a separate bank account, subject to all the statutory amount limitations and source prohibitions, that is permitted to make contributions to federal candidates. 

Leadership PACs
A Leadership PAC is a political committee that is directly or indirectly established, financed, maintained or controlled by a candidate or an individual holding federal office, but is not an authorized committee of the candidate or officeholder and is not affiliated with an authorized committee of a candidate or officeholder.  Members of Congress and other political leaders often establish Leadership PACs in order to support candidates for various federal and nonfederal offices.

Like other multicandidate PACs, a Leadership PAC may contribute up to $5,000 per election to a federal candidate committee.

Want to know more?
Here’s a little “light reading” from the Federal Election Commission.  
And some more on Ballotpedia.com
 
Clearly, successful political organization accounting is a lot more than setting up a chart of accounts and doing basic bookkeeping. To keep you safe, secure, and compliant with all regulatory bodies, take the time to hire the right specialist.

It’s not a task for the faint of heart or someone without ample political organization experience. 

​Notes Wikipedia: “Political campaign accounting is a specialty practice area of accounting that focuses on developing and implementing financial systems needed by political campaign organizations to conduct efficient campaign operations and to comply with complex financial reporting statutes. It differs from traditional management and financial consultancy in that it incorporates election law requirements and the unique requirements of political campaigns.”
 
According to the American Institute of CPAs, “Every state and jurisdiction has slightly different election laws, so it is critical that a candidate research laws pertaining to getting on the ballot, gaining petition signatures and reporting campaign income and expenditures. A good campaign manager will know the campaign laws of your state and will help ensure that you meet all reporting requirements, but candidates should also hire a CPA who is experienced in campaign finances.”

That’s John Morse to a “T.” He’s worked with political campaigns and organizations in Colorado—where John works and lives.
​
Here’s a link to Colorado’s requirements for 527 political organizations. (Remember, this is in addition to IRS requirements.)
 
Here’s an IRS link detailing the rest of the United States.
 
Political organization accounting and compliance are critically important to success.  Accounting done right can win the day. Accounting done wrong can land you in huge trouble with the IRS or state, and even the Federal Election Commission—which does have requirements tied to state as well as federal organizations. Consequences of inaccurate, incomplete, or untimely accounting reporting can include huge monetary penalties, legal prosecution, and destruction of reputation once the word gets out. John P. Morse, CPA, former Colorado Senate President, knows politics and political organization 

This document notes: Among other requirements, most tax-exempt political organizations have a requirement to file periodic reports on Form 8872 with the IRS. To file electronically, the organization must have the username and password it received from the IRS after electronically filing its initial notice (Form 8871). Use the ‘Political Organization Filing and Disclosure’ link below to file Form 8872 electronically.
 
FEC Filing Required for Some 527 Organizations
Overview of FEC "electioneering communications" filings required for some section 527 exempt organizations.
Filing Requirements
Political parties; campaign committees for candidates for federal, state or local office; and political action committees are all political organizations subject to tax under IRC section 527 and may have filing requirements with the Service.
Political Organization Filing and Disclosure
File and search for notices and reports filed with the Service under IRC section 527.
Exemption Requirements - Political Organizations
A brief description of the requirements for exemption under IRC section 527.
Taxable Income - Political Organizations
A brief explanation of how political organizations are taxed under IRC section 527.
Solicitation Notice
A brief description of the solicitation notice requirements under IRC section 6113.
Employment Taxes for Exempt Organizations
Links to information about employment taxes for tax-exempt organizations.
Political organizations: Resource materials
Resources available on irs.gov concerning tax-exempt political organizations (section 527).
 
Are you prepared to handle all this…and much more?
 
Political Organization Accounting and compliance are critically important to success. Accounting done right can win the day. Accounting done wrong can land you in huge trouble with the IRS or state, and even the Federal Election Commission—which does have requirements tied to state as well as federal organizations. Consequences of inaccurate, incomplete, or untimely accounting reporting can include huge monetary penalties, legal prosecution, and destruction of reputation once the word gets out.

John P. Morse, CPA, former Colorado Senate President, knows politics and political organization accounting and compliance inside and out. He and his team are specialists in helping tax-exempt political organizations, including such political action committees as PACs and SuperPACs.
 
Win with CPA John Morse, former Colorado State Senate president and current CPA of choice in Colorado political circles. Schedule a call.

​Nearly a half-century ago, political organization accounting complexities were creating waves of concern. They still are. “We created a monster,” announced U.S. Senator John Pastore at a recent Senate debate. “We have a law now that even the people who wrote it do not understand.” (Proquest.com 1976 article). Political organization accounting complexities—with many compliance requirements (and pitfalls)—merit a highly specialized CPA who can ensure accounting is done right.

Cumulative stress, disruption and monetary impacts take their tolls in many ways. But once you know the rules and put together systems to comply with them, you protect your business and peace of mind.

Many business owners complain about the burden of regulations on their businesses. Most of the time, the root cause of that frustration is not knowing the rules. And when the agency with oversight comes calling or something bad happens— exposing non- compliance—you end up spending time and money in the form of penalties, interest, and judgments that harshly impact your business. You also lose productivity and time that could have been better spent growing your business.

Cumulative stress, disruption and monetary impacts take their tolls in many ways. But once you know the rules and put together systems to comply with them, you protect your business and peace of mind. This process isn’t simple or cost free. But as you implement the requirements, it becomes routine and becomes much simpler. And avoiding the time, penalties, interest, and judgments not only protects your bottom line—it frees up your ability to spend time on the other aspects of your business that are both more enjoyable and more profitable to your business.

We understand your accounting challenges. We understand the stress you feel trying to stay on top of existing and evolving government regulations. We know you are spending too much of your own time doing it.
​
You need a CPA firm you can trust so you can replace that stress and strife with the peace of mind that comes with knowing all the regulations and compliance requirements relevant to you and your business are being addressed in full.

It's true. Bookkeeping is a necessary function of accounting. Making sure your daily, weekly, monthly, quarterly and annual transactions are completed, tracked, reconciled, reported and filed on time is important. And when well done, essential to Accounting Done Right.
 
But, detailed though it is, bookkeeping is just one piece of the whole accounting equation.
 
So, it's reasonable to ask yourself:

• Is everything being done that needs to be done?
• There are so many rules that must be followed. Are we following all of them? Do we know all of them? Does my bookkeeper?
• Does my CPA really get an understanding of my business from just preparing my tax returns once a year?
• Has my operation changed to where I should choose a different entity?
• Have I captured the right documentation to ensure that my expense is not just deducted but that it’s tax deductible?
• Are my payroll processes updated to include the latest changes?
• Is my current rate of cash flow adequate to meet my profit and compensation goals while simultaneously putting enough away to pay my taxes quarterly and at year-end?

 
You may have these questions and more. Questions you can’t even formulate. Sometimes, you just have an uneasy feeling. Bookkeeping in and of itself, isn’t designed to answer any of these questions.
 
Having your bookkeeping done with an eye towards answering all these questions offers an entirely different view. And outcome. That outcome includes someone you can talk to about the details of your operations, where it might be going, and how you might get there.
 
If your bookkeeping, accounting, tax planning and tax returns were all done by your CPA, you would have greater confidence they were being done right and your CPA would be looking at your business every month instead of every year. That’s so much more than bookkeeping alone. That’s another set of eyes on your business that can recognize financial and tax opportunities, and pitfalls, that you might not see.
​
With that kind of approach, you could spend your time focusing on the parts of your business that excite you and got you into business in the first place!

One of the most glaring financial mistakes entrepreneurs make is to focus on profits without considering what is left on the table. Many concentrate excessively on controlling expenses. Going by the wayside are such vital considerations as minimizing taxes, systematically pursuing new business, and maximizing profits by making and keeping customers/clients happy. Conceptually, many entrepreneurs view these vital considerations as standard operating procedure. Who doesn’t want to minimize taxes, get new business, and find ways to maximize profits? 

​​The difficulty occurs in the details. A CPA who only understands basic tax law may leave a lot on the table in terms of sophisticated analysis that can really minimize taxes. Many small business owners tend to vigorously pursue new business only when shortfalls occur—which is the worst time to start the process. And maximizing profits encompasses a variety of dedicated financial and operational processes that most entrepreneurs can only dream about.
 
Spendthrift vs. Thrifty Spender. Key to the profitability challenge is a well-entrenched mindset that tends towards spending money when it’s available, often excessively—the essence of a spendthrift. In contrast, thrifty spenders—unlike the Scrooge image—are small business owners who concentrate first on allocating revenues to profit accounts, then using what’s left to pay expenses. If there’s not enough money, they have to cut those expenses as much as needed, even when it hurts—hence the thrifty spender description.

Payroll, bookkeeping, accounting, tax planning, tax returns, and profit planning and execution. These are all critical elements of Accounting Done Right. When controlled and combined under one roof, small businesses have the ability to save lots of money in taxes, interest and penalties, and to make more money by optimizing profit planning and execution. This drives better business performance, longevity, and security—all providing peace of mind.