Four Important Tax Tips for Nonprofits

As the close of the calendar year approaches, it may seem to be too early to start thinking about tax season. On the other hand, now may be the best time for nonprofit leaders to begin gathering the advice – and the documents – that they’ll need to maintain their organization’s tax-exempt status for 2020. These four important tips will help to get you on the right track:

Know Your Forms
Even though tax-exempt organizations don’t file taxes, most (except religious and political nonprofits) are required to annually file what’s known as a 990. However, there are four different IRS Form 990s. Which form your organization completes depends on its size in terms of its assets, gross receipts and funding sources.

  • Form 990-N (now only filed electronically) is for nonprofits that take in less than $50,000 from public sources over the course of the year. The form’s eight questions make it quick and easy to file.
  • Your nonprofit will file Form 990EZ only if it had less than $200,000 in gross receipts from public sources or it has a total of less than $500,000 in assets.
  • If your nonprofit is a non-public tax-exempt organization, such as a private foundation that uses the resources of an endowment or other privately-funded sources, then 990-PF is the required IRS filing.
  • Finally, IRS Form 990 is the form for large, established nonprofits that had $200,000 or more in gross receipts throughout the year, or if its assets total $500,000 or more.

Maintain Good Records
Having accurate records of your nonprofit’s finances are, of course, important to have throughout the year, as well as at tax time. But they aren’t the only records necessary for filing your 990. It’s also important to maintain detailed records of the organization’s structure, its board members, salaries paid, and its departmental and programming budgets. Depending on the organization’s make-up, you may be required to file additional schedules with your 990. In addition to having this information accessible at tax time, prospective donors will appreciate your nonprofit’s transparency if it’s also available when they’re researching organizations worthy of their contributions.

Do a Double-Take
Because your annual 990 tax filing is essentially an application to retain your organization’s tax-exempt status, submitting an incomplete or incorrectly completed form may result in penalties, rejection or denial of its nonprofit standing. That’s why having someone check your work – and especially, to verify the accuracy of your records – is so vitally important.

Trust a Professional
Although software, websites and well-meaning individuals may be available to walk you through the process of completing your nonprofit’s Form 990, consider hiring a tax professional to do the job. Working with a tax professional not only saves time, but it also may save you the headache of re-filing in the new year. Donohoo Accounting Service is prepared to answer your questions before, during and after the tax-filing season. Talk with one of our accountants or schedule an appointment today by calling
513-528-3982 or contacting us via our website. Check us out on Facebook, Twitter or LinkedIn for our latest updates!

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4 Personal Finance Tips For A Strong 2020

2019 is quickly coming to a close. Get ahead of the game and get your money in order for 2020. Don’t know where to begin? No worries! Here are some helpful tips.

Get Organized

You can file taxes after the new year, so now’s a good time to get all your ducks in a row. In January and early February, you’ll be receiving important documents in the mail including your W2, mortgage interest statement (1098), or student loan interest statement (1098-E.) Most companies, by law, have until January 31 to mail statements, so keep an eye out.

Designate a single location where you’ll keep these documents so they are easily accessible when you’re ready to file taxes. You can use a folder, drawer, box or another container. Put a large “taxes” label on it and use the container for tax-related documents only, not other mail or bills. But you may want to keep it near where you sort mail, so you can immediately put the documents in their home.

Then start gathering other items you’ll need for filing taxes, including charitable contribution and expense receipts. Qualified expenses depend on your situation, but could include expenses related to childcare, medical, work (mileage, supplies, relocation) and education. Donohoo Accounting Services can help you navigate the complicated tax structure. In addition to income tax preparation, we handle payroll tax prep, tax levies and liens, back taxes, end tax penalties, estate tax return preparation and more.

Make Year-End Charitable Contributions

Many charities do a final fundraising push at the end of the year, so you’ll probably receive solicitations asking for support. If you want to help non-profit organizations while also possibly reducing your taxable income, make your donations by December 31. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year will count in that year – even if the credit card bill isn’t paid until later. You’ll want to make sure the charity is eligible. Many times, the charity will note its “501c3” status, which is IRS speak for tax-exempt. You can also use the IRS Tax Exempt Organization Search. If you live in the Greater Cincinnati area, check out our blog for four great local non-profit organizations.

Take an Assessment of Where You Stand Financially

Now’s a good time to take a hard look at your income, debt, expenses, retirement funds, college and emergency savings. Are you on track to meet financial goals? If yes – great! If no – why are you falling short? To properly move forward into the next year, you need a realistic picture of where you are now. Put pen to paper and write down all the numbers. It helps to see everything in black and white.

Make a Financial New Year’s Resolution (Or Better Yet – Create A Plan You’ll Stick With All Year)

Once you know where you stand currently, you can create a plan for 2020. Perhaps you want an emergency savings fund. You never know when the furnace is going to go out, someone in your family has a medical issue or there’s a company layoff. Experts say you should have enough emergency savings to cover three to sixth months of expenses. Maybe you have all your financial bases covered but want to take an exotic vacation? Set the goal, create a plan and start saving for that overseas beach trip.

Although it’s a busy holiday season, set aside time to get your money in order for the new year. Once you’re ready to file taxes, turn to Donohoo Accounting Services, locally owned and operated by Cincinnati native, Duane Donohoo. Give us a call at 513-528-3982 to arrange your complimentary consultation to see how we can help find the most deductions possible for your personal taxes. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest updates!

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