Tag Archive for: #The Charity CFO

The most effective ways to expand visibility and maintain funding in your business.

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On this week’s episode of A Modern Nonprofit Podcast, CEO Tosha Anderson invites Eric Ressler as her guest. Eric Ressler is the Founder and Creative Director at Cosmic, A Social Impact Creative Agency. Eric Ressler expresses his opinions and expertise about, “The most effective ways to expand visibility and maintain funding in your business.” Why do so many social impact organizations struggle to find, grow, and maintain funding? Eric breaks this question down and gives listeners tips to implement in your own processes. What does the future of social impact fundraising look like? Eric goes into the importance of your digital footprint and doing it in an authentic way. We cover why does social impact organizations invest in their digital strategy and platforms? We also hit on why should social impact organizations concern themselves with their brand when it seems like there are more important things to focus on? Finally why is the overhead percentage the wrong metric for assessing a social impact organization’s effectiveness? This episode is a wonderful conversation and a must listen.

Reach out to Eric Ressler @ [email protected]

Website: designbycosmic.com

Looking Ahead: 5 New Changes To NPO Tax Law You Should Know

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If you have a nonprofit, you have the option to file as a tax-exempt nonprofit. If you’ve filed for nonprofit in the past, be prepared for some changes in 2020.

In the past few years, the IRS has spent some time updating its data analysis capabilities. 

This year, 2020, they will focus on six major areas. This brings on a few changes to consider if you are filing for nonprofit status.

  • Compliance Strategies
  • Data-Driven Approaches
  • Referrals
  • Claims and Other Casework
  • Compliance Contacts
  • Determinations

Exceptions to Filing For Nonprofit Status

Some nonprofits are not required to file with the IRS. The exceptions are:

  • Organizations included in a group return
  • Churches, their conventions, and associations of churches
  • Organizations that need to file a different return

When to File

Your nonprofit Form 990 needs to be filed by the 15th day of the 5th month after the close of your fiscal year. The sooner you get on organizing your documentation, the less room there will be for error. 

The Further Consolidated Appropriations Act, 2020

Also known as H.R. 1865, Congress has passed this law that will have a significant impact on nonprofits. It includes two major provisions. These are excise tax simplification and benefits repeal. 

Excise Tax Simplification

Previously, the law required private foundations to pay excise tax on their investment income. This was a 2% tax. However, nonprofits did have the opportunity to lower the tax to 1%. This would happen if they made distributions over the minimum amount.

For years, nonprofits have hoped for a more simplified process. The Further Consolidated Appropriations Act, 2020 does just that.

As of this year, the excise tax rate is fixed at a flat 1.39%. This amount won’t change no matter what the distributions are. Nonprofits no longer need to carefully monitor their distributions. There is no more questioning if they qualify for a lesser amount or not. The tax percentage is the same for everyone.

Qualified Transportation Fringe Benefits Repeal

This act gives something else nonprofits have asked for years. It repealed the unrelated income tax on qualified transportation fringe benefits.

Furthermore, the repeal is retroactive back to the date it originated. You could be entitled to a refund. If your nonprofit had to pay this extra tax any time since December 31, 2017, consider filing an amended 990T. 

New Inflation Adjusted Rates

2020 also has some new, inflation-adjusted rates.

Low-Cost Article

A low-cost article is an item typically given as a “thank you” for a donation. The amount that qualifies as a low-cost article is directly tied to inflation. This means, what qualifies changes every year.

For the 2020 tax year, a low-cost article is anything that costs $11.20 or less. This is a ten-cent increase.

Other Insubstantial Benefits

If a donor receives something in return for their payments, he or she can still deduct the donation if:

  • The donation was $25 or more and the donor didn’t receive anything that costs more than $5 or the price of a low-cost article.
  • The value of the benefits given isn’t more than 2% of the donated amount, or $50, whichever is the lower amount.

Lobbying Expenditure Notice Exemption

Law requires nonprofits to offer members and supporters an estimate of dues nondeductible lobbying payments.

In 1998, the IRS ruled that there are some exemptions. These include social welfare organizations, agricultural, and horticultural organizations. They are exempt if more than 90% of their yearly dues are $75 or less.

This limit has increased for the 2020 year. Now, these organizations are exempt if their annual dues are $119 or less. 

Mileage

Mileage is one area that hasn’t changed for nonprofits. For 2020, you can still deduct 14 cents per mile on a nonprofit vehicle.

Failing to File

If you fail to file your 990 on time, you could see penalties and income tax liability. If you fail to file three years in a row, your tax-exempt status will be revoked. 

The IRS does keep a list of nonprofits with a revoked status for up to three years. If you need an automatic six-month extension, you can request one with a Form 8868. 

You cannot extend a 990-N due date, but you also won’t pay any penalties for submitting it late.

Losing Your Tax-Exempt Status

If you have lost your tax-exempt status, you are no longer eligible to receive any tax-deductible contributions. You might also have to bite the bullet and pay corporate income tax.

Going Digital

The IRS is implementing enhanced digital records on nonprofits for public access. They are also working to develop more secure communications vehicles to reduce any paper files.

Form 1023

Starting in January 2020, IRS Form 1023 will go electronic only. This is the Application for Recognition of Exemption Under Section 501(c).

Fraud

The IRS is also working to reduce tax fraud by enhancing its digital investigation. In 2019, there were 90,000 employee plan determinations. This has given them a reason to streamline investigations. 

The IRS will also look into potential private benefit and inurement in nonprofits. They have collected data that raises red flags in certain areas. This year, they plan to use this data digitally to find cases to look into.

Nonprofits in 2020

If you are filing for nonprofit status in 2020, take note on the changes. You might find that you are owed money thanks to the new law in place. Take note on the minimum numbers when it comes to low-cost articles. Alert donors when they qualify claims on their donations. 

Keep in mind, these changes can affect your nonprofit for the better. Contact us today for more information on how to seamlessly run your nonprofit. 

The Charity: 6 Common Tax Mistakes that Non-Profits Make

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If you run a non-profit organization, contrary to popular belief, it doesn’t mean that you don’t have to worry about taxes. 

In fact, stay on top of your tax issues to the best of your ability if you don’t want to get hit with fines or have your organization shut down altogether. 

When you understand the charity that you run and how to handle the business aspects, your organization will thrive and grow. With that said, there are several tax-related mistakes that non-profit organizations often make. 

Consider these mistakes below so you can avoid them and handle your tax matters properly. 

1. Failing to Get Organized

To get the most out of your nonprofit tax filing and accounting, you need to get organized.

This is something that every company needs, too many fail to master. Whether your goal is to get a great tax refund or to pay off debt, getting organized is the key to it all. 

Develop a record keeping process that works and that you can easily stick to. This could mean keeping both physical copies of records and digital copies, and you should definitely make use of software when at all possible. 

By having a process that you can stick to, you are far less likely to make mistakes with your taxes that can cost you dearly later. 

2. Not Truly Understanding Their Non-Profit Status and What It Means

There are so many situations in which a nonprofit manager doesn’t truly understand their status and ends up failing to satisfy requirements.

The most common situation by which your non-profit loses its tax-exempt status as a whole is because the manager failed to file a return from the previous year or from previous years.

It’s also important to understand that your tax designation affects both your state and federal requirements. If you simply follow the non-profit articles of incorporation in your state, you are not necessarily satisfying the requirements of the Internal Revenue Service.

You also need to be mindful of integral documents, such as Form 990, which should be filed the year you form the non-profit.

By understanding your status and what it requires, it becomes easy for you to avoid a plethora of mistakes that many fall prey to. 

3. Doing it Yourself When You Should Hire a Professional

There’s a time to go the DIY route and there’s a time to bring in the pros. 

Hiring a tax professional that is versed in bookkeeping and accounting can be just what you need to manage your taxes in a productive manner. Since the success of your company depends on accuracy and proper accounting, you can’t go wrong bringing a Certified Public Accountant (CPA) on board. 

Hiring some professionals is necessary since tax laws change from time to time. The last thing you would want is to have tax law specific to non-profits change in a way that impacts you, yet you were none the wiser because you didn’t keep up with these laws.

When you have access to a CPA, they will assist you in managing your organization’s debt, boosting your credit and bond rating, managing your investments to the fullest, and ensuring that you always stay organized.

4. They Forget About Their Local and State Taxes

Non-profit organizations often forget about taxes that pertain to their city or county as well. While they may have certain tax-exempt classifications, it doesn’t necessarily mean that they will be exempt from these local taxes. 

This also means that non-profits overlook other such tax obligations — such as sales tax, personal property tax, and taxes on real estate. 

5. Having a Board of Directors That is Subpar — or Not Having One At All!

Every non-profit worth its salt needs to have a strong government in place. This government, known as its Board of Directors, is integral to decision making and the objective sharing of ideas. 

By having a trusted board, you’ll have firm direction and the ability to tackle all of your issues head-on. What’s worse is that so many non-profit organizations don’t have a Board of Directors at all. 

Being loose with this detail makes it that much easier to be loose with details related to your taxes and accounting. 

6. Not Embracing Technology

Finally, so many non-profit organizations also remain stuck in the past in their willingness to embrace technology. Simply put, your non-profit will get left behind if it isn’t embracing this technology to the fullest. 

There are several mobile apps you can look into that will help you with your accounting and finance. Even more intriguingly, Artificial Intelligence (AI) is now helping non-profits optimize their fundraising, make the best use of their staff and decide on the best ways to shape company policy and initiatives. 

When you stay ahead of the game with the technology of the industry, you can count on your non-profit to be all the better for it. 

Understanding the Charity and the Tax Mistakes That Non-Profits Make

When you want the charity or non-profit that you run to stay at its best, handle your taxes. These are the tips that will carry you far in that regard and keep you from getting into trouble with the IRS.

If you plan to run a successful non-profit, we’d love to show you what kinds of financial services we can provide you with. 

Get in touch with us to request a quote for whatever kind of non-profit accounting work you need. 

Do Nonprofits Pay Taxes? This is What You Should Know

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There are more than 30 different types of nonprofits within the federal tax code and not all of them are exempt from taxes.

So, you may be wondering… do nonprofits pay taxes? The answer is a bit complicated.

Each type of nonprofit is different when you are considering lobbying and tax-deductible contributions, among other things.

To learn about how nonprofit taxes work, keep reading below and find more information that may help.

What is a Nonprofit?

A nonprofit is something that is often talked about, but not often understood in the context it should be.

People often believe that nonprofits are automatically tax-exempt, but this is not the case. With over 30 types of nonprofits, it can be difficult to determine which nonprofits fall into which category.

In the different sections of the tax code, you will find the different types of nonprofits.

For example, in section 501(c)(4), the social welfare organizations, volunteer fire companies, and homeowners associations can be found. In section 501(k), you’ll find child care organizations.

By being in a specific section, an organization is stating that it meets certain requirements and is or is not exempt from paying federal taxes. The biggest thing to remember is that nonprofits will not be paying out profits (which is why they are called nonprofits in the first place).

Donations that others make to nonprofits are generally tax-deductible for those individuals, but the nonprofit won’t pay taxes on those donations.

What Does a Nonprofit Do?

The purpose of a nonprofit is to serve the public.

This may be through offering goods to the community or providing services that are needed by the local population. Some nonprofits are capable of doing both.

The financial information, as well as operational information, has to be made public.

This is to ensure that businesses or individuals that choose to donate are aware of what the organization they are donating to is doing behind closed doors. They also want to know how the money they’ve donated previously is being put to good use!

Before a nonprofit is able to become tax exempt, it must request and complete a 501(c)(3) status from the IRS directly.

Once it is registered and starts operations, the organization has to maintain compliance. This compliance will be with the state agency that regulates the charitable organizations within that state. 

A nonprofit may also receive grants from the public, government, or other foundations to do specific types of work. If your nonprofit wants to do a big project, for example, you can apply for grants to get money to pay for resources.

To do all of this effectively, you may need to have a knowledgable and dedicated accounting team on your side.

Do Nonprofits Pay Taxes?

While nonprofits typically will not have to pay taxes, they still have to submit annual tax returns with the IRS.

Being tax exempt means an organization doesn’t pay federal taxes, but they still have to provide the IRS with the information they need. This is true for any nonprofit, no matter their status.

A nonprofit that identifies as a 501(c)(3) is the most common type you will find. It will include any type of organization that is educational, scientific, religious, literary, or charitable. 

If you have a nonprofit of this type, you would use the IRS form 1023 and file taxes each year. Contributions are generally going to be tax exempt.

Any organization that falls into this category will have to be:

  • A public charity that people may donate to, such as the Red Cross
  • A private foundation, such as the Getty Foundation

Keep in mind that there are other types of nonprofits. While these are the most common out there, your nonprofit may fall into a different category.

IRS Form 990

Since nonprofits have to report every year, they will submit a variation of the IRS Form 990. This form helps the IRS (as well as the public) look at what the nonprofit is doing and how it is operating.

The information included on this form would be the nonprofit’s mission, the programs provided, and the overall financial history for the year.

Depending on the filing year and the gross receipts of the organization, there are different types of the 990 form. These include the Forms 990, 990-EZ, and the 990-N.

An experienced accountant can help you determine which option is right for your nonprofit. You will get additional information that you may not be able to find on your own, but you’ll also have the chance to ask questions and know your forms are being completed correctly.

If a nonprofit that is required to file a Form 990 does not do it for 3 years in a row, the IRS removes the tax-exempt status from the organization.

Exceptions to this rule may include faith-based organizations, government corporations, or certain state institutions.

What Does Your Nonprofit Need to Do?

Trying to answer the question “do nonprofits pay taxes?” is a little confusing, but there are experts out there that can help.

With all of the options you have, you need expertise on your side. You also need accountants that know and care about what you’re doing for others. 

If you have accounting needs, the Charity CFO wants to help you continue to improve our communities. 

Get some more information on our policies and practices, but most importantly, find out why you should choose us to help you with your accounting and tax return by contacting us today.

Nonprofit Accounting Tips, Tools, & Tricks Your Organization Needs to Know

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When people think about the nonprofit world, they often think about the work they do to help others. Their mission and impact come to mind, but the way they’re actually run rarely comes up. 

A nonprofit may not make money the way a traditional business does, but money still plays a significant role in the nonprofit world. Donations need to be made, some employees may need compensation, and the books need to be balanced.

Proper accounting is important for the longevity of any organization, but luckily, it’s easy to handle with the right background.

If you want to learn the best way to handle finances in the nonprofit world, you’ve come to the right place. Keep reading to learn some simple accounting tips and tricks that can help you in the long run.

The Simple Guide to Nonprofit Accounting 

A financially healthy nonprofit is one that has the right accounting setup. 

If you want to know how to handle accounting at your nonprofit, make sure you pay close attention to the tips in this post.

Understand the Law

Accountants that don’t understand IRS tax law could be losing the organization thousands in exemptions and filings. 

If you want to handle accounting right at a nonprofit, you need to understand the differences between managing money for a regular business and a nonprofit organization. 

The IRS has a comprehensive and free resource guide that nonprofits can use to educate themselves on the ins and outs of handling finances for their organization. 

Everyone on your finance team should be familiar with tax guidelines. Even if they aren’t necessarily handling filing your taxes, encourage them to take advantage of the IRS’ free courses. 

Have a Solid Budget

A budget is important for any business or nonprofit organization. It’ll help you set goals for the coming year, and ensure that you’re operating your business in the most financially healthy way possible.

A realistic operating budget is the first step to handling accounting the right way in your organization.

Keep in mind that an ideal budget should be able to evolve throughout the year. Money from donors can ebb and flow depending on the time of year and market forces that are out of your control. 

Think about the best and worst times to limit expenses. There are some times of the year where you can expect a lot of cash flow like the holidays, and other times where you’ll have to be leaner.

It’s also important to make sure that your board members understand and approve the budget. 

We all know how important the siting board is in a nonprofit organization. If they understand the rationale behind why you’re setting certain expectations and limits, they’ll be able to better understand upcoming initiatives and support them.

Have Several Checks and Balances 

Fraud can occur in any organization, but frauds for nonprofits and charities can be absolutely devastating.

Aside from taking money from an important cause, it can also undermine people’s faith in your organization. They may think that their money isn’t being spent correctly, and you could see your donations quickly dry up.

One of the best ways to protect against fraud and to keep your accounting books balanced is to have plenty of eyes on the numbers. This means creating a series of checks and balances to ensure that everything literally adds up. 

Never have one person only handle financial matters in your organization. Always have someone else that can double-check their work and make sure that their numbers, bank deposits, and projections make sense. 

Having a professional with no financial stake in your nonprofit can be a great way to keep things balanced. Some nonprofits go the extra mile to bring in an external accounting consultant during tax time or when they’re planning budgets. 

Get Software

Getting solid accounting software is one of the best things a nonprofit can do. Software doesn’t just make it easy to track expenses, it also gives everyone the opportunity to access important financial information. 

Take time to think about the kind of software you want. Some accounting software can come with special features like payroll and benefits tracking help. Others can hone in on specific nonprofit areas like fundraising and donations.

The Nonprofit Plus Account Suite is one of the highest-rated niche accounting software packages you can use.

Aside from this software being specially designed for non-profits, it can help you handle nearly every financial aspect of your business. You can manage donations, handle employee payroll, and use its stellar forecasting capabilities. 

Stay in the Loop 

Do you know whenever someone in the marketing/communications department goes to an event and charges their Uber to the company card? Could you easily find receipts from operations during their last office supply shopping trip?

Having a deep understanding of what’s happening in every department is critical for the financial success of every nonprofit.

You won’t be able to read people’s minds or be around for every purchase. That’s why it’s important to create simple systems for people to report expenses and keep key people informed about purchases. 

This is where having solid software can come in handy. A software system that makes it easy for people to report their expenses and easily track spending can save people in accounting a lot of time and stress.

Start off by training people in other departments the right way to keep you informed about expenses. Let them know that reporting small expenses and big purchases are equally important.

Get Help 

We covered a lot of ways to handle nonprofit accounting in this post, but there’s one surefire thing that will always be helpful for nonprofits: hiring the right people to handle accounting. 

If you’re in need of experts that can manage your accounting needs, we’re here to help.

We offer services that can cover every financial aspect of running a nonprofit. Be sure to contact us today so we can talk about the best way to handle your accounting and finance needs.