Make Filing Taxes for Nonprofits Easy with These 4 Key Tips
As a nonprofit organization, filing taxes can be a daunting task. And unfortunately, many mistakes can occur that will hurt a business’ financial standing, not to mention putting them in hot water. However, with the right approach, it can be made easy and problem-free!
Today, we’ll discuss everything you need to know to make filing taxes for a nonprofit a breeze:
1. Understand Your Tax-Exempt Status
Before you begin filing taxes, it’s important to understand your tax-exempt status. As a nonprofit, you’re likely exempt from federal income tax, but you may still need to file an annual return with the IRS. Additionally, you may be exempt from state and local taxes as well.
To determine your tax-exempt status, you must apply for an Employer Identification Number (EIN) from the IRS. This will help you identify your organization as a nonprofit and ensure that you’re not subject to unnecessary taxes.
2. Keep Accurate Records
Accurate record-keeping is critical for any nonprofit organization. Not only does it help you keep track of your finances, but it also makes tax filing much easier.
Start by creating a system for tracking all financial transactions, including donations, expenses, and revenue. Make sure you keep detailed records of all transactions, including receipts and invoices. This will help you easily access the information you need when it comes time to file taxes.
3. Know Your Tax Forms
As a nonprofit, you’ll need to file Form 990 with the IRS each year. This form is used to report your organization’s financial information and ensure that you comply with federal tax laws.
There are several different versions of Form 990, so it’s important to understand which one your organization is required to file. For example, if your organization has gross receipts of $50,000 or less, you’ll need to file Form 990-N. If your organization has gross receipts of more than $50,000 but less than $200,000, you’ll need to file Form 990-EZ. If your organization has gross receipts of more than $200,000, you’ll need to file Form 990.
It’s important to note that failure to file Form 990 can result in penalties and can even lead to the revocation of your organization’s tax-exempt status.
4. Seek Professional Help
If you’re unsure about how to file taxes for your nonprofit, it’s always a good idea to seek professional help. There are many accounting firms and tax professionals that specialize in working with nonprofits and can help ensure that you comply with all tax laws.
Additionally, many nonprofit organizations are eligible for free tax preparation services through programs like the Volunteer Income Tax Assistance (VITA) program. These programs provide free tax help to individuals and organizations with low to moderate incomes.
Filing taxes for a nonprofit can be a complex process, but with the right approach, it can be made easy. By understanding your tax-exempt status, keeping accurate records, and more, you can ensure that all your taxes are filed properly. And, by taking the time to file your taxes each year properly, you can focus on what really matters, which is making a positive impact in your community!
Ash CPA offers trusted CPA accounting and tax services to help various businesses stay on top of all their accounting needs and more. If you are looking for an accountant in Framingham to help with your tax needs, work with us today.