Keeping Track from Donations to Taxes
Author: Keith Huggett
While nonprofits are not in business to make a profit, careful bookkeeping must be done. Often donors who make contributions want to know how and where their money is being used. If there is any sign of financial irregularities, donors may choose to donate to a different organization.
Tax Exempt Status & Receiving Donations
Have the proper forms been filed to attain tax exempt status? As with all things tax related, the requirements differ from state to state. Because the IRS only allows charitable donations to IRS designated tax exempt organizations you can see why this is a critical step. In most states, before you can accept donations, you will have to file Articles of Incorporation and appoint a Board of Directors to oversee the organization.
Tracking Donation and Recording Expenses
Having a solid accounting system in place to record donations and expenses is a must because donors require receipts in order to claim their deductions at tax time. Expenses should fall into two categories: program expenses and administrative expenses. Your program expenses are those expenditures made to support the organization's mission. Administrative expenses are those that are made in order to run the non-profit organization, overhead and fundraising.
Tax Returns
Most charities file IRS Form 990, the return for tax exempt organizations. If the total amount of donations is less than $50,000, IRS Form 990N may be filed instead.
The tax specialists at The Tax Office, Inc. have the answers to your tax questions. Contact us now, for a free, no obligation tax consulation for your non-profit organization.
