3 tax preparation tips for nonprofit organizations


Your nonprofit organization may meet the qualifications for tax-exempt status, but you will still need to prepare for end of year filings. While you should work with an experienced CPA, there are certain things you can do all year round to make your tax filing process less complicated. Here are a few tips to help you stay prepared to meet your tax obligations.

Do you need to file?

The first thing to consider is whether or not your nonprofit organization even needs to file tax returns. There are some organizations, such as churches, that aren’t required to file at all. If you do need to file, you’ll have to submit the completed Form 990. Your San Diego CPA can help you determine whether you need to file, and they can help you complete the necessary paperwork to ensure your organization is compliant with its tax obligations.

Are you acknowledging deductions?

Anytime your organization receives a donation, you should be sending out a thank you that acknowledges the donation. In addition to following proper gift-giving etiquette, this provides an opportunity for you to issue a receipt for each donation. The receipt should include the donation amount and the date it was received. The IRS has rules regarding “quid pro quo” gifts, so the receipt should also acknowledge whether or not a gift was given in exchange for the donation. Be sure to add that the gift or donation is tax-deductible and verify the state in which the donation was made.

Are your volunteers saving receipts?

Even though your nonprofit organization doesn’t need to pay taxes, you should still keep accurate records. If the IRS decides they need to audit your organization, you will have to provide accurate documentation, including receipts for expenses. Be sure your volunteers are turning in receipts for gas, auto care, and mileage. They should also provide receipts for travel expenses, including airfare and hotel accommodations. Save receipts for purchases for office supplies and other necessities. Any expense that’s related to the operation of your organization should be represented by a receipt.

By working with a CPA year-round, you’ll be ready for your organization’s year-end tax preparation. If you have any questions about your nonprofit organization’s tax status, you should contact a CPA at your earliest convenience.