What Does My Tax Exempt Status Really Mean?

Tax Advice for Nonprofits


Did you start a nonprofit organization in 2017? If so, hopefully you have a qualified accountant working with you to organize your finances. Whether you’ve started your own organization, are a member of a church, or volunteer for a local non-profit, most people are in some way involved with a tax exempt organization. You may be aware that non-profit organizations are tax exempt, but what does that really mean? Below is some important tax advice for nonprofits.

Who is exempt from taxes?

Tax exemption is a benefit afforded to charitable organizations in the United States, usually those organizations have a religious or community welfare focus. Some specific examples of tax exempt nonprofits are churches and religious organizations, political organizations, private foundations, fraternal societies,  and veterans organizations to name a few.

How do we file?

While tax exempt organizations are truly exempt from paying taxes, one may also assume that they don’t need to file any tax documents, however this is inaccurate. Most nonprofit organizations are required to file documentation with the IRS, excluding churches which are not required to disclose any financial information to the government or even to their donors.

The official IRS form for tax exempt nonprofits is the IRS 990. Most organizations, excluding churches, are required to fill out the 990 which is then made available to the general public. The publicizing of these documents allows community members and potential donors to evaluate the health of a nonprofit organization.

There are several different versions of the IRS 990 form, the form you fill out will be based upon the amount of income your nonprofit brings in. For nonprofits with receipts of more than $50,000 you will fill out the 990-EZ, while smaller organizations will fill out the 990-N.

Are we doing this right?

If you’re unsure how to file your IRS 990 form, or whether or not you meet the requirements of a nonprofit organization, I highly recommend that you contact an accountant today. Properly managing your organization's finances is very important for the long term health of the organization as well as maintaining good communication with your donors. Contact me today for a free consultation and to get more tax advice for nonprofits.  Together we can work to maintain the pertinent tax documentation for your nonprofit organization.

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