Not For Profit Accounting

Qualified Tax Exempt Entities

For Profit vs. Not For Profit Tax Accounting

Many aspects of not-for-profits tax preparation and planning have significant differences compared to for profit entities. Not-for-profits are required to itemize expenses across functional management (general and administrative), fundraising, and program areas. These are called “functional expenses” and the IRS requires that they be reported.

At Rosillo & Associates we offer complete non-for-profit tax accounting solutions for the tax authorities and the informed public requirements. We assist Not for Profit Organizations to Apply for their Tax Exemptions and to maintain their Tax Exemptions annually.

“Qualified” Tax Exemption

“Qualified” nonprofit organizations are exempted from federal taxes and in some states may also be exempt from some state taxes. Additionally, donors who contribute to federally “Qualified” not for profit organizations can receive a charitable donation tax deduction on their business or personal taxes for their contributions to these types of “Qualified” organization ONLY. If the Organization is not Qualified, a taxpayer cannot legitimately receive a tax deduction.

The tax exemption application process, tax filings and financial statement requirements can make the non-profit entities more expensive to manage. Also, it is important that you make sure which are the taxes your organization are exempt or not.

Why?

Because in order to sustain a tax-exempt advantage, a non-profit is required to annually provide a great deal of the business and financial information.

Applying for Tax Exemption

If you are considering applying for a tax exemption, we can help you; all you need to do is to provide us with the following information and we take care of the rest:

  • Call us to discuss the Draft of Form 1023 filled out as best possible by the client.
  • Support information and related attachments required in the Internal Revenue Service Instructions.
  • The Entity’s Corporate By-Laws (See Corporate Agreements)
  • A narrative of:
    • The activities your organization provides to benefit the public
    • The resumes and areas of expertise belonging to the members of the board of directors for the organization that support the public-benefiting mission of your nonprofit.
  • Current Accounting
  • Last Filed Tax Returns
  • Business Plan/Financial Projections or Budget.

Restricted Contributions

Another area that is important to nonprofit organizations, while rarely affecting for-profit entities, is the reporting of restricted contributions. Even though the amounts of restricted contributions are reported on the nonprofit Form 990 federal tax return, donors will typically require much greater detail about the use of restricted funds. This serves to inform the donor that the conditions of the gift have been, “qualified” charitable deductions, and enables staff to track what funds remain available for the restricted purpose.

We help you manage your restricted contribution reports

Maintaining Tax Exemption

A not-for-profit organization needs to annually disclose to the public that it is fulfilling its community responsibility that was claimed in its IRS tax-exempt application. This evidence can be in the form of tax returns and many times this financial information is required to be disclosed to the public. It is very important for the not-for-profit organizations to keep accurate and up to date bookkeeping records. In addition, not-for-profit tax returns require the filer to answer many questions to prove that it is meeting its community responsibility as well as spending its donations properly.

Our Non Profit Tax Accounting Plans Include:

  • Functional Bookkeeping
  • Not For Profit Tax Returns
  • Not For Profit Tax Consulting

For more information on the requirements to apply and the return of the exemptions see:

  • Form 1023 – Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code and Instructions
  • Form 990 – Return of Organization Exempt from Income Tax and Instructions

Hiring a CPA for Not-For-Profit Organizations

We highly recommend hiring a licensed Certified Public Accountant to take care of your non-profit organization tax filing. To maintain the “qualified” tax exemption status, the tax reporting requirements of a not-for-profit organization is much serious than the requirements of a for-profit organization.

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Give us a Call Today.

Our licensed CPA’s at Rosillo & Associates will gladly assist you in the process.

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