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Tax

Five Tips for Accurate Form 990 Reporting and Filing

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One of the most important financial filings nonprofit organizations must complete annually is IRS Form 990. For smaller nonprofits, this form may be the only action it takes each year to provide comprehensive financial information to the public and other organizations, such as grantors or charity watchdogs.

According to the Journal of Accountancy, Form 990 is one of the more challenging IRS forms. It’s complex, lengthy, and intimidating. The following tips may make reporting on 990 easier for your organization.

Which Version Should You File?

As with the personal income tax form 1040, there is an “EZ” version and a standard version. Nonprofits with gross receipts of less than $50,000 may wish to consider completing the EZ version. It’s always a good idea to meet with your accountant or with Welter Consulting to discuss which form may suit your nonprofit better and the advantages and disadvantages of each.

If your organization earns gross receipts between $50,000 and $200,000, you can choose between 990 EZ and 990. Any organization earning more than $200,000 should complete the standard 990. Private foundations, regardless of income status, must complete 990-PF.

Prepare for Filing

Gather your financial information, calculator, pens, paper, and records before sitting down to work on your 990. Some like to print a paper copy of the form and use it as a draft version. Once they are satisfied they have completed the form, they can then transfer it to the online filing system.

If you are using a not-for-profit accounting system such as Abila MIP Fund Accounting, it is easy to review the financial information needed for form 990. Others still using spreadsheets or general small business accounting software may need more time to review the numbers, find all the information, and prepare their report.

5 Tips for IRS Form 990

As you work on form 990, keep the following in mind:

  1. Do not include unnecessary personal information: Form 990 is made public and often shared with other organizations. Including personally-identifying information should be avoided as much as possible. In today’s world, with rampant identity theft, thieves find information through many sources, including published data. Don’t make their job any easier than it already is – do not disclose anything other than what is required.
  2. Complete parts I through XII: You can’t skip any parts between I and XII if you are filling out form 990 standard. Some mistakenly believe sections do not apply to their organization, but the IRS requires completion of the entire form.
  3. Include required schedules: After completing Part IV, you will have a list of all required schedules for your form. The IRS recommends double-checking the schedules to ensure they are complete. Be sure to include “0” on lines without an entry and answer “yes” or “no” to each question as required.
  4. Complete Schedule A: Speaking of Schedules, all 501(c) 3 organizations should complete Schedule A. Organizations with a designation of 4947(a) should also complete Schedule A. Failing to complete this schedule can result in penalties.
  5. Sign the return: You’d be surprised at how often people forget this simple step. Sign, date, and file the return!

Although no one enjoys completing IRS forms, they are necessary to ensure all financial information is reported accurately and promptly to the government.  Nonprofits must adhere to IRS reporting guidelines or run the risk of losing their tax-exempt status. By completing Form 990 promptly and thoroughly, you’ll rest easy knowing it’s done for the year and have a valuable document demonstrating your organization’s financial status.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

What the Tax Cuts and Jobs Act Means to Your Nonprofit

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President Donald Trump signed the new Tax Cuts and Jobs Act into law on December 22, 2017, that went into effect January 1, 2018. The provisions of the act impact individuals, businesses, corporations, and nonprofits, with certain provisions having moderate to significant impact on nonprofits.

Major Changes to Taxes, Summarized

Clearly, a detailed analysis of the implications of all that is contained within the new law is outside the scope of this article. However, there are major points which are important for all to note. These include:

  1. All the changes that affect individuals expire in 2025.
  2. New tax tables and rates are in effect from 2018 through 2025.
  3. The system for taxing capital gains and qualified dividends did not change under the act, except that the income levels at which the 15% and 20% rates apply were altered (and will be adjusted for inflation after 2018).
  4. During 2018 the 15% rate will start at $77,200 for married taxpayers filing jointly, $51,700 for heads of household, and $38,600 for other individuals. The 20% rate will start at $479,000 for married taxpayers filing jointly, $452,400 for heads of household, and $425,800 for other
  5. The standard deduction increased through 2025 for individual taxpayers to $24,000 for married taxpayers filing jointly, $18,000 for heads of household, and $12,000 for all other individuals. The additional standard deduction for elderly and blind taxpayers was not changed by the
  6. The act repealed all personal exemptionsthrough 2025. The withholding rules will be modified to reflect the fact that individuals can no longer claim personal

For a complete breakdown of the act’s changes, see this document from the National Association of Tax Professionals.

Changes to Charitable Contributions

The good news for nonprofits is that the act increased the income-based percentages limit for charitable contributions of cash to public charities to 60%. The act repealed  a prior-law provision that had never been put in effect because regulations were never issued. The provision that provides an exception to the contemporaneously written acknowledgment requirement for certain contributions that are reported on the organization’s return.

With the news that the act increased income-based percentages limits for contributions of cash, now might be a great time to increase your donor outreach and relations programs. Although tax savings may be a small incentive to donors in the bigger scheme of things, with items such as mission and services more important to donors, it may incentivize donors who are on the fence about giving to your organization.

Remember that any changes in the tax laws impact disposable income for consumers. These changes may make potential donors feel more inclined to give, as a little extra cash hits their paychecks and wallets. This also underscores that now is the right time to increase donor relations programs.

Are further changes expected? The Tax Cuts and Job Acts was a major move by the Trump Administration and a sign of their intention to keep campaign promises. It is unknown what further actions the President may take especially as they pertain to nonprofits and charities. However, given that these changes will be in effect until 2025, it is certain that nonprofits can move forward at least for the next several years with a better understanding of the current taxation situation.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.