5 Tax Season Tips For Nonprofit Organizations
For majority of people, there is usually a better way to do taxes to make it more efficient and maximize benefits. If you are a nonprofit organization, there are several tricks you can use to your advantage. Here are 5 tips you can use for tax season.
5. Inform your volunteers about what they can deduct
Volunteering is a great way to give back. But it can cost volunteers more than their time. Here are what volunteers can list down as tax deductible:
Transportation expenses are deductible. These include gas used, oil changes, and even mileage at a rate of 14 cents for each mile traveled while doing charity work. If you can calculate the wear and tear your car goes through while you are volunteering, then this can also be included as deductible.
Travel expenses are also deductible. If your volunteers need to fly or buy food while doing their volunteer work, these can be deducted from taxes. Accommodations will also be covered and can be deducted from taxes.
All office supplies used while volunteering will also be considered tax deductible. This can include phone usage and also uniforms.
Speak to your licensed EA or CPA tax preparation firm about all your expenses to see if they can be deducted.
4. Acknowledge donations
While small donations do not need to be acknowledged in writing, bigger donations usually need a written acknowledgment for tax purposes. Amounts up to $250 will require some form of receipt and/or a thank you note.
The note or receipt has to include certain details such as the amount donated, the date the donation was made, details to ascertain your status as a tax exempt organization, and statements to clarify if a gift was given in return for the donation. For more information, see your state’s laws and regulations relating to quid pro quo.
3. Keep a record of all expenses and donations
This is for your own protection in case you are ever audited. You are in big trouble if you are audited and are not able to account for all your expenses. Make sure everything is recorded and have backups of your records. Your records need to be organized and accessible or you risk losing your tax status as a nonprofit.
2. Include any money you raised through crowdfunding
Money raised through crowdfunding will likely be subject to donation tax laws. Take note of the size of the donation and if anything was given in return for that donation. It’s always better to be cautious and report everything. Especially if you are a nonprofit organization.
1. Get professionals to help
This is especially important if you are a nonprofit organization. No matter how small your nonprofit organization is, resist the urge to handle your taxes on your own. There are different rules to follow for nonprofit organizations and you need to follow all of it if you want to keep your tax exempt status. You’ll also want to maximize your tax exempt status and the best way to do that is to get local tax professionals to help you file your taxes.