Your Taxes: Nonprofit need-to-knows |

Your Taxes: Nonprofit need-to-knows

Michele Knight, CPA

As a resident of Summit County, I continue to be awestruck by the generous people who live here and their willingness to share both their money and time. I witness this each week as a member of the Rotary Club of Summit County, and I’m sure the other hundreds of nonprofits in the area feel the same way about their members and donors. Whether you support a cause financially or serve as a board member or employee, reporting requirements have changed recently, and it benefits you to read on and see why and how these affect you!Let me start out by saying that there is a huge discrepancy between IRS reporting requirements for nonprofits versus profit-seeking businesses. A corporation files a four-page tax return, while the nonprofit 990 return has grown to a whopping 26 pages! Likewise, privately held businesses can keep their financial position private, while nonprofits must publish their tax returns each year. While I do see this as a benefit for donors who want full-disclosure regarding their contributions (visit if you want to look up a Colorado-based nonprofit), it is still a discrepancy that even the smallest nonprofit must deal with. I often come across small nonprofits who don’t think the requirements apply to them, but that is far from the truth.Why do nonprofits need to worry so much about compliance? Almost every entity is required to file a tax return each year, but nonprofits face a harsher penalty than others. Failure to file a return means they may lose their tax-exempt status. If that happens, donations are no longer tax deductible, taxes must be paid on income, and the organization would no longer be eligible for many grants they would otherwise qualify for. A recent push by the IRS gave nonprofits a chance to renew their status by filing all past due returns, but the window is closing and many organizations are at risk of losing their tax exempt status. The IRS has published this list at In Summit County alone, there are 34 nonprofits in jeopardy of losing their status, and this affects anyone who donates money to those organizations, as those donations are no longer tax deductible.If you serve on the board of a nonprofit organization, there are a few basics that you should know to help your organization stay in compliance. While the tax filings are most likely done by a CPA or attorney, board members should still take the initiative to review the returns for reasonableness and bring up any concerns. The new 990 form asks nonprofits if they have various policies in place, such as a whistleblower policy, a gift-acceptance policy and a document-retention policy. If you see the tax preparer has checked “yes” to these questions, but if you are a board member or employee and aren’t aware of what those policies are or where to find them, it’d be wise to ask the question and verify that the organization truly has best-practice policies in place.In addition to simply complying with the laws, nonprofits who keep clean books and records and practice sound fiscal management may find an added benefit: donors are more willing to donate when they feel their money is in good hands! So, consider it an investment in the cause you are supporting and take the time to help make sure they are on the right track!Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. Please visit

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