Every Nonprofit's Tax Guide

How to Keep Your Tax-Exempt Status & Avoid IRS Problems

A step-by-step resource

November 2011, 2nd Edition

Keep your nonprofit's tax-exempt status and stay out of IRS trouble with this comprehensive tax guide. This practical, thorough, and easy-to-read book explains both ongoing and annual compliance requirements for nonprofits, including:

rules for charitable giving and cash donations
Form 990
annual IRS filings and disclosures

See below for a full product description.

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Tax rules for your nonprofit -- stay legal and keep the IRS off your back

Your nonprofit enjoys special privileges not available to other organizations -- but they come at a price. Nonprofits must comply with rules and regulations that don't apply to for-profit ventures. Every Nonprofit's Tax Guide explains these rules and what your nonprofit must do to maintain your tax-exempt status and avoid problems with the IRS.

This practical, thorough, and easy-to-read book explains both ongoing and annual compliance requirements for nonprofits, including:

rules for charitable giving and cash donations
Form 990
unrelated taxable business income
annual IRS filings and disclosures
property donations
bookkeeping basics
working with independent contractors and volunteers
restrictions on lobbying and political activities

Plus, the book also includes a chapter on the types of transactions that can get your nonprofit in hot water with the IRS.

ISBN 9781413316377

Pages 472 pp

1. Nonprofits and the IRS

What Do We Mean When We Say “Nonprofit”?
The Life Cycle of a Nonprofit
Ongoing Compliance
IRS Audits

2. Annual IRS Filings—The Form 990

The Nuts and Bolts of the Filing Process
The 990-N Postcard Filing—As Simple as It Gets
Form 990-EZ: The E-Z Way Out
The New Form 990: Just Hold Your Nose and File It
Letting the Public See Your Report Card: Disclosure of Form 990
Notifying the IRS If You Terminate, Merge, or Contract Your Nonprofit

3. Record Keeping and Accounting

Why Keep Financial Records?
What Does the IRS Require?
Do You Need an Independent Audit?
Minding the GAAP

4. Volunteers, Employees, and Independent Contractors

Volunteers—The Backbone Workforce of Nonprofits
Reimbursing Your Volunteers—Know the Rules
Unreimbursed Volunteer Expenses
Benefits and Freebies—How to Show Your Appreciation Tax Free
Paid Help: Employees and Independent Contractors
Hiring Independent Contractors
Hiring Employees

5. Charitable Giving—The Basics and Cash Donations

Your Role as a Nonprofit
Threshold Requirements for Deducting Donations
Annual Limits on Charitable Deductions
What Can a Donor Contribute?
When Is a Contribution Made for Tax Purposes?
Special Gifts—Earmarked, Restricted, and Conditional
If Your Nonprofit Provides Goods or Services
Cash Contributions
Cash Gifts From IRAs
Interest-Free Loans
Quid Pro Quo Contributions
Charity Auctions

6. Property Donations

Annual Deduction Limit for Property Donations
Valuing Property Donations—An Art, Not a Science
Different Types of Property Donations
Documenting Property Donations

7. Excessive Compensation, Sweetheart Deals, and Other Ways to Get in Trouble With the IRS

A Nonprofit Is Not a Personal Piggy-Bank
The IRS Intermediate Sanctions Minefield
Transactions With Disqualified Persons—How to Avoid Problems With the IRS
Excessive Compensation for Services: The Most Common Excess Benefit
Correcting and Reporting Excess Benefit Transactions
The IRS’s Sentence of Death: Revocation of Tax-Exempt Status

8. Nonprofits That Make Money and UBIT

What Is UBIT?
Activities Exempt From UBIT
Do You Owe UBIT?
Filing UBIT Tax Returns

9. Lobbying and Political Campaign Activities

Lobbying by Nonprofits—What’s Allowed and What’s Not
Political Campaign Activities—An Absolute Ban
Getting Around the Restrictions

10. Help Beyond This Book

Help From the IRS
Other Helpful Publications and Websites
Researching the Tax Law
Consulting a Tax Professional

Appendix: Forms

IRS Form 990-EZ
Sample Conflict of Interest Policy (from IRS Form 1023, Appendix A, With Annual Conflict of Interest
Acknowledgment Statement)
Rebuttable Presumption Checklist
Family and Business Relationship Questionnaire
Expense Report

Index

Forms

IRS Form 990-EZ
Sample Conflict of Interest Policy (from IRS Form 1023, Appendix A, With Annual Conflict of Interest Acknowledgment Statement)
Rebuttable Presumption Checklist
Family and Business Relationship Questionnaire
Expense Report

Free Chapters

Introduction

Intro

This book is for you if you have a nonprofit that is up and running, whether it’s been one day or one decade. You have dealt with the IRS already because you have your tax-exempt status. Now you’re wondering: “what else does the IRS have in store for me and my nonprofit?” The answer is: “a lot.”

Your nonprofit’s relationship with the IRS doesn’t end when you receive a determination letter recognizing your organization’s tax-exempt status. Indeed, that’s only the beginning. Until your organization ceases to exist, the IRS will continue to oversee its compliance with the myriad of complex tax laws and regulations governing nonprofits. Dealing with the IRS and its rules is the price all nonprofits pay in return for the substantial tax benefits they receive.

Failure to comply with these laws can lead to dire consequences— revocation of your tax-exempt status or the imposition of taxes and penalties on your nonprofit, or, in some cases, your officers, directors, or employees personally. In the past, the IRS was relatively lax about performing its duties of monitoring and enforcing nonprofit compliance with tax rules. However, this is changing. In response to widespread publicity about abuses by nonprofits and Congressional calls for better enforcement, the IRS has taken several steps to more closely monitor nonprofits. These include more audits, requiring all nonprofits to file annual notices with the IRS, and substantially revising and beefing up the annual information return filed by larger nonprofits—the IRS Form 990. As a result, nonprofits need to take ongoing compliance with IRS rules and regulations more seriously than ever before.

In this era of fewer donations and grants and reductions in nonprofit staffing, the last thing a nonprofit wants to do is pay a lot of money to an outside accountant or lawyer to deal with IRS compliance issues. Fortunately, you can handle all or most of these compliance tasks yourself or with minimal help. This book is designed to show you how to do just that. It contains step-by-step guidance on:

how to file annual information returns with the IRS
what types of books and records your nonprofit is required to keep
how to classify workers as employees or independent contractors and deal with employment taxes
how to comply with the tax laws governing the use of volunteers
tax rules regarding the deductibility of charitable contributions
tax rules requiring nonprofits to provide written substantiation for many contributions
how to avoid imposition of taxes or penalties by the IRS due to conflicts of interest, payment of excessive compensation, insider transactions, and other prohibited behavior
how to avoid having to pay taxes on side businesses your nonprofit conducts to earn extra income
what types of lobbying are and are not allowed, and
how to avoid running afoul of the prohibition on political activity.

Running a nonprofit is difficult enough these days without having to worry about the IRS looking over your shoulder. Hopefully, this book will serve as a trusted resource you can turn to whenever you have a question about IRS rules or nonprofit compliance issues.

Tip TIP: What this book is not. This book is not about how to form a nonprofit corporation or apply for IRS recognition of your nonprofit’s taxexempt status. For guidance on these tasks, refer to How to Form a Nonprofit Corporation, by Anthony Mancuso (Nolo). Also, this book has been written primarily for Section 501(c)(3) organizations that qualify as public charities. Thus, it does not cover the special tax rules applicable to private foundations. Moreover, while much of the material here is applicable to nonprofits other than Section 501(c)(3) organizations, this book has not been written with such organizations in mind.