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ExpressTaxExempt Blog

Tuesday, October 17, 2017

Keeping Your Nonprofit in Compliance with the IRS


Nonprofit Compliance Checklist


More often than none, I find myself speaking to the head of an organization whose nonprofit status was revoked. It came as a complete surprise them — he thought the organization was in good standing, but ever since the officer who handled their tax filings left, no one had actually checked.

Unfortunately this isn’t a rare case from my experience. There are many nonprofits who aren’t aware of everything it takes to stay in compliance with IRS requirements — and sooner or later, they get the dreaded “status-revoked” letter in the mail.

If you’re unsure whether your nonprofit is in good standing, you’ve come to the right place.

In this post I’ll cover why compliance is mandatory, the risks of noncompliance, and a comprehensive checklist to ensure your nonprofit stays compliant every year.

Nonprofit compliance laws are put in place to protect the public and ensure nonprofit organizations do not abuse their financial advantages. The ability to be exempt from federal and state taxes, along with having access to public funding, causes nonprofits to be held to a high standard by the government.


Why Do Nonprofits Have to Stay Compliant?

Businessman Reviewing Areas of Compliance
Nonprofit compliance laws are put in place to protect the public and ensure nonprofit organizations do not abuse their financial advantages. The ability to be exempt from federal and state taxes, along with having access to public funding, causes nonprofits to be held to a high standard by the government.

Following these necessary compliances is also a vital component to the success and effectiveness of a nonprofit organization.


The Penalties​ ​of​ ​Noncompliance Aren’t Worth The Risk

Although 501(c)(3) nonprofits receive major financial benefits from becoming an incorporation, the penalties they can receive for not complying are very serious and can become rather costly.



To stay compliant, nonprofits must submit the appropriate tax form for their organization in the Form 990 Series. This form collects information about the income and expenses of an organization as well as other pertinent information. Failure to file this form annually can result in a number of significant penalties, such as:
  • A fine of $20 per day
  • Automatic revocation of 501(c)(3) status if the form is not filed for three consecutive years.
  • States can administratively dissolve a nonprofit corporation and impose high financial penalties. Organizations can also be prevented from receiving grants or large donations.

This Nonprofit​ ​Compliance​ ​Checklist Covers Everything You Need to Know   


In order to avoid noncompliance penalties or revocation of your organization’s tax-exempt status from the IRS, there are several things that must be taken care of annually for your organization.

Here is a checklist of everything you need to do to ensure your nonprofit is compliant with the IRS every year. It’s a good idea to save this checklist for your reference:
  • Gather your organization’s records (financial records, organization information, etc.).
    • You can gather and update your records anytime during the year.
  • Ensure your current tax exempt status is up-to-date.
  • File the Form 990 Series (990-N, 990-EZ, 990 or 990-PF) annually.
  • Review your State Nonprofit Requirements and ensure your registration is updated.
  • Submit an Annual Filing Form to the Corporation Division of the Secretary of State. Depending on your state, filing requirements may differ. Contact your state for details.
  • Register and maintain a License to Fundraise (Charitable Solicitation Registration).
  • Maintain State-Level Tax Exemption with your State Revenue Department.
  • Keep accurate & complete records and also have procedures in place to keep these records updated.
    • Some examples of records to keep include: Contributors Information, Expenses, Grants Written & Received, Accrued Expenses & Revenue, Bank Statements, Cancelled Checks, IRS Letter of Determination, Form SS4, Previous Tax Filings, and Articles of Incorporation  
  • Conduct a Leadership Transition Meeting at the end of each term  

Whether you are a well-established nonprofit organization or simply considering starting one, maintaining compliance with the IRS takes time and hard work. However, the ultimate reward comes from the peace of mind you will experience from never having to worry about losing your organization’s tax exempt status. 

To find detailed information on charity regulations, tax filings and non profit corporation filings for your specific state, click here. Maintaining the necessary compliance of your nonprofit organization requires effort, but can be handled successfully, especially with the help of an IRS-Authorized e-file provider, like ExpressTaxExempt.  
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Tuesday, October 10, 2017

Blessings on Blessings: The 411 on Earnings For Clergy

Clergy.jpg
A familiar passage of scripture found in Luke 6:38 says: “Give, and it shall be given unto you; good measure, pressed down, and shaken together, and running over, shall men give unto your bosom…”

Although financial blessings are greatly appreciated by all mankind, men and women of the cloth should take some precautionary measures when accepting monies for their ministerial services.

Licensed, Commissioned, or Ordained ministers are considered to be common law employees of a church, employed to provide ministerial services.

Some exceptions to this classification are made to those such as traveling evangelists who are self-employed under the common law.

As a minister that performs ministerial services, all earnings, including wages, offerings, and fees received for performing marriages, baptisms funeral, etc., are subject to income tax, whether the amount was earned as an employee or self-employed person. The way you treat these expenses (related to these earnings) differs if you earn the income as an employee or as a self-employed person.

Church Employee vs. Self-Employed

Generally, clergy is considered to be an employee if the church or organization has the legal right to control what the clergy does and how they do it, even if there is considerable discretion and freedom of action provided.

As a minister, if a congregation employs you with a salary, you are generally a common-law employee of the congregation and your salary is considered wages for income tax that can be withheld.

Amounts of money received directly from members of the congregation, including fees for performing marriages, baptisms, or other personal services, are generally earnings from self-employment for income tax purposes.

NOTE: The salary you receive from a congregation and fees received from members of a congregation are subject to self-employment tax.  

Social Security/Medicare


Regardless of a clergy’s status under common law, ministerial services performed by clergy are considered self-employment earnings and are generally subject to self-employment tax.


Deductions

If you plan to itemize your deductions when filing, you may be able to deduct certain unreimbursed business expenses that are related to your services as a common-law employee on Form 1040, Schedule A (Itemized Deductions). Other forms that you could utilize when filing are:
  • Form 2106 (Employee Business Expenses)
  • Form 1040, Schedule C (Profit or Loss From Business - Sole Proprietorship)
    • This form is used if you are reporting self-employment income such as offerings or fees received for performing marriages, baptisms, funerals, etc.)
  • Form 1040, Schedule C-EZ (Net Profit From Business - Sole Proprietorship)

Housing For Clergy

Minister’s who have been provided a parsonage (home) may exclude the fair rental value of the home, including utilities. Please note that the amount excluded cannot be more than reasonable compensation for the minister’s services.

Also, minister’s who receive a housing allowance may exclude the allowance from gross income to the extent that it is used to pay expenses in providing a home. The amount excluded cannot be more than the compensation of the minister’s services.

If a minister owns their own home, deductions can still be claimed for mortgage interest and real property taxes. If the housing allowance exceeds the lesser of the reasonable compensation, the fair rental value of the home, or actual expenses, it must be included in the amount of the excess in income.  

NOTE: The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister. Also, the fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount for self-employment tax purposes.

Exemption from Self-Employment Tax:


Did you know that clergy could request exemption from self-employment tax?
Yes, ministers can request an exemption from self-employment tax for their ministerial earnings, if they are opposed to certain public insurance for religious reasons. Exemption can NOT be requested for economic reasons.

In order to request this exemption, one must file Form 4361 (Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners).  This form must be filed by the due date of the minster’s income tax return (including extensions) for the second tax year that the minister has net earnings from self-employment of at least $400.

Moving Forward

As you continue to do the work of the Lord and make a difference in the lives of others daily, remove the burden of having to figure out how to file your taxes. With ExpressTaxExempt, we provide a simplified e-filing process that will suit all of your filing needs. Visit our website and save even more money when you e-file with our recently reduced filing rates! We’re available to assist you via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com.
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Tuesday, October 3, 2017

Maintaining Exempt Status with Unrelated Business Income

Lady Calculating Unrelated Business Income for taxesWhen filing either a Form 990 or a Form 990-EZ, you’ll have to report any income that was received outside the normal activities of your organization. Even though your organization may be tax-exempt, income from unrelated business activity can be taxed at corporate income tax rates.  
Before discontinuing any activities that could bring in taxed income, you should understand that tax-exempt organizations are allowed to participate in a regulated amount of business activities that are unrelated to its exempt purposes. Unrelated Business Income becomes taxable if it meets the following qualifications:

Income From a Trade or Business:

A trade or business includes any activity done for the creation of income either from selling goods or from the completion of services. Generally, the IRS sees it as any endeavor motivated by making a profit; therefore, unrelated business income tax can be applied broadly and could cover many activities done through your exempt organization.

Trade or Business is Regularly Carried On:


“Regularly carried on” basically means how often and in what method the business is conducted. Even if your activity is not done year round, it could still be considered as “regularly carried on” if the activity is common to the frequency and method of for-profit organizations.

Example: If a for-profit company normally does an activity seasonally, and your exempt organization does that same or similar seasonal activity, then it would be classified as “regularly carried on.” On the other hand, something like a one-time only sale of property wouldn’t fall in this category.

Trade or Business isn’t Substantially Related:


Of course, for any activity to be considered as unrelated business, it must not be substantially related to the main purpose of your exempt organization. Regulations state that business activities must essentially contribute to the execution of your exempt organization’s purpose. If not, it’s considered unrelated, and any income made can be taxed.

As with any other tax stipulations or rules, there are some exceptions and modifications. Contact your local tax professional if you find yourself in an unspecified situation with unrelated business income.



Word to the Wise:


Just because your exempt organization can participate in unrelated business activity doesn’t necessarily mean it always should. As mentioned earlier, authorization of unrelated activities should be limited. If operating an unrelated business becomes the primary purpose of your exempt organization, you would risk losing your tax-exempt status.

Report any Unrelated Business Income through your Form 990 or Form 990-EZ with ExpressTaxExempt. We work closely with the IRS to provide you the most secure, easy, and accurate tax e-filing experience. Our servers are encrypted, McAfee secure certified, and protected by SSL (Secure Sockets Layer). Your information goes directly to the IRS and no one else.

For any assistance or questions about e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9 a.m. to 6 p.m., EST), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).
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Thursday, September 28, 2017

Upcoming Filing Deadline for Exempt Organization Employers



Has your organization employed individuals to help carry out the mission of the group?
Do you or someone you know own and operate a business with employees?
If so, as an employer, it is required that you file Form 941 with the IRS quarterly.

Employers are responsible for withholding federal income tax, social security tax, and Medicare tax from each of their employee’s salary. Form 941, also known as the Employer’s Quarterly Tax Return, is used to report these employment taxes quarterly and assists with calculating the employer’s portion of Social Security and Medicare tax.

Quarterly Filing Deadlines:

Form 941 has a total of four filing deadlines each year. These deadlines are split into first, second, third, and fourth quarters with the following due dates:




Form 941 Quarterly Filing DeadlinesWith only two days left in the month of September, the Third Quarter deadline is right around the corner. Be sure to file your Form 941 no later than October 31 with ExpressTaxFilings.

Filing Process:

Most people think that filing taxes can be a headache and an extremely time consuming process...not with our sister product, ExpressTaxFilings! You will only need two major pieces of information to get started--Employer and Employment Details.


Employer details include the employer’s name, EIN, and address; while employment details include the following:
  • Employee Count
  • Medicare Tax & Social Security
  • Deposit Made to the IRS
  • Tax Liability (Monthly/Semiweekly)
  • Signing Authority Information
  • Online Signature PIN or Form 8453-EMP

Once that is entered all you will need to do is review the completed form, pay a small, affordable price per form, and transmit directly to the IRS. And just like that, you’ve avoided IRS penalties and compliance issues.

Well, since we said the word ‘penalties’ let’s just go ahead and discuss it briefly so you know what you’re avoiding when filing with us.

Form 941 IRS Penalties:

Failure to file by the Form 941 deadline will result in a 5% penalty on the tax return for each month that the return is late. Although this penalty cpas at 25%, the IRS will penalize you heavily for late payment or not paying the full amount owed. Your organization will be charged 2-15% of the unpaid tax determined by the number of days it remains unpaid.

NOTE: Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability.

Next Steps:

Out of the many components to running your organization, one of the most important is staying in compliance with the IRS. ExpressTaxFilings, sister product to ExpressTaxExempt, is an industry leader for online tax preparation and tax filings which offers accurate and efficient e-filing at prices that can’t be beaten! Visit their website today to find out more information about Form 941 and the other services that ExpressTaxFilings offer.

As always, we at ExpressTaxExempt aim to help all exempt organizations and hope that your organization can benefit from both of our services. If you need any assistance with filing, just know that we’re available to assist you via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com.

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Friday, September 22, 2017

America's Got Talent....And So Does Your Organization!

Little Girl Performing at Talent ShowIf you’re a fan of the hit televised talent showcase “America’s Got Talent,” also known as “AGT,” your eyes may have been glued to the TV Wednesday night during the show’s season finale.

Out of the various stellar performances by the final round of contestants on the summer’s most-watched series, there is one in particular that’s receiving a lot of buzz.


Country superstar Shania Twain joined America’s Got Talent finalist Mandy Harvey for an emotional duet of Twain’s 1998 hit song, “You’re Still the One.” Harvey, who ended the show in fourth place, has been deaf for the last decade but continuously “wowed” the judges and viewers throughout the AGT season.


Although the latest season of AGT has come to an end, that doesn’t mean that talent showcases around the world have to cease too. Besides, there’s probably tons of talent within your nonprofit organization that can be showcased!


Talent Show Fundraiser

An easy way to highlight the talents of your organization’s members, their children, friends, and those in your community, is by hosting a talent show; which can also be a great fundraising event as well!


Simply form a talent show committee within your organization that will audition contestants, select judges, and plan the format of the event. Once the event is planned, decide on an admission fee (this can be as low or as high as you’d like), have a flyer designed, and promote your event locally and through social media.

Social Media Integration

A neat way to add a special touch to your event is by creating a Snapchat Geofilter. Geofilters are creative overlays that capture where you are or what you’re up to in a Snap. Create your own and surprise Snapchatters in the location you choose.

Also, hashtags can be used for sites such as Facebook, Twitter, and Instagram as well (ex: #PantherIdol #CMHSGotTalent, etc) to inform others of your fundraising initiatives.

The Grand Finale

Whether it’s a spin-off of America’s Got Talent, American Idol, or even a religiously based version like Sunday’s Best, talent shows are a simple, easy, and fun way to raise funds while having a great time enjoying the various acts. You’d be surprised at how many singers, musicians, dancers, comedians and ventriloquists that are in your area.

When planning and hosting your event, be sure to keep track of any receipts, expenses, and funds collected throughout the process so you have accurate records when you e-file with ExpressTaxExempt to maintain your tax exempt status with the IRS. Visit our website for any tax forms that your tax exempt organization may need throughout this year and save even more when you e-file with our recently reduced filing rates! We’re available to assist you via phone at 704.839.2321 on Monday through Friday from 9 a.m. to 6 p.m. EST or reach out to us 24/7 via email at support@ExpressTaxExempt.com.

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Wednesday, September 20, 2017

Tax Exempt Organizations and Nonprofits: Are They The Same Thing?


Nonprofit vs. Tax Exempt | They’re the same thing, right? Or are they different? Hmm...

Often times the terms “nonprofit” and “tax exempt” are used interchangeably in conversation. While tax exempt status is conferred and determined by the IRS.
Many organizations are both nonprofit and tax exempt, there is an important distinction between the two. For example, nonprofit status is designated by the state while

Here’s a more detailed explanation on nonprofits and tax exempt organizations:

What is required for an organization to be considered a nonprofit?

According to the IRS, nonprofit status is a state law concept; meaning that an organization must apply for and receive nonprofit recognition from the state in which it does business. 

Once an organization has become a nonprofit it receives benefits, determined by its state, which includes exemption from property taxes, state and local income taxes, franchise taxes, and sales taxes for that state specifically. 

Misconception of Nonprofit Organizations

One of the main misconceptions of nonprofit organizations is that these groups are NOT allowed to make any profits throughout their calendar year. In all actuality, nonprofits usually have to turn a regular profit in order to function and operate effectively. Things such as facility upkeep and equipment purchases or repairs, require additional funds that go far beyond their annual expenses. 

As a nonprofit organization, these groups are allowed to receive funds, but any surplus of profit cannot be distributed to an organization’s members, employees, officers, or shareholders, and must be used within the organization to further the mission and goals of the nonprofit. 

How does an organization receive Tax Exempt Status?

An organization who has been granted tax exempt status must have received this recognition from the federal government. Being tax exempt essentially boils down to these two things:

1) The organization does NOT have to pay corporate income taxes on any money generated from the organization 

2) Those who donate money to the [tax exempt] organization can use a tax deduction for their donations when filing their taxes. 

Although most believe that many nonprofits automatically have a tax exempt status, they must apply for tax exempt status separately. The requirements for acquiring tax exempt status can be found in Section 501(c)(3) of the Internal Revenue Code. Generally, the main requirement to have tax exempt status is that the organization must be organized and operated specifically for charitable, religious, educational, cultural, scientific or humanitarian purposes. 

What does it mean to be tax exempt?

Sounds like a self-explanatory question right? Unfortunately, most misconceive the tax exempt reality. Organizations that are tax exempt technically aren’t completely exempt from tax. 

Although exempt organizations are not required to pay federal income tax, they are still subject to state and local taxes unless there’s a nonprofit designation which exempts them from those payments. 

Additionally, most exempt groups have to pay the employer’s share of their workers’ Medicare & Social Security taxes along with federal unemployment taxes. 

Maintaining Your Tax Exempt Status

As a nonprofit organization, it is crucial that you maintain your tax-exempt status with the IRS. ExpressTaxExempt, the #1 IRS-authorized tax e-filing solution for tax-exempt organizations, allows you to do just that. Providing security, ease, and peace of mind to organizations and its leaders, we respect the services that nonprofit organizations give to communities and are motivated to help with e-filing so you can get back to proudly making a difference in your community. With newly reduced rates, organizations can now save funds annually when e-filing Form 990 Series (Form 990, 990-EZ, 990-PF, 990-N, and Form 1120-POL). Pay us a visit at www.expresstaxexempt.com today and begin your e-filing process. 


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Thursday, September 14, 2017

Is My 990 Information Return Due on September 15th?

Does your organization operate on a fiscal tax year instead of a calendar tax year? Are you unsure of what the difference is between the two? Well let’s find out right now!

If your organization operates from January 1 to December 31 it is considered to have a calendar tax year with a standard tax filing deadline each year. Organizations that function for 12 consecutive months but end on any month besides December are operated as a fiscal tax year. 

Tax exempt organizations that operate on a fiscal tax year and function from May 1 to April 30 have a tax filing deadline this Friday, September 15th to file their 990 Information Returns. 

Form 990 is considered to be the Return of Organization Exempt From Income Tax form which many tax exempt organizations such as religious groups, educational groups, charities, and other nonprofit groups are required to file each year to provide the public with financial information about their organization. 

Forms included in the Form 990 Series are Form 990, 990-EZ, 990-PF, and 990-N. Form 1120-POL, the newest ExpressTaxExempt tax form, is specifically designed for political organization tax filing. The appropriate form that your organization should file will be dependent upon the amount of gross receipts that it accumulates throughout its accounting period (tax year). 

To find out which tax form your organization should e-file, click here.

Is your nonprofit's tax return due tomorrow (September 15)?

 

No need to worry or stress out! Our user-friendly tax filing software makes your e-filing experience very simple and easy to complete. Simply go to ExpressTaxExempt to begin filing or if you need some extra time to gather all of your information, quickly file a Form 8868 for a Form 990 Extension to avoid penalties and receive an additional 6 months of filing time for your tax exempt organization. 

Operating your nonprofit organization without tax-exempt status can be extremely challenging and quite difficult. Eliminate the worry and concern of losing your tax status or even regain tax-exempt status by filing your Form 990 series returns with us at ExpressTaxExempt. With affordable pricing and a safe, secure and easy-to-use e-filing system, organizations can quickly and accurately file their forms directly to the IRS. Need help during the filing process? No worries. We’re always here to help! Feel free to contact our support team of e-file experts at 704.839.2321 for any questions or help with the e-filing experience. We’re here to assist you Monday through Friday from 9 a.m. to 6 p.m. EST or feel free to reach us 24/7 via email at support@ExpressTaxExempt.com.

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Frequently Asked Questions

Find answers related to e-filing IRS Form 990, 990-EZ, 990-PF, 990-N (e-Postcard), Form 1120-POL and Extension Form 8868 with our Frequently Asked Questions.

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