Every Nonprofit's Tax Guide: How to Keep Your Tax-Exempt Status & Avoid IRS Problems Paperback – Dec 2009
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This book is designed for them, for anyone in a tax-exempt who doesn't have access to competent legal advice on their IRS Code Section 501(C)(3) tax-exempt status. It is, in a very general way, a lawyer in a book.
Attorney Stephen Fishman provides in very clear language guidance on every aspect of maintaining your Section 501(c)(3) status. He avoids convoluted legal language and uses plain English (bless him!). He begins with the Form 990 which is a disclosure of the tax-exempt nonprofits finances and is publicly accessible. He covers the importance of accounting and record keeping - something that often goes undone in volunteer organizations.
He helps the uninitiated distinguish between employees, volunteers and independent contractors. These distinctions are very important. Fail to withhold and pay employment taxes and the IRS doesn't care who you are or what you did, they go after you.
Next he moves on to contributions of goods, cash and services and how to deal with them. This is a crucially important subject.
Lots of Section 501(c)(3) raise lots of money and pay their executives very, very well. What's to stop an a aggressive fundraiser from setting up a tax-exempt and paying themselves huge salaries? Not much really, but Fishman does point out how to get caught and what happens when you do.
UBIT stands for Unrelated Business Income Tax. At one time, a tax-exempt could engage in a business and not pay taxes on the revenue. Not so much any more.
Finally, Fishman distinguishes between permissible lobbying activities and the forbidden political campaign activities.
This is a well-written, thorough examination of tax issues relating to Section 501(c)(3) tax-exempt nonprofit organizations. Even though the subject is narrow, the book still runs to almost 450 pages. Fishman and Nolo have done a good job here and anyone who volunteers or works for a small or medium-sized tax-exempt that doesn't have full access to specialist legal or accounting tax advice will do well to purchase, read and continually consult this book.
I've been informed by my attorney that when nonprofits first start, that they oftentimes end up having to close because they don't completely understand everything that's required to maintain their tax status. One example is that you can't become politically involved. Also, you need to start showing a certain percentage of donations within a certain time frame for your new nonprofit. Many, many other things too. This is an absolute must-read for key nonprofit individuals that are in leadership positions. The IRS doesn't allow ignorance to be an excuse, so you're going to need to get educated. And, if you're a nonprofit, you probably don't have, or want, to spend a lot of your money talking to someone when you can get much of the same information in a book. Of course we can't know all the information by heart, but a good foundation of knowledge will set you up for success.
Due to the exploits of some badly managed organizations, it seems like IRS has become much stricter on the review of 501(c) filings. You need to handle everything from donations, to travel refunds; from volunteer works, to paying for your employees (ours has only volunteers, even then there is a lot to file).
The book covers all these areas, that you know, and you probably do not know, in great detail, and easily followed language. It starts with a general overview of various non-profit organizations (public charities, private charities, schools, churches, etc), and then goes into describing every aspect of your IRS related paperwork: yearly 990 forms, public disclosures of them, board meeting minutes, volunteer work, expenses, and so on.
If you participate in, or manage a non-profit, this is a definite must have resource. Even if you have a professional handle your paperwork, it will allow you to keep everything in check (we have been burned by this in one occasion).
Expertly organized, with an excellent search index and sample forms, this reference tells staff members, in plain English text, what pitfalls to avoid and also what to DO for the long-term betterment of the organization and its goals.
Highly recommended. I keep it at hand and refer to it regularly.
Here are some example of the valuable information in this book (which I didn't know before reading this book):
1. How to create your legal entity and obtain tax-exempt status.
2. What do we mean when we say "Nonprofit"?
3. Explains nonprofit tax regulations and how to maintain nonprofit status (what Tax forms needs to be filed, detail filing process and the new form 990, etc)
4. What to do when someone try to harras you/your nonprofit?
5. GAAP rules and accounting method (cash, accrual, hybrid etc)
6. Detail charitable giving rules (e.g. If donation to a nonprofit is conditioned/earmarked for a particular person or small group of people, then the gift is not tax deductible for the donor, though the organization can still accept the donation. Rules on quid pro quo donation, etc)
7. Who should worry about UBIT? (i.e. tax imposed on income earned by nonprofits from business they conduct that are unrelated to their charitable mission)
8. What are prohibitive activities? (e.g. political campaign activities, endorsing candidate for public office, contributing money to political campaign, etc)
9. Which organization usually gets audited?
10. How to set your organization general ledger (asset, liabilities, net asset, income, expense)
11. Rules on paying and reimbursing employees and volunteers (e.g. value of time and services donated is never deductible, etc)
12. Rules on hiring employees and independent contractors
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