If you are starting a nonprofit corporation, there will be many details that require your attention. Many of these are related to your financial and tax situations, so it's important to get on the right page from the start.
Many people assume that they can start a nonprofit corporation, collect donations, and not pay any taxes. While you may be right, it's imperative that you have a clear understanding of how donations come into play.
Here are some of the many questions to address with respect to donations:
- What requirements are in place for acknowledging the receipt of charitable contributions?
- What type of system do you need to have in place in order to collect donations and keep them separate from other nonprofit financials?
- Do you have to pay taxes on any donations that you receive?
- What should you include in a document to acknowledge a charitable contribution?
If you neglect to address these questions as you start a nonprofit corporation, you could soon find that you don't know what you should and should not be doing from a financial perspective. This may not appear to be a big deal, but keep this in mind: The IRS is watching every move that you make, just the same as for profit companies.
If you own a nonprofit corporation and are part of a tax audit, you don't have any time to waste. You need to learn more about the audit, including what the IRS is looking into. This will give you a better idea of the steps to take.
There are things you can do to prevent a nonprofit corporation tax audit, such as answering the questions above regarding donations, but there is no guarantee this will never come into play.