If you are part of a non-profit organization, it's imperative to have a clear understanding of your tax situation.
When it comes to matters of accounting, there are things you should and shouldn't be doing. Unfortunately, it only takes one mistake to cause serious trouble, such as losing your status as a non-profit organization.
Here are a few non-profit accounting and tax mistakes to avoid at all costs:
- Neglecting to implement a formal accounting process
- Relying too heavily on accounting software
- Failing to take into consideration unrelated business income
- Classifying workers as independent contractors as opposed to employees
- Assuming that a non-profit organization is taxed in the same manner as a traditional company
These are the types of non-profit accounting and tax mistakes that could put your organization in a difficult spot in the future.
If you're concerned about these, here are some of the many questions to address:
- Do you understand your current non-profit status and what this means from a tax perspective?
- Does it make sense to consult with a tax professional regarding your status?
- Have you made any non-profit accounting or tax mistakes in the past?
- What system do you have in place for avoiding mistakes in the future?
- Are there any types of professionals who can provide assistance?
Non-profit companies need to have a solid grasp of the accounting and tax practices that govern their organization. Without this knowledge, it's easy to make mistakes that can lead to trouble with the IRS.
If your non-profit receives a letter from the IRS, such as one regarding an audit, you need to read it from start to finish to fully understand what's going on. From there, you can learn more about your legal rights, collect information regarding the audit and do whatever you can to put this in the past as quickly as possible. Taking immediate action can be the difference between solving your problem and letting it linger.