The West Suburban Philanthropic Network invited Cray Kaiser to help their members understand the complicated forms and tools, best practices and potential pitfalls of tax compliance and accounting specific to their 501 c3 organizations. Having a better awareness of these issues helps these group members acquire and maintain their nonprofit status so they can meet the charitable goals of their organizations.
Amy Langfelder, CPA, and Eric Challenger, CPA, provided answers to questions from this group of executive directors and other team members employed by nonprofit organizations in the DuPage County area.
Key take-aways from the presentation included:
- Proper 501 c3 registration is difficult to achieve and confirm. Many organizations operate under the belief that they’ve registered and later learn that their application was incomplete or had errors and that the funds they have collected are now taxable.
- A thorough understanding of grant agreements can reveal additional grant money that may be available.
- Grant money that philanthropic groups depend on to run their organizations require full compliance and can be recalled if grant agreements are not met.
- Both financial statements and Form 990 (a tax form required for 501 c3 organizations) serve more than just tax purposes. Potential donors review these documents when making donation decisions. Understanding the marketing potential of these tools helps organizations increase funding.
Eric: “The 990 is like your resume for big donors.”
- Managing accounting and tax compliance year-round, assigning one person to handle accounting, and creating accounting policies and processes helps organizations avoid audit and tax issues and prevents loss of grant money.
- Achieving a 501 c3 status does not ensure that all income brought in by the organization is tax-free. Income sources are taxed differently regardless of nonprofit status.
Understanding tax compliance and accounting tools, best practices, and potential hazards helps philanthropic organizations like the participants of the West Suburban Philanthropic Network secure and retain the income needed to run their organizations. Cray Kaiser is proud to have helped educate those who do so much for our community.