If you own a nonprofit organization, it’s imperative that you’re informed on your tax-exempt status and what it means. This is important for the health of your organization, as well as the finances of your dedicated volunteers. If you’re new to the nonprofit world, you may benefit from these crucial tax tips from your small business accountant in Gilbert.

Educate Your Volunteers on Deductions

For individuals who are kind enough to volunteer their time, you want to make sure that they are not paying unnecessary expenses. There are many expenses that are tax deductible, including:

• Transportation expenses. It’s possible for a variety of expenses to be deducted, including gas, oil changes, or mileage at a rate of 14 cents per mile. If volunteers travel for your charitable organization, they may be able to deduct transportation expenses.
• Travel expenses. If your volunteers ever have to fly somewhere for you, or have to pay for accommodations or food while traveling, they can deduct these expenses.
• Out-of-pocket expenses. Out-of-pocket expenses that are necessary for their volunteer work are also tax deductible.

Know When to Acknowledge Charitable Donations

If a donor gives more than $250, than their donation needs to be acknowledged in writing. This should be done by giving them a receipt and a “thank you” letter. Be explicit about the donation amount, the date it was received, acknowledgement of your tax-exempt status, and clarification of whether or not a gift was given in exchange for the donation.

In the case that a gift was given in acknowledgement of the donation, it must follow certain IRS rules to ensure no laws are broken. Familiarize yourself with these laws to ensure that your donor base doesn’t run into issues with the IRS.

Document All Donations and Expenses

In the event that you are audited, you need to make sure that all your ducks are in a row. This means you should record every expense and that you practice good accounting habits, as this can make or break your nonprofit organization. The last thing you want is to be audited by the IRS without anything to show them.

Seek Professional Help

All this is to say that nonprofit taxes can be complex. For the financial health of your organization, it’s best to leave taxes up to the professionals. When you’re first starting a nonprofit, it may be tempting to try your hand at accounting. But chances are, you aren’t a tax expert. Consulting an outside tax professional is advisable because they know how to get the most out of your tax-exempt status and how to best maintain it.

You want to make sure to do right by your organization, so ensuring the financial health of your organization is imperative. Contact BASC Enterprise for a small business accountant in Gilbert.