Utility Studies

Nonprofit Tax Tips You Didn’t Know about

tips for nonprofit tax

One in five Americans believe nonprofit organizations should spend about 23% of their budget on overhead costs. This includes administration, hiring employees, buying office materials, investing in nonprofit software and equipment.

Nonprofit organizations and charities aim at solving societal problems that cannot be solved for a profit. These organizations attract donors with various proposals aimed at solving those problems, taking aid in the form of donations.

It’s up to nonprofit organizations how this money is utilized when it comes to fulfillment of goals and projects in the city.

Some nonprofit organizations perform brilliantly when utilizing funds and minimizing overhead costs, yet it is a difficult endeavor.

Are Nonprofit Organizations Exempted From Giving Tax?

It depends. Some nonprofit organizations can purchase certain items without having to give sales tax for that item. However, qualified nonprofit organizations must become sales tax exempt, after applying at the correct Indiana department.

Sales Tax Exemption – Does Your Nonprofit Organization Qualify?

Your organization can qualify for this exemption if:

  • Operated separately for religious, charitable, and/or educational purposes.
  • Must be eligible for exemption from federal income tax under section 501(c) (3).
  • Senior citizen group organization created for recreation, pleasure or nonprofit purposes. Must be exempt under 501(c) of IRC and have members aged 55 or older.

Additionally, there are other ways of saving money via sales tax exemption.

Tip#1 – Make Sure All Volunteers Know About Deductions

Do you utilize time and service of volunteers for operation of the nonprofit organization? Volunteering if not carried out effectively can prove to be expensive. Many don’t realize but a lot of things are tax deductible for volunteers.

Make sure all volunteers are aware of exemption from tax of the following:

  • Car and transportation expenses
  • Travel expenses
  • Uniforms and other out-of-pocket expenses utilized for the organization

Tip #2: Is Your Organization Required to File a Return? Find That Out

Research is essential when trying to save money. Conduct an investigation regarding tax exemption, i.e. is your organization eligible in the first place? Do you have to file a return’s claim form to benefit from tax exemption?

According to the IRS, religious nonprofit organizations are not required to submit Form 990. Federal and nonprofit groups are also exempted from filing a yearly return. In addition, the IRS also exempts nonprofits that are subsidiary groups of larger charities.

Do you think you pay sales tax when you can easily be exempted from this requirement? Don’t know how to go about the procedure? Enguard’s excellent consultation services will help you make sense of sales tax exemption for nonprofit organizations. Call us today!

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