Episode 134: Tax Time for Nonprofits: The IRS Form 990
The IRS uses the Form 990 to determine if a nonprofit is operating as a regulated public charity. Whether or not the organization generates a lot of revenue, they have to submit a form 990 to the IRS so that they know if your organization is operating as a tax exempt organization. Learn all the in's and out's of submitting your form 990 and the consequences if you don't.
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🔦 NONPROFIT SPOTLIGHT 🙌🏿
Mary Katherine Matalon Pt. 2
👉🏿https://www.linkedin.com/in/mary-katherine-matalon
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🚀 RESOURCES TO HELP YOU RUN A SUCCESSFUL NONPROFIT
The Nonprofit Volunteer Program
https://www.amazon.com/Nonprofit-Volunteer-Program-Structured-Convince/dp/1733367861/
How To Price Your Tickets for Profit
https://fusion.amberwynn.net/product/how-to-price-programs-for-profit/
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Podcast Transcript
Speaker 1 (00:00):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident, Philanthrepreneur, Amber Wynn.
Speaker 2 (00:22):
Hey fam, it's your girl, Amber Wynn, Philanthrepreneur, and today we are going to cover tax time for nonprofits. Don't be sad, be excited because this is a part of the business of running a nonprofit, and as long as you have the information, you should be good, which is why I'm here. So we're going to talk about the IRS Form nine 90. I'm going to share with you what it's for, what the IRS uses it for, what you need to submit, all of the good stuff. I'm your girl, I told you. I got you. So when we return tax time for nonprofits, if you're just starting out and have limited resources, you may be tempted to use a volunteer-based model for your nonprofit funders prefer paid staff because there's more accountability and consistency. But if you want your proposal to be competitive than having more than just volunteers who come and go is essential.
(01:18):
Check out my building and effective nonprofit volunteer program toolkit. It provides all the essential elements of an effective nonprofit volunteer program. Things that demonstrate standardization, consistency and continuity. Learn how to develop a nonprofit volunteer program funders feel comfortable with funding. Order your copy today. Welcome back. You're on air with Amber Wynn, and today we are talking about tax time for nonprofits. Listen, a nonprofit is a business. You cannot start a nonprofit and just do whatever you want to do that's going to get you into deep trouble, and the nonprofit has to file taxes. The biggest misconception, especially from brand new nonprofits is, well, I didn't make no money so I shouldn't have to file taxes. Right? Wrong, wrong. It's extremely important for nonprofits to file their form 990 every year. Why? Because you've been given this special exemption, meaning the government has said, here's this incentive.
(02:25):
You don't have to pay taxes on your revenue. If the work that you're doing supports the public good, they need to know that you're supporting the public good. If you are using your 501(c)(3) for personal gain, then they're going to snatch your tax exemption. So the only way that they know that you're doing what you're supposed to do is by you filing taxes. So this is why it is important for you to file your taxes every year. Here's the thing, if you have not generated a lot of money, meaning if you generate under 50,000, the IRS has provided for you a short way to submit. It's really simple. You go online, you click a box and you're done. Right? I think you may have to pay $20. It's called the 990 N, or it's the e postcard. If you generated under $50,000 the last year, then you will submit a postcard and you do it online.
(03:31):
If you've generated over 60,000 the last couple of years, then you'll be required to file a regular 990. And the more money that you make, then the more complex is the 990 form that you have to submit. But you have to submit it. If you don't submit it three years consecutively, the IRS will revoke your tax exempt status. They will put you excuse put on a website that says, Hey, this person has not filed their taxes and therefore they no longer have the tax exempt status. If you don't have tax exempt status, then a funder's not going to donate to you because now you can't give them the right to write that off. So the funder needs to know that. That's why they ask you for your tax exempt number because they run it right? They go to the IRS website, they put your number in.
(04:27):
If you come up on this tax revocation list, then they're not going to fund you. So it is important that you file your taxes by May 15th, whatever the end of your fiscal year is. Some people have calendar years, right? So they'll go from January to December by the following May 15th, they need to file. If you go from June, was it usually June to July, then you need to do it by May 15th of the closing of your fiscal year. But you have to file the majority of nonprofits across the United States. The last time I checked the number was 40%. 40% of all nonprofits in the United States has a budget under $50,000. So y'all should be filing your ePost card online that check that box saying I made under $50,000. But you want the government to know that you're still operating as a viable nonprofit. This is important, you guys, it's important.
(05:33):
Compliance is 50% of any nonprofit's existence because you are authorized by not only the IRS, but the Secretary of State and the Attorney general. So you've got federal, state, and your local government agencies that are responsible for managing you. Meaning if you don't file your documentation, they have the right to snatch your tax exempt status. And yes, there are people who are altruistic out there, but trust and believe when they ask if you're a nonprofit, it's because they want to be able to get a tax write off on that donation. So this is one major way that you can get your tax exemption revoked, and we don't want that. So again, this is why I started off the episode by telling you don't frown. The IRS has made it easy. You go online, you check that box, boom, you're good. Make sure that you don't rely on your accountant to do it, because this is the biggest thing that I get from nonprofits.
(06:35):
My tax exempt status has been revoked. I thought that. There you go. There you go. My accountant was supposed to do it. We thought the board was doing it. We thought the executive director was doing it. We thought the treasurer was doing it. Executive director and president, this should be on your checklist every year. May 15th is when it's due. May 16th, you should be saying, Hey, did we file our taxes? Let me see. Give me a copy. Because if you don't file in three consecutive years, your tax exempt status is going to be revoked. And let me just tell you, it is a beast trying to reestablish it. I've had organizations who didn't know that their tax exempt status was snatched and it was a beast. It got to the point where we recommended that they just don't even try. Just start a new nonprofit. That's how complicated it was.
(07:29):
That's how much money that they owed. Oh, by the way, you do get fined. You're out of compliance. So don't let that be you. Make sure that you stay in compliance and make sure that you file your 990 every May 15th. Alright, wonderful. So when we come back from the break, you get to ask me your question with Ask Amber. If you're thinking about hosting a golf tournament or any other kind of event, make sure at the end of the event you generate a profit and not come out with a loss. There's a formula for guaranteeing that your event will generate a profit. You'll find it in my Hotter Price event. Tickets for Profit Toolkit. Learn the insider secrets for how to ensure your event will always make a profit every time. Order your copy today and we're back. You're on air with Amber Wynn, Philanthrepreneur, and we're at the part of the episode where you get to ask your pressing questions.
(08:26):
This question is from Alton. Alton, Hey Alton. Alton is from Washington State and he says, I run an organization that's been around for 20 years. Congratulations. We have a solid track record for decreasing recidivism in Latino males from the inner city. We've been in conversation with the funder who's asked us to change the way we deliver our programs. What'd you say? Essentially doing the opposite of what we do. What you say to get this grant that would help fill a huge gap in our operations budget. We need the money, but I'm not feeling good about this as it goes against all we stand for. What should I do? Well, Alton, you should not take that money as my mama say, all money ain't good money. Here's the thing. You have been doing what you know to do, which has been successful for over 20 years, to have a funder come in and say, we'll give you money, but you've got to do the opposite of what you do.
(09:32):
It's counterintuitive and it's unproductive. It's going to undo all of the things that works for your population. I had a similar experience when I was Executive Director of Girls Inc. I had a funder. We did financial literacy and our population was Latino. They were low wage workers. So we would meet with them on Saturdays for eight hours because they had to work during the week, and we had a babysitter and we fed them. So this is what works. This is why our numbers were so great. And they were like, oh, can you meet with them more during the week, two or three times during the week? And we were like, no. The reason why our numbers are so high is because we know our population. So I ended up saying, you can give me the money for what works or thank you so much, but no thank you.
(10:22):
I'm going to tell you, all my executives directors were like, what? Never turned away $150,000. I did because I would've taken the money and failed. And if any of y'all know me, I'm an overachiever. Amber does not fail. And especially because I know my population and I know what works. So Alton, I'm saying the same thing for you. Your population for 20 years, this formula has worked for you. Stick to your guns. Tell them this is what you do. This is how you get the results. If they want to partner with you, you'd be happy to take their money, but you've got to deliver the programs the way that you always deliver them. Okay, good luck with that. Listen, when you know who you are and when you know what you do, you've got to be able to stick to your guns. Yes, you need the money, but trust and believe that money is going to come.
(11:10):
If you start doing what's called mission creep, then you won't have a solid track record because you're over here and you're over here and you don't have expertise. And so then your outcomes are going to be wonky. Your outcomes are what gets you money. So stick to what you know. So thank you so much for that question. If you have questions for me, you can hit me up on any of my socials. I'm out there on Instagram, I'm on Facebook, I'm on, I don't know what they call it now, X tweet or Twitter. I don't know. I'm on all of it. All of it. You can even email me at amber@amberwynn.net. I love to get your questions because I want to make sure that I'm giving value. So let me know what it is you want to know. And now we're transitioning into the nonprofit spotlight.
(12:02):
It's where I shine a light on the nonprofits doing the work in the community. That's you. My amazing nonprofit leaders or the consultants out there doing the work to support the most amazing people in the world. That would be me. That's what I do. And we are on part two of our conversation with Mary Catherine Madeline. One of the things that I found to be quite interesting with our conversation is what we felt was missing. There's a disconnect sometimes I think with founders and what they think a fund development officer is supposed to do, a fund development director, you're not handing over the responsibility of fundraising to your fund development director. You are working in collaboration and in partnership. Your fund development director has an expertise that will allow you to go to the next level. But sometimes when you guys hire fund development directors, you think they're the holy grail. They're not. They're there to support the board in fundraising. The board is like, well, what's the fund development director doing? What you doing? We're in partnership. So I think listening to that conversation should be eyeopening. It was affirming for me. But let's take a look. Part two of our conversation with Mary Catherine Madeline.
Speaker 3 (13:35):
So to start with one of the things, and it's kind of a mindset as much as it's a set of things you need to have prepared. And so I think when you're working with a fundraising advisor, you have to come in with a healthy curiosity and kind of a dash of bravery, right? Because a lot of times when you start working with someone, you're going to find some things that maybe you didn't know you needed to do, or you're going to find out parts of your organization that need a little tending to, and you're going to find out the things that are going well. So I think what you really as a nonprofit need to do is show up and be present and really understand that it's a partnership and a mutual back and forth, right? Because I think so often, unfortunately, there's a perception that we can get this one grant and then all of our problems are solved.
(14:20):
We can gift. But really it's about setting up a system and kind of doing the work day in and day out. And really, a lot of times, I think more and more donors of any kind, they want to hear from the leadership. They want to hear from the executive director. They want to build a really holistic relationship with the organization. So my goal and job with nonprofits that I work with is to help them figure out how to best create those relationships in ways that align with their values. And that takes some tending, right? Understanding what your value proposition is, what you need the funds for, and how you're showing up in meetings. So to be a good partner, it's really about doing some internal assessment and then really being able to have some kind of courageous conversations around what you want fundraising to look like.
Speaker 2 (15:30):
Welcome back. You're on air with Amber Wynn, Philanthrepreneur, and this episode we've talked about taxes for nonprofits. We've listened to part two of our conversation with Mary Catherine talking about how to engage with funding, get it out, Amber directors of funding, and just all of the good things. I am always in your corner here to support you. If you have any questions, hit me up on my social media. Otherwise, I hope to see you next week. If you found anything of value in this episode, be sure to share it with people in your space. Don't forget to like and subscribe, and yeah, I'll be here next week. Same bat channel, same bat time. So remember to take care of yourself like you take care of your community.
Speaker 1 (16:28):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.next/podcast for the links and resources mentioned in today's podcast. See you next time.
