What Is Tax Preparation Services?
tax preparation is all about preparing your tax returns thoroughly with high quality precision, often with your income tax returns, obtaining accurate information in order to make your tax benefits available as soon as possible. In doing so, tax professionals find potential deductions and tax breaks. Some agencies even go as far as to communicate with the IRS directly about client’s taxes.
Tax Preparation for Non-Profit Organizations
Although non-profit organizations do not pay federal taxes, it is important that they file an informational return with the IRS to maintain their tax exempt status. The IRS requires a specific form in order to keep up to date with your finances, getting all these forms ready will help you with tax preparation.
Knowing What Form You May Need
One form used specifically is a Form 990. Form 990 is the annual reporting return that ensures that the non-profit organization can maintain their status and does not have to go on with paying federal taxes or owing the government any money.
There are multiple versions if the form for various non-profit organizations. The 990-EZ form is for larger non-profits while the 990-N is for smaller ones. The smaller organizations gross less than $50,000 annually and therefore need a separate form. Lastly, private organizations file a 990-PF.
What the IRS Needs From You
Along with the 990 form most suitable for your non-profit organization, in order to be fully prepared, the IRS needs particular information to move forward with your annual return. They require definitive revenue and expense categories. These include but not limited to donations, salaries, rent and so on.
Balance sheets and revenue schedules are also needed. The balance sheets include cash, accounts payable and receivable. The schedules can list donations and income and direct you to exactly how certain amounts of money are going in definitive detail.
In other words, the schedule describes the sources of income in bigger categories. These categories are not limited to the fees to be a member of the non-profit, the donations and the expenses within the program.
Along with this three things and the Form 990, two more statements are needed for tax preparation for a non-profit organization. One statement called the functional expense statement describes the expenses budgeted for program services and operations. The other one, labeled the individual program expense program addresses individual expenses for each program or service.
Having a good accounting system or is significant so that one may be knowledgeable to expenses and revenues as well as be organized and prepared. It is also important for the IRS to get all the information for non-profits to maintain their status as tax exempt.
Making Sure Your Tax Preparer is registered with the IRS
Many accountants who claim to be tax experts or professionals are often not who they say they are. Various times, they would appropriate customers’ money and not give them a satisfying result.
Because of fraudulent accounting activities from these so called professionals, the IRS established the Preparer Tax Identification Number program. This PTIN program makes it mandatory for the tax preparer to register with the IRS and the number be included with the signature on returns they have prepared.
This program is especially important for non-profit organizations as the IRS will have a handle on what preparers aren’t registered and have plans of insincerity. The non-profit who is putting their trust into the preparer suffers in the end as they can face an audit or other complications.
It is essential that these organizations be very mindful of who they have doing their tax returns. Being conscious as much as possible is utterly important because most companies are paying these preparers. Always remember to be cautious with your company’s money.
If You Want to Start Your Own Non-Profit Organization
In terms of tax preparation for non-profit organization, in order to be considered, a few things are necessary in trying to maintain a tax exempt status. Articles of Incorporation list exactly what you need to report in your reasoning for applying for the status.
For any type of consideration you must carefully list the inventory of assets and liabilities, expenses and revenues as far back as attainable as this will help with the application.
The documentation of the organizations’ activities, operations and programs show the statement of purpose, fundraisers, and pamphlets along with the sources of revenue like contribution and offerings also aid in the best regard for the application also.
Rent and lease agreements are factors in a non-profits application for tax exempt status. The history of the organization, by-laws of the organization and the fund raising program descriptions are extremely useful to further the tax exempt process with the IRS.
Most importantly, the employer identification number, board meeting times, names and addresses of the board members and active member and an IRS filing fee are highly essential in moving forward to be qualified and considered for tax preparation as non-profit.