Non-Profit Organizations: Why It Helps to Hire an Accounting Service

by Kevin Smith Author

In the increasingly complex world of business, finance, and tax laws remain confusing and difficult to navigate for many people. If you run a non-profit organization, tax season can be a particularly stressful time. One of the best ways to ensure that you’re handling your tax requirements properly is to keep a thorough and detailed record of your finances and know whether you are considered a charitable organization, a tax-exempt organization, or a political organization. Hiring an experienced company that provides basic accounting for non-profit organizations will allow you to adhere to IRS guidelines.

Responsibilities of Being Tax-Exempt

Accounting for non-profit companies is an intricate and complex topic, particularly when taxes are concerned. Being tax-exempt is not a static, permanent status. It requires constant maintenance and financial reporting. The IRS considers it as a “lifecycle” because it is ever-changing and requires constant observation and upkeep. Tax-exemption also requires annual filing of exempt-organization returns, various unrelated business income tax filings, and returns and reports specific to the business.

This means that you must keep records of all finances related to your non-profit, no matter how insignificant they may seem. Usually, this includes money going out, money coming in, employment tax records (if the organization isn’t tax-exempt), and asset records. Keeping track of those requires even more detailed knowledge. A business that performs basic accounting for non-profit organizations understands this and will handle the requirements in a simple-to-understand yet efficient way so that you understand each step in the process.

Keeping Track of it All

Properly reporting money coming in and out requires records of receipts, donations, bank deposits, credit card slips, account statements, or canceled checks. IRS rules state that you should keep these records for at least three years after the date that you file your taxes. Many groups such as creditors, insurance companies, or state agencies require that you keep them for longer. That’s not even considering the employment tax records or asset records you may be required to maintain.

Hiring a business that performs Basic accounting services for non-profit organizations will allow you to rest easy and focus on other aspects of your organization. These businesses may even set up custom systems that organize and streamline your financial tracking and will perform the data entry for you, provide you with the required IRS documentation, and give you monthly reports to keep you knowledgeable without requiring you to spend endless hours poring over your records.