Charitable Ventures: Tax Perspectives

Charitable Ventures: Tax Perspectives

Contributing to charitable causes is not just a noble pursuit but can also yield significant tax advantages. As the world enters new realms of philanthropy, charitable organizations are becoming more strategic about their giving decisions. This shift highlights the need for professionals involved in non-profit tax policy and regulatory landscape to help navigate these murky waters. As a Certified Public Accountant, DeFreitas & Minsky LLP understand the importance of adhering to the best practices in nonprofit tax compliance.

Nonprofit Tax Guidance: Navigating the Complexity

In the world of charitable giving, increased IRS audit activity and an increasingly complex regulatory environment present major challenges. According to the IRS, nearly 20% of all audited tax returns for non-profit organizations in 2019 resulted in additional tax or penalties due to violations of existing tax rules. These issues are typically not intentional evasions of the law, but rather indirect outcomes caused by a lack of guidance.

That’s where we come in. Our team at DeFreitas & Minsky LLP specializes in providing tailored nonprofit tax guidance to help entities achieve their mission while minimizing associated financial risk.

Understanding the Importance of Nonprofit Tax Guidance

The need for tailored guidance in the nonprofit sector grows parallel to this sector’s expansion. The National Center for Charitable Statistics reports a staggering 1.73 million nonprofit organizations registered in the United States in 2019. Unfortunately, the IRS data reveals that several of these organizations grapple with tax non-compliance issues, a problem mainly attributed to insufficient knowledge about unique tax obligations.

Many nonprofits operate under the misconception that their tax-exempt status implies they are exempt from most IRS regulations. This myth often leads to severe consequences, including financial penalties or, in worst cases, revocation of tax-exempt status.

Key Aspects of Nonprofit Tax Compliance

  • Maintaining tax-exempt status: Nonprofits must meet certain conditions to maintain their tax-exempt status. For instance, a substantial part of their activities must not involve lobbying, political campaigning, or unrelated business activity.
  • Employment taxes: Even though nonprofits are exempt from income taxes, they are still responsible for employment taxes. Nonprofits must withhold Social Security and Medicare taxes from their employees’ wages and also pay their share of these taxes.
  • Filing a tax return: Most nonprofits are required to file an annual tax return called Form 990. This form provides information about the organization’s mission, programs, and finances and is publicly available.

Aiding Charitable Organizations with Nonprofit Tax Guidance

At DeFreitas & Minsky LLP, we believe that a solid understanding of tax obligations and guidance, especially from a nonprofit perspective, is the cornerstone of maintaining tax-exempt status and achieving organizational goals. Our team made up of experienced CPAs provides bespoke guidance and strategies required to stay compliant and avoid IRS penalties.

The DeFreitas & Minsky LLP Approach

We leverage our extensive wealth of experience and an in-depth understanding of IRS regulations governing nonprofits to offer expert advice. We help charitable entities maintain their tax-exempt status, guide them on employment taxes and reporting, and provide assistance in filing tax returns.

Final Thoughts on Charitable Ventures: Tax Perspectives

Navigating the intricate web of nonprofit taxation can be a daunting task. To avoid falling foul of IRS rules and regulations, charities should consider working with certified public accountants like DeFreitas & Minsky LLP who understand the nuances of the nonprofit sector. With the right guidance, charitable organizations can focus on their primary objective: Making a difference.

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