Understanding Credits and Tax Incentives for Non Profits

By September 24, 2018 Blog No Comments
James Richardson tax incentives

There are 29 types of non-profit entities, at least to the IRS. The IRS gives these companies various tax incentives to help them out.

They all perform different services, in different places, for different reasons, and at different costs. However, they all try to help their communities and support the people who need it most.

The IRS helps them do that by changing the amount of taxes they would owe as an organization. Yet, since there are so many various kinds of nonprofits, it’s a maze to navigate the tax rules for each.

It can be hard to see the value of tax incentives with so much complexity. Nevertheless, they are there and they are valuable. Keep reading to see how.

Tax Incentives Make Nonprofits More Transparent

The IRS is infamous for getting its tax money. Al Capone didn’t pay his taxes and they took him down. Non-profit companies are no different – if they don’t pay they will get punished.

Yet since they help their communities, nonprofits are not required to pay as much. Figuring out how much they do need to pay can be tricky. They receive so many tax credits and adjustments that somebody has to keep track of the company’s budget.

Accountants at nonprofits not only manage the company’s books but also keep it transparent. The government requires nonprofits to submit articles of incorporation, bylaws, and create a board of directors.

CPAs ensure the organization meets its tax requirements. By doing that, they help people know the nonprofit is doing what it says.

They Help and Motivate the Nonprofit to Do What It Does

Money is a good incentive. When a nonprofit can operate without fear of being taxed out of business, they can do more. They can purchase extra materials and resources and assist more people.

Tax incentives can also motivate the company to go above and beyond expectations. If an incentive requires a company to perform a certain activity or implement a particular policy, it’s more likely the nonprofit will conform.

Most of all, nonprofit tax returns can be read by the public. That means if a nonprofit goes rogue, they won’t just be lying to the government. They will lie to the public and that typically never ends well.

They Involve You, Directly and Indirectly

You can also share in the tax incentives nonprofits receive. First, if you’re in need of a nonprofit’s services, you’re more likely to get it since the less an organization is taxed, the more it can do.

Secondly, you can get a deduction on your own taxes. By donating to a nonprofit, you can write off a certain amount when tax season comes around. Be sure to ask for a receipt when you drop items off or make a monetary donation.

Tax Incentives Create a Net Good for the Whole Community

Tax incentives can sometimes be better than laws. With laws, people are motivated to follow them because they’re afraid of being punished.

Tax incentives, on the other hand, give people something they want: money. They can save organizations money and allow them to provide financial assistance to those in need.

In combination with grants, nonprofits sacrifice their profit-motive for genuine support. They help the community and the community helps them in return.

That doesn’t change the fact, however, that taxes are complicated. It takes a professional to navigate them.

Contact us if you need help with your nonprofit’s taxes and we’ll provide you with experienced professionals equipped to handle all of your accounting requirements. We’ll make sure you’re able to serve your community the way you do best!

James P. Richardson, CPA, Inc. is an accountancy firm founded in 1978 that specializes in working with non-profit organizations. No matter what stage your non-profit is in, we understand your needs and serve them. Whether your business is for-profit or non-profit, we make sure it is run efficiently, guided by best practices. Our firm brings a worldview of contribution, determination, and hard work to all client engagements.