Nonprofits provide essential services to specific groups of people within the community. They generally rely on support or revenue from membership dues, charitable contributions, fundraising events, public and private grants, and investment income. We serve a variety of nonprofit organizations in our communities, including civic organizations, fraternities and sororities, health and welfare organizations, educational organizations, philanthropic foundations, and other vital nonprofits.
Cooke, Lavender, Massey & Company, P.C., provides discounted tax preparation, accounting services, and attestation engagements to nonprofit organizations and charities in Blacksburg, Christiansburg, Radford, the New River Valley, and the surrounding region.
We offer a variety of services, including:
- Payroll Services
- Income Tax Preparation
- Audits and Reviews
Unique Accounting and Tax Challenges Faced by Nonprofits
Nonprofits face several unique accounting and tax preparation challenges that for-profit businesses do not need to navigate.
Accounting and tracking donations
Unlike for-profit businesses, nonprofits must accurately track and record charitable donations, member dues, grants, and all other types of income unique to nonprofits. It is essential to provide appropriate acknowledgments to donors with the correct language.
Accounting for pledges can also be a complicated but it is a necessary process for any nonprofit that uses monthly giving programs and other fundraising strategies. It can get very complicated to accurately account for money that is pledged but not yet donated. We can help navigate this complicated area of nonprofit accounting.
Recording restricted donations.
Restricted donations are charitable donations with specific conditions about how or when the money can be used. By accepting a restricted gift, a nonprofit has essentially entered into a contract with the donor or grantor.
There are several ways charitable donations can be restricted. Perhaps the donor wants the organization to use the money for a specific project, or the donor would like the funds to be used after a specific date or event. Restricted funds reassure donors that their donation will be used in the way they intend.
Accounting for endowments and investments
Endowments and investments have many specific and complicated reporting requirements. Many nonprofits do not have the resources to handle the complicated accounting and tax preparation internally. Accounting for endowments is often further complicated by the fact that most endowments are funded by restricted donations.
Our accountants provide valuable guidance related to the accounting of, and the reporting for, endowments and investments.
Frequently Asked Questions
Nonprofits and charitable organizations have many questions about accounting and tax preparation. Here are some of the most important questions our team receives from nonprofit clients.
Because of the complicated accounting and tax preparation requirements of nonprofits, it is easy to make mistakes that could cost you valuable time and money. Our team is dedicated to providing accurate and reliable accounting and tax preparation services to nonprofits.
Here are some of the most common mistakes we observe from nonprofits:
Not filing Form 990 on time
Nonprofits can avoid significant penalties by submitting the correct Form 990 by the due date. Organizations that fail to file the annual Form 990 for three consecutive years may have their nonprofit status automatically revoked by the IRS.
Not reporting unrelated business income
Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. For most organizations, the IRS defines unrelated business income as income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption. An Exempt organizations gross income from an unrelated business that is equal to or exceeds $1,000 must file Form 990-T. Some common scenarios include income derived from the rental of real property (if the organization has a mortgage note), selling advertising in a brochure, or having advertising on the organization’s website. If the organization has these types of income, it is essential to report this unrelated business income and pay the appropriate taxes, as necessary.