Non-Profit Taxes - Essay Example

Non-profit taxes A non-profit organization is an organization whose main objective is to support issues or matters of private or public concern for purposes that are not commercial. Non-profit organizations can be involved in a number of areas relating to charities, arts, education, religion, politics, research, or some other enterprise. Most experts deem that it is the legal and moral restrictions on the distribution of profits to shareholders and owners that fundamentally distinguishes the non-profit organization from commercial enterprises.

A more accurate 'not-for-profit' is regularly used in legislation and texts in place on 'non-profit'.Non-profit organizations do not operate to bring about profit, a characteristic widely deemed to be the crucial aspect of such organizations. Still, a non-profit organization can accept, hold and pay out money and other items of value. Non-profit organizations may also legally and morally trade at a profit. The degree to which it can produce income may be constrained, and the use of those profits is doubtless restricted.

Therefore, nonprofits are characteristically funded by donations from the public or private sector and generally have tax-exempt status. Private donations are sometimes tax deductible. In several countries, non-profit organizations may apply for tax-exempt status. This allows financial donors to claim back any income tax paid on donations and, furthermore, the organization itself can be exempt from income tax. In the United States, Tacoma Washington included, following a recognized legal entity that has been created at the state level, it is traditional for non-profit organizations to ask for tax-exempt status with respect to income tax.

That is achieved by applying to the Internal Revenue Service (IRS). The IRS reviews the application to ensure the purpose of the organization. If certain conditions are met then the organization is given the status of a tax-exempt organization (example: a charity). The organization is issued an authorization letter granting it tax-exempt status regarding income tax purposes. The exemption, however, does not apply to other Federal taxes like employment taxes. Raising funds for a non-profit community book festival is the same as fundraising for any other non-profit community program.

Here are some important pointers. Firstly, it is important to assess the goals and needs of the non-profit organization. What is it that you are actually trying to achieve is essential to review the federal and state limitations that are set for non-profit fundraising, as well as examining your current fundraising programs. Evaluate their pros and cons. Brainstorming for original and unique fundraising ideas can take you far. Out-of-the-box ideas do bring about a lot of attention. Determine quickly whether you want to ask for funds face-to-face, by phone, online, via mailers, through special events, or through combining some of these aspects.

Develop already existing relationships. There is a popular adage regarding fundraising that says: "Fundraising is not raising funds, it is raising friends." Seek out big corporations for philanthropic funds through their public relations department. One should think like a business when going to big corporations for help. One can approach corporations that are moving to the locality and want to set up a "presence." Solicit donations of supplies and equipment from companies in the neighborhood.

Flowers and food can be obtained for small events. Think about setting up a partnership with a local corporation. Discuss what your organization might be able to give to the company. Following that you can contact their marketing department. There is no harm in seeking out government grants and donations. Also, consider hosting unique and special events. The expenses involved are considerable, and profits may be little, but events engender visibility and name recognition. Contact the local media before the book festival.

There is no substitute for adequate and good advertising. Continue raising funds until you have an adequate level of cash flow. A good, planned fundraiser can be a base for future fundraising. You can also consider purchasing software specifically designed for non-profit fundraising and management. Develop bonding with potential contributors gradually. You can begin by inviting them to view an organizational meeting or an event. Face-to-face soliciting necessitates great dedication. It is vital to pick volunteers that are dedicated to the organization.

There is no special mantra for effective fundraising. The most crucial thing is hard work. A non-profit organization should strongly consider acquiring help with taxes. Guidance and advice from a competent tax advisor with a sound understanding of nonprofit matters is invaluable. It is extremely important how you define your plans when filing for tax exemption with the IRS or incorporation with your state. Concomitantly, there are several reports and filings you are likely to have to submit.

When your organization is exempt from taxes, it is also likely to be exempt from a host of other taxes, like state, property, and sales taxes. A nonprofit-knowledgeable tax advisor can be of great help. Approach other non-profit organizations for references to competent tax advisors. Your organization does not have to acquire tax-exempt status. Still, you should consider this seriously, as it allows you to do away with paying federal taxes on your income. Also, raising money can then become a lot simpler.