Starting a nonprofit is an incredible way to make a difference, however, turning the passion you have for a cause into a tax exempt entity comes with a lot of paperwork, compliance requirements and responsibilities that continue to be imposed.
This is a shocking fact that the IRS receives more than 90,000 requests for tax-exempt status throughout the year. That’s a lot more than 7,000 per month.
What is this all about to you? If you’re planning to start a nonprofit there’s no reason to be alone. In this highly competitive market having a savvy CPA on your side can assist you in avoiding costly mistakes to save time and help ensure that your organization starts with a solid foundation.
In Parr & Ibarra CPA, we aid existing and new non-profit organizations with the tax-exempt process from beginning to end.
What Is Tax-Exempt Status?
If you’re considering forming a non-profit the initial step is to apply to be granted 501(c)(3) or any other applicable IRS tax exempt status. Once you’ve been approved:
- Your company won’t have to pay federal income tax for related activities.
- Donors are eligible to receive tax deductions, which can boost the potential for fundraising.
- You’ll be eligible to receive certain grants and discounts for nonprofits.
However, the process of applying for a CPA can be difficult and that’s why professional CPA assistance can make a huge difference.
Why So Many Nonprofits Need CPA Support
The fact that more than 90,000 applicants apply each year indicates that it is clear that the IRS has a lot of work to do and the process of reviewing is meticulous. Many nonprofits experience delays or rejects due to frequent filing mistakes. This is what you can do to help. Parr & Ibarra CPA supports the new nonprofit in every step:
Selecting the Right Entity Type
Do you need to form an entity such as a trust, corporation or an association? We will help you select the most appropriate legal structure that meets your objectives and long-term compliance requirements.
Preparing IRS Form 1023 or 1023-EZ
This is the basis part of the 501(c)(3) applications. We manage the in-depth budget projections and narratives and attachments required to satisfy IRS requirements.
State-Level Filings & Registrations
Beyond the federal tax exemption, we’ll make sure you’re registered with the state’s charity bureau, secretary of state and other relevant agencies.
Setting Up Accounting Systems
We’ll assist you in establishing non-profit accounting systems that promote long-term compliance as well as clean financial audits.
Common Mistakes That Delay Tax-Exempt Status
The process of applying for tax-exempt status may be overwhelming, particularly for those who are the first non-profit founders. However, many well-meaning organizations have to endure frustrating delays or denial due to easily reversible mistakes. As CPAs specialising in compliance for nonprofits We often encounter the following problems that can stall the approval process
- Inadequate Mission Statements
A mission statement constitutes at the core of the identity of your nonprofit and the IRS examines it carefully. Many applications are denied due to the mission statement being either unclear, or too broad or doesn’t convey an explicit charitable goal.
Tips: Your mission should clearly define how your company contributes to the public good and not only a particular organization or private interest. We assist clients in defining their mission statements to ensure that it is in line to IRS Section 501(c)(3) standards.
- Improper or Generic Bylaws
Bylaws form the foundation of your nonprofit’s rules that outline governance policies as well as board responsibilities. They also outline the policies regarding conflicts of interest. Bylaws that are generic or templates that are available online could lead to IRS protests if they do not accurately reflect the way your organization runs.
Tips: At Parr & Ibarra CPA, we help clients create custom bylaws that meet the federal guidelines while fitting the structure of their organization.
- Incomplete or Unrealistic Financial Information
Even the newest nonprofits are required to provide adequate, well-organized financials on the IRS application. Many founders omit budget projections, fail to report sources of income or do not include the required explanations of how the money will be utilized.
Tips: We help in the creation of multi-year financial projections and then explain how the projections are in support of the nonprofit’s mission. An accurate, transparent financial planning will help your application stand out.
- Missing Board Governance Documentation
The IRS requires full transparency regarding how your board structure and functions. Inadvertently omitting information such as the roles of board members as well as meeting times and schedules decisions-making processes could result in request for additional information or a total rejection.
Tips: Our team can ensure that your documentation for board members is completed, clearly demonstrating that your nonprofit is overseen by an inclusive, independent and active board that is in accordance with IRS standards.
5. Non-Alignment to The IRS Charitable Purpose Guidelines
Many applications are stalled because the purpose of the non-profit isn’t clear enough to fall within what the IRS defines as charitable activity like religious education, public health, community development.
Tips: We evaluate each client’s mission and actions against IRS guidelines to ensure that there is no confusion. If required, we can help change the focus of your mission to be in compliance, without jeopardizing your goals.
How Parr & Ibarra CPA Can Help?
Avoiding these common errors isn’t just about filling out forms and knowing what the IRS defines compliance. With many years of experience in helping nonprofits get the status of tax exempt, Parr & Ibarra CPA provides strategic insights along with technical expertise and individual assistance to the process of applying for tax exemption.
No matter if you’re just starting out or need assistance with an application that isn’t working We’re here to help ensure your organization can get off the ground in the correct way.
What to Expect When You Work With Parr & Ibarra CPA
Our non-profit services go far beyond filling out your IRS documents. We can help to create a reputable driven, mission-driven business:
- Initial consultation with a consultant to better understand your goals and structure
- The full IRS Form 1023 preparation or 1023-EZ filing
- State-wide registrations for charities and nonprofits
- Setting up of bookkeeping as well as financial report systems
- Support for compliance and taxation on a regular basis
We’re not here just to launch, We’re a partner of yours for the long haul in non-profit financial management.
Ready to Launch Your Nonprofit the Right Way?
The process of obtaining tax-exempt status is one of the most important things in establishing your nonprofit. Don’t put it off to chance. With more than 90,000 people applying every year, precision professionalism, clarity, and professionalism are more important than ever.
We’ve helped numerous nonprofits get IRS approval, and we’re here to help you as well.
Call Parr & Ibarra CPA today for a complimentary consultation. Take the first step to build an effective, legal non-profit organisation.
