Experienced Accountants In Nonprofit Finances

Before starting your nonprofit, you should be able to answer these questions:

• Who will you serve?
• How will they benefit?
• What programs will you be conducting, and who will be conducting those activities?
• Is there any special training or abilities required by the person or people providing your services?
• Where will you be operating?

Once you have your nonprofit idea ironed out, it's important to find the answers to these questions before you get started:

• How can the charity best serve others?
• What staff will be needed?
• What facilities will be used?
• Will any special equipment be needed?
• Should any charges be made for the services provided?
• What is the nature of expenses?
• What do you expect to be total revenue and expenses?
• Who will be members of the Board of Directors?
• Will a board member have the ability to analyze financial records?
• Who will be the registered agent for the Secretary of State, and what will the address be? (The registered agent is the person the Secretary of State can contact if they have questions about the organization.)

Federal documents:

• Form 990-N for organizations with gross receipts less than $50,000
• Form 990-EZ for organizations with gross receipts between $50,000 and $200,000
• Form 990 for organizations with gross receipts higher than $200,000

State documents:

• Annual report with the Secretary of State

 Federal guidelines

The Internal Revenue Service (IRS) requires the filing of either Form 1023-EZ or Form 1023 to be recognized as a public charity operating under Section 501(c)(3).

Form 1023-EZ is used for organizations with an operating revenue is no more than $50,000 within the first three years of operation. The fee to file the three-page Form 1023-EZ is $275.

Organizations with an operating revenue over $50,000 should file Form 1023. The fee to file the 18-30 page Form 1023 is $600.

The date of reorganization by the IRS is the date the Articles of Incorporation are filed with the state’s Secretary of State. Once an organization becomes incorporated with the state, it may begin operation, collect donations and operating revenue, and pay expenses.

Lobbying limitations

Public charities, recognized as exempt organizations by the IRS, are strictly prohibited from participating in a political campaign either by donation, endorsements, or public appearances.

Dissolution policy

​A public charity should designate what Section 501(c)(3) organization should receive its remaining assets when it dissolves and has stopped operating. It may merely say “a Section 501(c)(3) organization,” as a specific organization may not be in business upon dissolution. A report of this intention to dissolve must be filed with the state’s Attorney General, who will request a certified affidavit stating how the remaining assets will be distributed to another public charity within the state.

There are several differences, but the main difference is that for-profit organizations pay taxes on their profits and nonprofits do not.

Donations to public charity nonprofit organizations may be deducted from the donor's income tax return in many instances.

Public charities may file either Forms 990-N, 990-EZ, or 990, while other nonprofits can only file Form 990. 

Nonprofits should maintain accrual accounting systems to reflect accrual of revenue charged and expenses incurred. Depreciation must be maintained on capital assets purchased and put in use over a period of years. 

Accrual financial statements required for year-end reports are a Form 990-N, 990-EZ, or 990 reflecting the balance sheet with assets, liabilities, and net worth, and an income statement reflecting the revenue, expenses, and net profit.