Month: August 2021

Do Nonprofits Need to File Annual Tax Returns?

Many nonprofits are exempt from paying federal taxes. As a result of this exemption, there are often questions around whether or not this type of organization needs to file an annual tax return. Even though a nonprofit may not have to pay any taxes with the federal government, they generally are required to file an annual tax return.

The specific return that most nonprofits need to file is Form 990. This form is specifically designed for organizations that are exempt from federal taxes. The purpose of this form is so the IRS can understand how a nonprofit is handling its operations. This form can also be used by members of the general public to understand the specifics of a nonprofit they may be interested in supporting. By looking at the different elements of Form 990, which include information about a nonprofit’s mission, programs, and finances, it’s possible to be aware of any potential red flags.

More Information About Form 990

Just as individuals may need to file different types of tax returns, there are different versions of Form 990. The specific version that an organization is required to file depends on its size. Larger nonprofits with gross receipts of more than $50,000 file Form 990 or 990-EZ, while smaller nonprofits with gross receipts of less than $50,000 file Form 990-N (e-Postcard). And private foundations need to use Form 990-PF.

If your nonprofit does need to file this form, the due date is the 15th day of the 5th month after the end of your organization’s taxable year. So for an organization that follows a standard calendar year (January 1 – December 31), May 15th would be the annual due date.

Exemptions and Penalties

Although the majority of nonprofits are required to file a version of Form 990, there are certain organizations that are exempt from this requirement. Those organizations include most faith-based organizations, religious schools, missions or missionary organizations, as well as subsidiaries of other nonprofits. Government corporations are often exempt from needing to file, as are state institutions that provide essential services. Nonprofits should always consult directly with the IRS if they have any questions about whether or not they’re required to file.

The reason it’s crucial to know if you need to file Form 990 is the failure to do so three years in a row will result in an automatic loss of tax-exempt status. Over the last five years, more than half a million nonprofits have lost their tax-exempt status for this very reason. Given that the IRS has no appeal process for automatic revocations due to failure to file an appropriate Form 990 for three years, this is an issue that needs to be a top priority for your organization.

For expert help with your nonprofit tax return preparation, contact Donohoo Accounting Services by calling 513-528-3982.

 

 

Garnishment 101

The term garnishment means that debt collectors can take payment for what they’re owed directly from someone’s bank account or paycheck. Although that sounds quite scary, it’s important to understand that garnishment is generally viewed as a last option for debt collectors. But even though the road to garnishment is long, it does happen, which is why we want to help you better understand the details of this process, along with what you can do about it.

The Basics of Garnishment

The two types of garnishment are wage and nonwage. With the former, a creditor will be able to legally obligate your employer to give part of what you earn each month for your debts. And with nonwage garnishment, creditors can legally tap your bank account to help pay debts.
As mentioned above, both types of garnishment come after a debt collector has made multiple attempts to secure some type of payment for what they’re owed. However, wage garnishment is still surprisingly common. A study of thirteen million employees found that 7.2% had their wages garnished over the course of a year. For employees between the ages of 35 and 44, over ten percent were impacted by wage garnishment. Of the nearly million employees identified in this report, the most common reasons for wage garnishment were child support, consumer debts, student loans and then tax liens.

The standard process for garnishment occurs after a debt goes unpaid for a period of time, which is often six months. The debt is then often sold to a collector, who in turn may try to secure payment and then sue if unsuccessful. Losing this suit or not showing up at all can result in wage or non-wage garnishment. It’s worth noting that in cases involving federal student loans, child support or back taxes, garnishment can occur without requiring a court order.

What You Can Do About Garnishment

Individuals do have some specific rights in regards to garnishment, including receiving legal notification, being able to file a dispute if information is incorrect, exemption of certain forms of income like Social Security and being protected from getting fired over one wage garnishment (although this protection doesn’t apply if you have multiple garnishments).

Once a garnishment is instituted, options for dealing with it include working out a different deal with the creditor, challenging the judgment or paying off the garnishment in a lump sum. Keep in mind that a garnishment will show up on your credit report and stay for as long as seven years, so taking any available steps to prevent the situation from escalating to this point will help you a lot in the long-term.

If you’re dealing with wage garnishment, Donohoo Accounting Services has the expertise to help. Call us now at 513-528-3982 for a free consultation.