Links to IRS Forms and Information

Regulations and interpretations regarding Nonprofit Organizations: http://www.irs.gov/irm/part7/index.html

The IRS homepage for all NPO: www.irs.gov/eo

Form SS-4 – Application for Employer Identification Number: http://www.irs.gov/pub/irs-pdf/fss4.pdf

Form 1023 – Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code: ftp://ftp.fedworld.gov/pub/irs-pdf/k1023.pdf

Form 8868 -- Application for Extension of Time to File an Exempt Organization Return, for 12 month extension before a form 1023 must be filed or 90 days for the 990 forms: http://www.irs.gov/pub/irs-pdf/f8868.pdf

Form 990 – Public charity annual form: ftp://ftp.fedworld.gov/pub/irs-pdf/f990.pdf

990 Schedule A: http://www.irs.gov/pub/irs-pdf/f990sa.pdf

990 Schedule B: http://www.irs.gov/pub/irs-tege/eotopich03.pdf

Form 990PF – Private foundation annual form: ftp://ftp.fedworld.gov/pub/irs-pdf/f990pf.pdf

Form 990EZ – Shortened annual form: ftp://ftp.fedworld.gov/pub/irs-pdf/f990ez.pdf

Form 990T – annual form filed in years with Unrelated Business Tax due: http://www.irs.gov/pub/irs-pdf/f990t.pdf

Form 990W – worksheet to determine unrelated business tax: http://www.irs.gov/pub/irs-pdf/f990w.pdf

Form 2848 – Power of Attorney and Declaration of Representative, when the chairperson or president of the board cannot sign for some reason, another officer can stand in for him or her: http://www.irs.gov/pub/irs-pdf/f2848.pdf

Form 941 – Employer’s Quarterly Federal Tax Return: http://www.irs.gov/pub/irs-pdf/f941.pdf

Form 8821 – Tax Information Authorization allows the IRS to provide information about your application to an employee other than a principal officer or director: http://www.irs.gov/pub/irs-pdf/f8821.pdf

Form 8283 – For noncash donations over $5,000: http://www.irs.gov/pub/irs-pdf/f8283.pdf

Conclusions

Non-profit organizations are unique business opportunities that allow the members to do exceptionally meaningful work. Operating a legal nonprofit means taking advantage of a program that ultimately serves the community, and being involved in one of the most rewarding business opportunities that exists today.

The present-day tax code allows nonprofits to maximize their positive potential, and for the business-savvy NPO founder, the benefits available to the public through the NPO sector are vast and varied. However, navigating through the complex laws that govern the nonprofit sector can be a tricky proposition. With the right amount of research, a good deal of preparation, and a high level of enthusiasm and energy, anyone can found and run a successful nonprofit organization.

Educational NPOs benefit the public by changing the business landscape through compassion and charity. People who are passionate about the possibilities that are made feasible by nonprofit organizations can join the industry, and reap its many benefits. It is up to each individual, as well as the structure of the nonprofit, to define not only the organization and the role each member plays within it, but also, how that organization shapes, and is shaped by, the community it serves.

Regulations Governing Dissolution

Generally, once the board moves to dissolve the NPO, it is no longer considered active by the IRS. One of the final moves an organization may make might be to finish reporting any outstanding income or expenses and file all final paperwork with the state, informing them of the organization’s non-active status.

Board members of a nonprofit are not permitted to divide up remaining assets of the NPO among themselves. All money, property and equipment must be put to charitable use. “Charitable use,” however, can take many forms. Any money that is left over can be given to another charitable organization or used to pay off any debts the NPO owes. Once all funds are allocated, the NPO must finish the process by closing its accounts.

Property may be given to another NPO or may be donated to the community, as in the formation of a park. In either case, the end use of the property must be considered charitable. Any property that is sold, traded, or otherwise disposed of within two years of receiving it as a donation must be documented to the IRS. The NPO must file Form 8282, “Donee Information Return (IRS-557, 2005).” If there is no property owned, but a space is rented or leased, the nonprofit may have to pay a fine for breaking the lease. Any remaining funds may be used to pay off any such fines associated with closure.

Ensuring a Smooth Transfer of Responsibilities

Transferring responsibility from one board member to the next must be accomplished in a timely manner. All vacant positions must be filled in a reasonable amount of time, so for the board member who is ready to leave, ha having an exit strategy can be helpful.[i] This strategy may include grooming someone to take over the post or simply keeping records in very good order.

Completing the Nonprofit’s Mission

Some nonprofits complete what they have set out to do. There may be other and perhaps even related potential missions, but if the goal of the nonprofit in question has been accomplished, then it is time to dissolve the NPO in success.

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[i] Idealist.org, online. http://www.idealist.org/en/faq/61-72/60-2

Stepping Down and Dissolution

For board members who are ready to step down, there are a few rules that need to be followed. Additionally, if the organization is ready for dissolution, then there are regulations in place that govern the distribution of the NPO’s assets.

Determining When to Step Down

For members who have expressed a desire to leave the board, there are a few pertinent questions to ask to determine if it is the right time to leave the organization.

• Does the member still feel a passion for the mission?
• Is the organization set up to get along without the member?
• Has the member accomplished what he or she specifically set out to do?
• Does the member have something to contribute as an employee?
• Is there anything that could change the member’s mind about staying?
• What is the motivation for leaving?

Honestly evaluating the motivations for leaving will ensure that the board member in question is not making a hasty decision, and that a smooth transfer of responsibilities can take place.

Audits

Nearly all NPOs request an external audit at some point in their operations. Healthy nonprofits will seek out an audit in order to ensure that the operations of the business are both legal and contributing to the primary mission of the organization.

Some states require external audits for larger NPOs to maintain nonprofit status. Almost all audits find that some number of changes should be made to an organization. Because non-interested parties are completing the inspection, it is most often best for an NPO to follow the advice of the auditing company.

Furthermore, all Form 990 filings are subject to the Freedom of Information Act (FOIA) and must be made available to anyone who requests them. Photocopies are required to be made available at “a reasonable price.” If a request for information comes in writing, the NPO has 30 days to produce the requested information. As such, pertinent financial records should always be kept on-site to deal with the occasional audit and information request.

Financial Duties

Financial Statements and Balance Sheets

Financial statements are usually given quarterly to the members of the board. These reports are typically prepared by the CFO. Generally, the statements track an opening balance that is then added to and subtracted from throughout the course of a year. Such statements also include expenditures broken down into different categories for analysis. The information from these statements appear prominently in the annual report, and keeping this information accurate is an important aspect to maintaining legal and healthy financial operations.

Chief Financial Officer Duties and Hiring Professional Accountants

Many organizations use an outside accountant to help file the annual Form 990 with the IRS. Small NPOs can often get some discount of the services of a tax accountant, though larger organizations are more likely to pay full price.

Unless the CFO of an NPO organization is an accountant who specializes in nonprofit work, it is a good idea to take advantage of a hired accountant. In order to ensure that operations are legal and that any future audits will not turn up any illicit information, even small organizations rely upon outside tax professionals.