Another potential form of taxation might include income generated by investment incomes and property held by the NPO. Like any business tax, this tax must be paid quarterly on investment income of more than $500 per year. A professional accountant will be able to give advice on the quarterly filing on any such income.
In addition to the IRS forms required for an NPO, every year or fiscal quarter statements and reports must be prepared for organization associates and board members. Depending upon the size and mission of the NPO, this task can be quite involved. Even financial information that shows an organization in a negative light will likely, depending upon individual state laws, have to be made public.
Finally, when it is time for an NPO to dissolve, all physical property and assets must be given away to another recognized NPO. The founder and the investors will not recover compensation for any money or property that was originally put in to the venture. This rule exists to prevent NPOs from becoming money-laundering schemes and is applicable in all 50 states.
The tax-exempt status of an NPO can be a considerable benefit, but knowing the intricacies of tax law is essential to running a successful and lawful nonprofit. Being prepared for the negatives as well as the positives of running a not-for-profit can help to sufficiently prepare a would-be NPO founder.
