Donation Details Matter– Some Pointers

Donors want to give, members want to renew memberships, but sometimes they cannot. It can be a real problem for an organization, which may have spent a lot of money and energy in development, but then, somehow it doesn’t receive the funds.  What could be the problem?  It’s on the details…  which some may consider to be a no-brainer, but still, they deserve a second look because they are so common problems.Below are a couple of details to pay attention to:

Detail 1– Links should work

Recently, I received an invoice as an attachment to a nice email. All was well done and professional until I clicked on the link for online payment. Then, I was taken to an error page on the nonprofit website.  Now it’s up to me to figure out how to pay the organization. Do I look around the website for a link? Write a check?  Maybe leave this alone for now…and the organization may never see any donation or membership payment. Some prospective donors may never contact the nonprofit with this issue, and the bad link detail will go on undetected.

*** Pointer —  Check regularly on the invoice or email master text to make sure it’s still valid.  Usually, changing only one invoice or email doesn’t work well, since most systems use a master file that populates all the communications with donors.

Detail 2 – Take information over the phone easily

Have everybody in the organization trained in handling payments over the phone. Not just accounting folks. All the information and forms should be easily accessible and ready to be used, including online forms. When donors or others call to make a payment, get it done, which may be easier said than done. I have seen people transfer donors from one person to another– don’t do that. Don’t frustrate the person on the other end of the line.  Everyone should know how to handle the calls, help and get any payment.

***Pointer — The nonprofit could have a phone setup for people who want to pay so that they can do it so easily. The message could be,  “If you want to make a donation or a payment, please press 1 and someone will get the information right away.”

Detail 3 — Process donations quickly

Money should be in the bank, not sitting in someone’s drawer or safety box. The longer a nonprofit waits to process a donation, the more likely it is for it to have issues with bounced checks or charge backs. Online donations take care of most of these issues, but part of processing donations should also include who, how and when you want to thank donors.  Maybe a donation over a certain amount would receive a different type of acknowledgment than those that give only $10.

***Pointer — Develop policies and procedures regarding donation processing with specific people in charge of sending thank you notes, using autopen and when to actually obtain a real signature.
Nonprofits are competing with other organizations for every cent they get. Sometimes the day-to-day activities cloud the importance of making donations easy and stress-free. Sorry, but if I’m put on hold for a bit too long or get attitude or cluelessness, I hang up and give my money to someone else. So it’s important to make donating an easy, pleasant experience, not one where donors get error messages on the computer or an aggravating phone person. Details matter.
 

 

Check out the book “Nonprofit Finance: A Practical Guide” –– Nominated for the 2016 McAdam Book Award

 

Tax Forms Nonprofits Need

It may come as a shock that nonprofits may be tax-exempt, but they may need to file tax returns and even pay taxes on certain income, including those at local, state, and federal levels. If nonprofits fail to file the forms, they may lose their tax exemption,  be liable for penalties and interest, making tax compliance a priority to many organizations. This article focuses on federal and California tax forms and requirements.

Below are some tax issues and forms nonprofits should mind:

Sales Tax

States and local authorities may collect sales tax on fundraising efforts, including proceeds from auctioned items. Some states allow for exemptions if the nonprofit files an exemption form before the event.

In California, sales taxes are applied to certain auction items, and the nonprofit must remit the tax using the form BOE401a2. Depending on the case, you may need to file the taxes online and pay using a regular check, e-check or another method.

Payroll Taxes

Nonprofit organizations must follow the law when it comes to payroll taxes, including withholdings and paying their share of Social Security tax unless the nonprofit has its own approved retirement plan.

Nonprofits file the same payroll forms, as for-profit business do, such as the form941, Employer’s Quarterly Federal Tax Return, and form 940- Employer’s Annual Federal Unemployment Tax Return. Also, a nonprofit distributes tax forms W-2 to employees in the beginning of the following year with summaries of salaries and withholding.

Note that states have their own payroll taxes that nonprofit must comply with and pay. California has the form DE1NP Registration Form for Nonprofit Employers and DE-9 Quarterly Contribution Return and Report of Wages.

Annual Information Tax Returns

Except for religious organizations and a few others, nonprofits are required to file a form within the 990 tax series a few months after their year-end. Small organizations may file online the e-card 990-N, giving the IRS basic information, such as name and address of the nonprofit. Larger organizations file the forms 990 Return of Organization Exempt from Income Tax, or the 990-EZ, which are more detailed, requiring specific numbers for revenues and expenses along with information on programs and board of directors. If the nonprofit doesn’t file taxes for 3 years, its tax-exemption may be revoked, including smaller organizations.

In addition, states like California have their own reporting and paying system. In California, for instance, requires annual reporting – FTB 199N of smaller organizations, with larger ones filing longer, more detailed form 199.

Unrelated Business Income Tax

There are instances where nonprofit may compete unfairly with for-profit businesses, such as a nonprofit opening a restaurant with no connection to its mission. Many exceptions apply, but if the organization is deemed to have unrelated business income, it must file form 990-T with the IRS and pay the proper tax, also known as UBIT.

Note that California requires that nonprofits with taxable income to fill out the form 109 Exempt Organizations Business Income Tax Return.  Other states may have their own reporting and paying requirements.

>>Be sure to double check the requirements for these forms at least once a year, since things change often and you don’t want to be out of compliance. For instance, Obamacare has requirements for businesses, including nonprofits, to provide health insurance for employees if the organization has a certain number of employees.  It also may be possible for smaller nonprofits to get the Small Employer Tax Credit.  Since Obamacare may change in the future, keep an eye of this and other issues.

 

Check out the book “Nonprofit Finance: A Practical Guide- Second Edition” –– First edition Nominated for the 2016 McAdam Book Award

What you need to organize a nonprofit well – Article-Blog