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When are Nonprofit Taxes Due?

There are many perks to operating a nonprofit organization, one of which is being exempt from federal income taxes according to the Internal Revenue Services (IRS) subsection 501(c). The tax deadlines for nonprofits vary as to what tax status the nonprofit falls under. The most common tax status amongst nonprofits is a 501(c)(3) status. This status allows an organization’s donors to write off their contributions and the organization to be tax-exempt from income and sales tax. 

Since nonprofit organizations fall under the category of “charitable work,” their main nonprofit taxesmotivation is not to amass monetary wealth. Thus, the United States government offers substantial benefits to these meaningful organizations as a token of gratitude for their service to society and the nation.

Taxes Nonprofits Do Pay

Even though nonprofits are exempt from paying a substantial tax amount, they do have to pay employee taxes. According to the Federal Insurance Contributions Act (FICA), all employees in a nonprofit organization must pay Social Security and Medicare taxes on earnings over $100 or more. Similarly to for-profit organizations, nonprofits are legally obligated to withhold Social Security and Medicare taxes. The tax on employee wages is due quarterly: January 31st, April 30th, July 31st, and October 31st.

 Nonprofits are also required to pay federal unemployment tax (FUTA) to employees that have lost their jobs. However, FUTA can be exempt if a nonprofit has a 501(c)(3) status. If an individual within the organization fails to comply with IRS tax procedures, then a Personal Liability tax is issued upon this certain individual within the organization.

Taxes Exempt for Nonprofits

When addressing what taxes are exempt from nonprofits, it is important to address what type of federal tax code a nonprofit has in the first place. In the instance of a 501(c)(3) organization, the most common tax status amongst nonprofits is exempt from paying federal income tax in addition to some state taxes, like sales and property tax. However, all tax exemption statuses are investigated case by case by the IRS. For example, in Washington, nonprofits are required to collect retail sales tax from the sale of goods. While in Michigan, there were tax exemptions offered to nonprofits seeking to purchase personal property. 

Qualifications for 501(c)(3)

In order for a nonprofit to qualify for a 501(c)(3), an organization must fall under a purpose for operation outside monetary gain. Such purposes include scientific, educational, religious, charitable, literary, public safety, and prevention of animal/human cruelty. Nonprofits that fall under these purposes must then incorporate to file for tax-exempt status. Then, the organization must provide its Employer Identification Number, Article of Incorporation/ business purpose, Form 1023, and complete a state-level application if necessary. After the 27th month of incorporation and filing the Form 1023, the nonprofit achieve its long-desired tax-exempt status. 

To maintain its tax-exempt status, nonprofits with gross revenue over $50,000 must annually file an IRS form 990EZ, while nonprofits with a gross receipt below $50,000 must file a form 990-N. These 990 forms are due every year by the 15th day of the 5th month after the close of your tax year.

Obtaining a 501(c)(3) has benefits in addition to the tax-exempt status it provides, such as certain grants being available for these organizations. Additionally, being certified as a 501(c)(3) organization reflects the credibility of an organization that files its forms with due diligence and complies with the IRS. With the tax exemptions that nonprofits gain, they can focus their spending on improving their organizations and further-reaching their commendable missions of creating a better world.

Financing Solutions Nonprofit Line of Credit

Since 2012, A+ 5 star BBB rated Financing Solutions has been the leader in providing nonprofits with a line of credit that is easy and inexpensive.

Unlike a bank, Financing Solutions does not require any collateral or personal guarantees which has always been the biggest stumbling block for nonprofits.

Nonprofits will often use their line of credit as a cash back up plan when cash flow is down and when important bills must be paid. The line can be used and paid back at any time.

The nonprofit credit line costs nothing until used and is inexpensive when needed. If your nonprofit is doing at least $200,000 per year in revenue then you will probably be qualified.

The application is online and takes 2 minutes to fill out requiring no documents for a written offer letter. There are no credit checks done for the application and you will be sent a written offer letter to consider. A FS Relationship Manager will call you to answer any of your questions.

The time to set up a credit line is when your nonprofit doesn’t need it. You can find the 2-minutes online nonprofit line of credit application here.

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