Common Non-Profit Financial Mistakes and How to Avoid Them

Charts and graphs on a black clipboard with a blue note reading “NON PROFIT” in El Paso.

Non-profit organizations have the goal of meeting community needs that might otherwise go unmet. They fill a service gap by benefitting people and animals and addressing social justice issues. By nature of being a non-profit, these entities are exempt from paying income tax on net revenue, and donations to the non-profit can generally be deducted by the donors. Our firm cautions non-profit organizations to seek professional guidance because we see many common financial mistakes that can lead to serious consequences.

At Marcus, Fairall, Bristol + Co., PPLC, we strongly believe in and encourage giving back to the community. In fact, our partners are active within the local non-profit community, and we understand the important role non-profits play. That’s why we urge these organizations to seek a consultation to ensure that they receive knowledgeable tax information. Below, we enumerate some of the tax mistakes that we see. Contact us online or call (915) 775-1040 to learn more from our El Paso non-profit accounting specialists.

One of the most significant mistakes a non-profit can make is the failure to establish proper financial oversight. The absence of a well-structured financial management system requires clear roles and responsibilities for financial staff and regular, thorough financial reporting to the board of directors. Without proper non-profit accounting, mismanagement or financial irregularities can occur.

Non-profits often make the error of mixing personal and organizational funds. This co-mingling of funds makes it difficult to track and report financial transactions accurately. In turn, this can lead to legal and tax complications.

Many non-profits overlook compliance with federal and state regulations. This may mean missing important deadlines for filing required documents or failure to maintain proper records.

Poor record-keeping can lead to financial discrepancies, miscalculations, and even fraud. Proper bookkeeping and accounting records allow for transparency with donors, supporters, and regulatory agencies. With the help of our firm, your agency will be positioned correctly and entitled to the tax benefits of a well-run agency.

In their aim to do good, non-profits sometimes may over-promise by failing to create and adhere to a realistic budget. With a commitment to a realistic financial plan, non-profits can ensure they have enough resources to fulfill their mission effectively.

How Do You Know When to File Non-Profit Tax Returns?

Non-profit tax returns, such as Form 990, are public documents. This means they are accessible to anyone who wishes to view them. Typically, the IRS website will post the latest forms for the upcoming tax year within a year, so you always have time. However, by working with a non-profit accounting firm, these specialists can keep you informed of all the upcoming deadlines that may impact your organization.

Failure to file required nonprofit tax returns can have serious consequences, including the loss of tax-exempt status for not filing required information returns for three or more consecutive years and financial penalties and fines for late or incorrect filings.

How a Nonprofit Accounting Firm Can Help Avoid These Mistakes

Certified Public Accounting firms are an invaluable resource that can help steer your organization clear of these common financial pitfalls. They offer expertise in managing nonprofit finances, ensuring compliance with tax regulators, maintaining accurate records, and providing budget assistance so your organization is financially stable.

Non-profit Accounting in El Paso

If you are looking for tax-related guidance for your non-profit organization, Marcus, Fairall, Bristol + Co., PPLC is here to offer our expertise. We offer non-profit accounting services in El Paso and surrounding areas, as well as tax planning and preparation

services. Call (915) 775-1040 to speak to one of our specialists today!