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Accepting Non-profit Donations From Individuals and Companies
from:For charitable non-profits, donations from individuals and other companies are an essential part of operations unless they were founded with the sort of endowment that pays constant dividends. However, even thought he IRS may have granted these organizations tax exempt status under their own 501 regulations, that doesn't mean they won't be keeping an eye out for any inconsistencies on the part of your bookkeeping.
Of course, charitable non-profits have to register with their states as corporations before they can even apply for satus as a non-profit. Donations generally are put on hold during the initial phase while the IRS puts their application in line with everyone else's (unless a “rush” fee is paid to put your application in front of eyeballs immediately).
This means that the non-profit organization (or NPO) must have at least two (more often three, depending upon the state) officers and meetings at least once per year where duties are assigned and financial matters are attended to and voted on. It must also decide upon a course of action to further its charitable mission under the guidance of a chairperson or president. Non profit donations accepted during the time period between incorporation and the granting of an exempt tax ID number may still be accepted, but with certain regulations as outlined by the
Of course, non profit donations can always be accepted if the donors don't expect to get a deduction from their donations of time, money or things. This leaves a lot of room for bake sales and fun fairs, since the organization only has to make sure the proceeds are used in the manner outlined to the IRS and definitely not benefiting a member of the board either personally or professionally.
The number and type of organizations with missions approved by the IRS is truly staggering, with educational, religious and social organizations all competing for the same relatively small pool of non profit donations. Of course, the best way for such an organization to grow is to encourage now sources of charitable giving.
For instance, it was Goodwill Industries that first came up with the idea of using car donation as a way to generate operational funds. However, as automotive donation became more prevalent in the 1990s and ongoing wars sparked budget crisis in Washington, the true usefulness of many non profit donations came into question, especially when unregulated, for-profit industries were taking thick cuts off the top of vehicles entrusted to them. The same is true of household goods and clothing.
As such, IRS regulations have been very strict regarding the amount of a deduction a donor can take without confirmation of the gift from the charity itself. When items are sold for a profit to be rolled back into the non-profit, the donation of items other than cash must be accompanied by a Form 8282 that is sent to the IRS as well as a form 8283 that is sent to the donor for use with their Form 1040 filing.
This means that for any non profit, donations must be very carefully taken care of. The name, address and receipt of donation for each and every item taken in with a value of over $250 must be recorded so the appropriate paper work can be sent off later. Though this requires someone to take care of all that paperwork, the threat of audit (or even loosing the exempt status that can take two years to acquire from one end to the other), is enough to justify that function.
It should, of course be planned for. With start up non-profits, donations are usually handled initially by the treasurer until that function becomes overwhelmed and a full or part-time donation manager is required. Learning how to handle growth in non profit dontaions is part and parcel of handling the most lucrative types of donations. Generally, anything you can find time to do yourself or with volunteer labor is far less expensive than letting an external service handle it for you, as is the case with third-party donation agents and vehicle donation.
Non-profit donations are best spent with organizations that have the ability to use the item directly, or at least has the time and mission to get a retail price for the sale of the item. As such, it's best to check out any potential non-profit's donation schedule in an effort to maximize charitable benefit and tax deduction.
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