- About Us
- Legislative Center
- Contact Us
It’s Tax Time
By Jimmy Warden
One thing we always can count on every year besides peak delivery season and peak vacation season is tax season! Yes, it’s almost time for all branches to file their tax returns with the IRS. This is a yearly requirement for all nonprofit organizations, including NAPS.
Each branch is required to file income taxes by the 15th day of the 5th month at the end of the branch’s fiscal year. Most branch’s fiscal year likely ends on Dec. 31, so you are required to file your tax form between Jan. 1 and May 15. The gross income for the fiscal year of your branch will determine which tax form needs to be filed:
Gross receipts are determined by all income the branch received for that specific fiscal year (monthly DCO, interest on investments, etc.).
NAPS branches fall under the tax-exempt law 501(c)(5). Prior to 2007, tax filings were not mandated for most nonprofits. The law changed in 2007; every non-profit has to file a tax return for three consecutive years. A nonprofit organization that fails to file a required 990-N (or forms 990 or 990-EZ) for three consecutive years will lose its tax-exempt status. The revocation of an organization’s tax-exempt status will not take place until the filing due date of the third year. If you do not file on time, the IRS may assess your branch a late fee.
Each state has different tax laws. Most states do not allow 501(c)(5) tax-exempt organizations to avoid paying state sales tax. I recommend you contact your state Department of Revenue to determine income tax filing requirements.
If your branch does not have a federal employer identification number (EIN), you need to apply using IRS Form SS-4 before filing for nonprofit status. When filing for nonprofit status, complete and mail IRS forms 1024 and 871, with supporting documentation, to the IRS.
These three forms can be found on the NAPS website under the “Members” section under “Forms & Documents.” Scroll down to the section on “Training.”
When mailing the forms, you also must include current copies of your branch’s:
There is a $600 filing fee payable to the United States Treasury. You may want to verify the fee as it may have changed.
In preparation for nonprofit status, a branch needs to:
When managing records, the branch needs to maintain the following on a manual general ledger or a computer accounting program such as QuickBooks:
Records that need to permanently be kept are:
All tax returns, general ledgers and financial reports should be kept for three years, plus the current year. I strongly recommend you keep all these records for seven years should the IRS request an audit of the branch’s tax return from three years prior. The IRS can, should deficiencies be found, request another three years prior to the year they are auditing.
Key issues most branches are unaware of include:
Should any branch have a concern regarding filing taxes, you can refer to the NAPS website. Under the “Member” section, click on “Forms & Documents” and scroll down to the “Training” section. There is a 46-page slide presentation that explains the process.
Some branches hire a tax consultant/preparer to prepare and file their taxes yearly. This is something your branch may wish to consider to at least get you started if your branch has not filed or does not have an EIN. Filing yearly tax returns is every branch’s responsibility.