Nonprofit Accountants In New Jersey
As a nonprofit organization, your primary focus is serving the greater community. But the financial end of the not-for-profit business can be nuanced and time-consuming, and it can pull you in numerous directions, ultimately detracting from your end goal. Cg’s accounting services for nonprofits offer a vital framework of support for your nonprofit, including auditing, grant-writing, financial strategizing, and more, so you can get back to doing what you do best: serving the community.
Our Non Profit Accounting Services
- 403(b) audits: We’ll eliminate unnecessary expenses and ensure your compliance with ever-changing reporting requirements, all while maintaining essential employee benefits.
- Grant accounting: From writing effective proposals to analyzing contracts to efficient fund allocation, we can handle every aspect of your grant-generated income.
- Internal control evaluation: After meticulously studying your controls, we’ll develop and implement a plan to help your organization run smoothly and save money.
- Strategic planning, budgeting, and reporting: You have big plans for the future, and we can help you get there. We’ll develop an in-depth strategy for your continued business success, and provide detailed reports on your progress.
- Technology and software recommendations: Accounting technology doesn’t have to be intimidating. We can show you the ins and outs of cutting edge accounting software that will streamline your procedures and make budgeting, data analysis, and planning incredibly easy.
- Taxation and compliance: Losing your tax-exempt status could mean serious financial consequences. We help your organization adhere to important state and federal requirements, so you can hang onto that exemption.
- Fundraising planning: Fundraising is a nonprofit’s lifeblood. You have a plan to reach new donors and engage returning ones. Let us help implement it, then manage the incoming funds so you don’t let a single dollar go to waste.
- Joint cost allocation: By carefully examining your organization’s expenses, we can allocate joint costs to appropriate activities. This way, you can dedicate resources to your programming and operations at the same time.
There are many questions surrounding nonprofits and the taxes they have to pay. Our non profit accountants have answered some of them here for your convenience. In the information below, we’ll highlight the difference between dividend vs. capital gains, break down what capital gains tax is, analyze the components of their tax liability, and talk about other nonprofit tax benefits and exemptions.
Do Nonprofits Pay Capital Gains Tax?
Whether or not nonprofits have to pay capital gains tax is a question that every nonprofit organization, private foundation, and their donors have to answer every tax season. The answer, unfortunately, isn’t as simple as a yes or no. Depending on the specifics of your organization’s financial situation, you may be liable for paying federal taxes, including income taxes on any profits you make from investments and property sales.
As long as a sale of an investment or a piece of property relates to tax-exempt purposes, a nonprofit doesn’t have to pay capital gains tax.
A real estate example: As long as the real estate being sold by a nonprofit is being used for its tax-exempt purpose, such as housing homeless families, operating a school, or other public charity activities, then a tax-exempt organization doesn’t have to pay capital gains tax on a sale. The exemption, however, only applies to the tax-exempt portion of the property being sold. This means that if you have one building with 50% of its square footage used for charitable contributions and another 50% for taxable ones (such as a private business or managing a tax-paying organization), then the tax exemption only applies to the 50% tax-exempt space. Other assets subject to capital gains tax include certain investments like mutual funds and stocks.
What is the difference between Dividends and Capital Gains?
Dividends and capital gains are two different things. Dividends are when a company pays money to its shareholders from its profits. When you sell something for more than you paid for it, that’s called capital gain. In other words, when the fair market value of an asset is greater than your purchase price, you will incur a capital gain on the sale. If, however, an asset’s current fair market value is less than the amount you paid for it, the result is a capital loss upon sale.
If you sell a capital asset for a profit, your capital gain is the difference between what you sold it for vs. your purchase price. For example, Your office furniture investment valued at cost basis is $750, and the current fair market value for the property is $2,000. When you sell the asset, you will incur a capital gain of $1,250.
However, the federal government does provide some exemptions to capital gains tax, such as exempting sales of certain types of real estate and property owned by a nonprofit or tax-exempt organization.
Are There Other Nonprofit Tax exemptions:
If your nonprofit has taxable income and has to file a 990-T tax return, you may be exempt from paying capital gains tax on that income. A 990-T is a form filed by charitable organizations with more than $1,000 in investment income or gross receipts from fundraisers or gambling activities.
If your charitable organization generates income from a trade or has revenue from an unrelated business – a business that isn’t related to charitable activity – then it’s exempt from paying capital gains tax on those profits as well. However, the percentage of your charitable work must be greater than the percentage of your business. For example, suppose you have a nonprofit that runs a charitable thrift shop of volunteers but also works as an accounting firm for other companies on the side of its philanthropic activities. In that case, you’re exempt from paying any capital gains tax rate on the sale of any property related to your charitable organization’s work.
The same exemption applies if your charitable organization rents out space in its building used for philanthropic purposes.
Talk to an accountant or tax adviser to ensure that your charitable organization is exempt from paying capital gains tax. They can help you navigate the murky world of charitable deductions, net operating losses, and other issues involved with charitable giving.
What are the Advantages of Nonprofits being Nontaxable?
There are several benefits to having a nonprofit organization exempt from capital gains tax.
- Nonprofits have access to 100% of the donations to charity, and they can reinvest all of their profits back into the organization. This allows them to grow and expand their services, which can help more people in need.
- Nonprofits don’t have to worry about complex tax regulations, meaning they can focus on their mission and helping those in need.
- Nonprofits can fundraise more easily as potential donors know that when they donate assets to charity, it will go towards helping those in need. In addition, the donors are entitled to write off their gifts to charities as a charitable deduction when computing their tax liability.
- Having a nonprofit organization exempt from capital gains tax can inspire others to start their charitable organizations, thus helping even more people in need.
Capital Gains Tax for Nonprofits – Conclusion
As you can see, capital gains tax doesn’t apply to capital gains that are related to an organization’s mission or purpose. If your capital gain is taxable, this will be taken care of when you file your regular income tax return (which includes medicare tax and social security tax).
Do Nonprofits pay capital gains tax? The answer is no if the capital gain is related to their specific purpose or cause. Please speak to your accountant or adviser for more information about capital gains and their effect on tax-exempt organizations.
Why Hire Cg’s Nonprofit Tax Accountants?
Nonprofit taxes can be complex. The fact is that nonprofits often have special circumstances and require more personalized assistance. Not every accounting firm offers that type of close attention and care, but Cg does. Our expert Nonprofit Tax Accountants are ready to go above and beyond for our clients, providing the specialized knowledge and services that nonprofits need, like maintaining non-exempt status, crafting winning grant proposals, assisting with fundraising plans, managing donations, and much more.
Cg: A Step Above the Rest
When you put your financial interests in the hands of our certified public accountants and consultants, you don’t only get spreadsheets and tax returns – you get four decades of experience with professionals that care about your values as much as you do. Your success is our success, so we’ll do everything we can to help you thrive. We’ve worked with charitable organizations, foundations, trade associations, veterans organizations, and more, so we know what nonprofits need. We’ll take time to understand your goals and values, then use them to provide top-notch accounting services that streamline your finances and advance your cause.
Your organization has a complicated financial framework, so you need accountants like Cg’s, who offer solutions customized for the nonprofit structure. We’re not only crunching numbers, we’re taking care of all the little details that allow your organization to grow, expand, and spread your positive influence. Contact us today at 732-676-4100 to learn more about how we can help.