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Do churches have to file a 990?

No they do not. According to the IRS website, "Generally, tax-exempt organizations must file an annual return. Tax-exempt organizations that have annual gross receipts not normally in excess of $25,000 are not required to file the annual information return, but may be require to file an annual electronic notice (e-Postcard) From 990-N. In addition, churches and certain religious organizations, certain state and local instrumentalities, and other organizations are excepted from the annual return filing requirement.

Are contributions to our organization...such as to its annual auction...tax-deductible on the donor's personal tax return?

If your organization is recognized as tax-exempt by the IRS contributions to the organization may be tax-deductible for the donor. To be a contribution, however, the donor may not receive anything of significant value in return for his donation. Therefore, for example, the value of items donated to an auction may be tax-deductible for the donor. However, the amount paid for items purchased at the auction is typically not tax-deductible as a donation becuase the purchaser is receiving something of value (whatever is purchased) in return for the amount paid. The exception may be if it can be documented that the amount paid exceeds the fair market value of what is received. For example, if someone pays $50 for a $25 gift certificate to a local restaurant. Commonly, however, whatever is bid for an auction items is considered by the IRS to be the fair market value of the item. Similarly, paying for raffle tickets and purchasing fundraising products is not considered a tax-deductible charitable contribution. (Copyrighted information reproduced with permission by Pfau Englund Nonprofit Law, P.C., www.nonprofitlaw.com)

Does our organization need to develop and approve an annual budget?

One of the primary legal responsibilities of the governing body of any nonprofit group is to be properly handle the group's finances. Developing an annual budget, and having it approved by the governing board or the membership as appropriate, is an important basic leadership responsibility of your organization. The budget does not need to be elaborate but should show at a minimum the primary sources of income for the coming year and estimated amount of income from each, and the primary categories of expenses aprroved for the year. In addition, it is a good idea to develop and approve a basic financial operation policy. The policy should specify at a minimum how many signatures are required on checks (for example one signature for budgeted amounts of $500 or less; two signatures for amounts greater than $500) and who may sign checks. It also is a good idea to implement standard financial controls in which the person(s) signing checks is different from the person who approves the expense and making yet a third person responsible for reviewing and reconciling the bank account each month. (Copyrighted information reproduced with permission by Pfau Englund Nonprofit Law, P.C., www.nonprofitlaw.com)

Can my organization use another organization's sales tax exemption number? What about another organization's EIN?

Organization's should not use the identifying numbers of other organizations. Sales tax is administered at the state level. Many states provide exemption from the state sales tax to organization's recognized by the IRS as tax-exempt charities. The exemption, however, generally is not automatic. An organization must apply for it from each state in which they believe that they are eligible. Many states provide a state sales tax exemption number to an organization that is recognized as exempt from the state's sales tax.

The federal employer identification number (EIN) is an identifying number for an organization similar to how the federal social security number identifies an individual. The EIN has no relationship to tax-exempt status. All organizations, whether for-profit or nonprofit, tax-exempt or not, usually must have an EIN for banking and other purposes. EINs are easily obtained by completing IRS Form SS-4 (available online at www.irs.gov). (Copyrighted information reproduced with permission by Pfau England Nonprofit Law, P.C., www.nonprofitlaw.com)

Do we need to file a tax return for our small nonprofit group?

The IRS is now requiring that all organizations recognized by the IRS as tax-exempt must file an information return (IRS Form 990 or 990-EZ or 990-PF) regardless of the gross receipts brought in by the organization.

The IRS frequently charges penalties for late filing of the required information return. An attorney or accountant can often assist your organization in determining if you had a "reasonable cause" for failing to file the returns and assist your organization in seeking a waiver of the penalties. (Copyrighted information reproduced with permission by Pfau Englund Nonprofit Law, P.C., www.nonprofitlaw.com)

What is a 990? 

Form 990 is an Internal Revenue Service “information return” that many nonprofits must file every year. Nearly all the information in the form is available to the public; increasingly, completed 990s are posted on the IRS website.

What is Unrelated Business Income Tax (UBIT) and how is it reported?

Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the bases for the organization's exemption. An exempt organization that has $1,000 or more of gross income from an unrelated business must file a Form 990-T. for more information visit www.irs.gov.

How should we document gifts-in-kind?

Donors of tanglible goods (gifts-in-kind) should receive an acknowledgement or receipt for their gift that accurately details the gift. However, the donor is responsible for declaring the value and could do so with a receipt for newly purchased items or by using a third party appraiser.

Must all nonprofits file a Form 990 with the IRS each year?

Yes, the IRS now requires all nonprofit organizations to file the appropriate form of the 990 each year. For more information visit www.irs.gov.

What is an A-133 and are we required to have one?

A more detailed type of audit is required for organizations which spend $300,000 or more (in a given year) in total federal funds (including federal funds which have passed through state or local government agencies). This audit, performed by a C.P.A., is described in OMB Circular A-133 and is usually referred to as an A-133 audit. A-133 audits are frequently substantially more expensive than "regular" audits. The complete text of OMB Circular A-133 can be found on-line at: www.whitehouse.gov/OMB/circulars/a133/a133.html. You can also order it by phone from the Office of Management and Budget Superintendent of Documents, at 202/512.1800.

What are internal controls?

Internal controls are a set of policies and procedures which help ensure operational efficiency and prevent the deliberate or misguided use of funds for unauthorized purposes. Nonprofit organizations need strong internal controls because they hold a public trust which is conferred upon them with their tax-exempt status and because they must ensure that donated funds are used for the purposes which donors intended.

How should we determine the compensation for our Executive Director?

It's advisable to benchmark against other comparable positions in your area. The Nonprofit Times conducts an annual "Salary Survey" in the industry. The 2005 Survey in available at www.nptimes.com/Feb05/sr1.html.