SVA's 2021 Year in Review: Nonprofit Industry

In this Biz Tip, SVA's nonprofit industry experts share the common problems and questions from their clients in 2021, and offer recommendations for 2022.

Was there a common problem or issue experienced by nonprofit clients in 2021?

The biggest issue this last tax year with nonprofit clients was their general lack of understanding of how returns work. This includes:

• The importance of the return regarding compliance with IRS requirements
• The due date of the tax return
• Their responsibility for the filed return

These organizations may not feel they have the funds to hire an outside expert to assist with their tax returns, so they use staff or board members with little or no expertise to facilitate their returns. This lack of knowledge can lead to many complications for the organizations, not only with the IRS, but possibly paying too much or too little taxes.

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Were there common questions asked by nonprofit clients in 2021?

IRS Form 990, Return of Organization Exempt from Income Tax, resulted in many questions from nonprofit organizations.

Form 990 presents expenses grouped differently than what organizations would expect. In addition, the form requires compensation to be reported for certain individuals and determining what goes into the compensation amount reported in the form can be challenging.

The form also has many questions where a response is required by the organization. For example, there are questions about whether certain policies and procedures are in place at the organization.

A major source of confusion is the difference in year-end dates among organizations, and the subsequent due date for Form 990. The due date for Form 990 is on the 15th day of the 5th month after the organization's year-end date. So if your organization has a calendar year-end date, the due date for your Form 990 would be May 15th.

There were questions surrounding the Paycheck Protection Program (PPP) loans and how those should be reported in the form. These aspects of Form 990 were the source of many questions from SVA’s nonprofit clients.

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Looking ahead to 2022, what recommendations does SVA have for nonprofit organizations?

Based on the questions revolving around Form 990, the biggest recommendation SVA has is to become more familiar with the form - what it includes and why the information is needed.

SVA offers training for nonprofit board members and management on Form 990 to help them better understand the form and make next year’s tax return easier to understand.