2020 was a historic year. Economies shut down and many of us changed our lifestyles to help protect loved ones. Perhaps you even decided that this was the year to start that community foundation or nonprofit organization. Now that you’ve set up your website and coordinated your services, you’re ready to change the world.

Now it’s been a year and it’s time to pay taxes.

Do nonprofits have to pay taxes? Aren’t they tax-exempt?

Nonprofits – 501(c)(3) – still need to file tax forms. They aren’t taxed like traditional businesses, but they still have to file annual reports to the IRS for regulatory reasons.

The type of form you submit depends on your income and organization classification. This article will provide a brief overview of the nonprofit tax filing process. For other non profit-related tax issues, we recommend this section in this article:Accountants for Nonprofits.

First, Have You Filed for Tax-Exempt Status?

If you are a new nonprofit executive, you might not have registered as a 501(c)(3), the official designation for tax-exempt entities. Simply declaring yourself a nonprofit is not enough. The IRS requires specific forms.
 
You can file as a 501(c)(3) by using the 1023-Series Application. The IRS also requires you to apply for an Employer Identification Number (EIN) even if you don’t have employees. You can learn more about the Internal Revenue Code Section 501 on the IRS website.

File the Correct 990 Form Based on Income

After you’ve been approved to be a 501(c)(3), you need to determine your nonprofit’s annual income. This number will be based on your gross receipts: donations, program fees, merchandise sales, etc. Most nonprofits fall under these two categories.
 
Less than $5000: Not required to file
 
More than $5000 and less than $50,000: File 990-N
 
Greater than $50,000: File 990 or 990-EZ

Exemptions and Exceptions

If your organization meets any of these criteria, you do not need to file a 990 or will need to file a 990 form different from the ones listed above.
 
Private Foundation: 990–PF
 
A private foundation is generally defined as a fund that comes from a single source like a family or corporation. The foundation does not engage the general public for donations or contributions. Check with the IRS or a tax professional to confirm that your entity qualifies as a private foundation.
 
Group Return Organization: Not required to file
 
Is your nonprofit part of a larger, parent organization? If so, the parent organization may file for you. If you’re unsure whether you’re part of a group return, contact the umbrella organization and ask whether or not you need to file tax returns.
 
Religious Organization: Not required to file
 
A religious organization can include churches, religious schools, missions or missionary organizations.
 
Government Programs: Not required to file
 
For a full list of exempt organizations, visit this page on IRS.gov.

When to File the IRS Form 990

For many, tax day is April 15th. This might not be true, however, for your nonprofit. Many nonprofits elect to operate on a fiscal year that’s convenient for them. Depending on the fiscal year you determine, the Form 990 is due on the 15th day of the 5th month after the end of the organization’s taxable year. This means that if your organization follows the calendar year (January 1 – December 31), your Form 990 would be due on May 15th of each year.

Penalties for Failure to File

Filing taxes can be complicated and difficult for many new nonprofit directors. For this reason, it’s important to begin filing early and consult a professional accountant if necessary. If a nonprofit does not file its 990 on time, the IRS will levy fines.
 

• From IRS.gov: “The Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization’s gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.” 
• If an organization fails to submit tax forms for three consecutive years, their tax-exempt status will be revoked. 
• The IRS publishes the list of organizations whose tax-exempt status was automatically revoked because of failure to file a required Form 990, 990-EZ, 990-PF or Form 990-N (e-Postcard) for three consecutive years.

 

Other Questions? Ask a Professional Nonprofit Accountant

 
There are other exemption status types and each has its own annual filing and Form 990 requirements. It’s important to seek help from a tax professional for your nonprofit tax filing. 
 
At Perry and Associates, we help a variety of nonprofit organizations throughout Ohio and West Virginia. We are members of the WV Nonprofit Association and partner with and sponsor various events held by Marietta College’s Nonprofits Lead. 
If you are a new nonprofit director needing tax advice, contact the team at Perry CPAs. We are well-versed in 501(c)(3) compliance issues and can make filing your annual taxes easy and hassle free. Click here to get in touch with one of our associates.

Last year was an uncertain year for everyone as COVID-19 paralyzed the world, including the economy and the pocketbooks of millions of Americans. The government responded with the CARES Act and Paycheck Protection Program (PPP). More recently, the government passed the American Rescue Plan Act of 2021.
 
But the uncertainty doesn’t end with the signing of a new stimulus bill. Headed into the end of tax season, many Americans are wondering what this legislation means for their 2020 filings. Have these new tax laws significantly affected your 2020 filing?

FAQs for Tax Laws for 2020 Filings

 
To assist, we’ve put together a list of common questions taxpayers have related to their 2020 filings. For specific questions, reach out to one of our CPAs. 

1. Will the stimulus check money I received be taxed on my 2020 filing?

No. Technically, all Economic Impact Payments, aka, “stimulus checks,” are considered refundable tax credits. The amounts are not counted toward your gross income, and therefore will not be taxed. 

2. I didn’t qualify for stimulus money based on my 2019 return, but I would qualify now given the current economic situation. Is there a way I can update my info and receive payments?

If your income now qualifies you for stimulus payments, you need to file your 2020 tax return as soon as possible. The IRS will use this information to send you the most recent round of stimulus money ($1400 based on the American Rescue Plan). Once they have your info, the IRS will then send you a direct deposit, check, or debit card.

3. If my business received a Paycheck Protection Program loan, will that be taxed?

PPP loans are also excluded from gross income on your 2020 filing. Forgiven expenses, however, are not deductible. To file for loan forgiveness, contact your lender for the required documentation.

4. I dipped into my 401(k) to cover expenses. How will that money be taxed?

The CARES Act made provisions for a “hardship withdrawal” of up to $100,000 for individuals who tapped their retirement accounts in 2020. Withdrawal penalties are waved up to that $100,000 amount.
This doesn’t mean that money goes entirely tax free. You will still pay income taxes on withdrawals from 401(k)s and IRAs. Pay attention to whether these withdrawals put you into a new tax bracket.

5. Speaking of tax brackets, did those change in 2020?

 
Tax brackets changed slightly to adjust for inflation. Reference the chart below to check your bracket and marginal tax rates for the 2020 tax year.
From the IRS:
 

2020 Marginal Tax Rates	Single Tax Bracket	Married Filing Jointly Tax Bracket	Head of Household Tax Bracket	Married Filing Separately Tax Bracket
10%	$0–9,875	$0–19,750	$0–14,100	$0–9,875
12%	$9,875–40,125	$19,750–80,250	$14,100–53,700	$9,875–40,125
22%	$40,125–85,525	$80,250–171,050	$53,700–85,500	$40,125–85,525
24%	$85,525–163,300	$171,050–326,600	$85,500–163,300	$85,525–163,300
32%	$163,300–207,350	$326,600–414,700	$163,300–207,350	$163,300–207,350
35%	$207,350–518,400	$414,700–622,050	$207,350–518,400	$207,350–311,025
37%	Over $518,400	Over $622,050	Over $518,400	Over $311,025

 

6. What is the Standard Deduction for my 2020 filing?

Like the adjusted tax brackets above, the standard deduction increased to adjust for inflation, not because of an entirely new law. Still, it’s important to be aware of standard deduction rates as you decide how to process charitable giving and other deductions. The changes this year are marginal.
 
From the IRS:
 

Filing Status	2019	2020
Single	$12,200	$12,400
Married Filing Jointly	$24,400	$24,800
Married Filing Separately	$12,200	$12,400
Head of Household	$18,350	$18,650

 

7. I received unemployment benefits last year. How is that income taxed? 

The American Rescue Plan was a new law passed in early 2021. It has large ramifications for unemployment benefits received in 2020. Now, you can exclude the first $10,200 in benefits from federal income tax for households with incomes below $150,000 a year.
That change will either decrease how much you owe the IRS or increase your refund, with the latter being most likely.

8. How much can I contribute to my Health Savings Account (HSA)?

HSA contribution limits were raised  to $3,550 for individuals or $7,100 for families. If you did not meet those limits during the 2020 calendar year, you may add to your HSA before filing day on April 15th. 

9. I donated to charity in 2020. Have any new tax laws changed how I report that giving?

With the relatively new Standard Deduction limits, many Americans opt to take the standard deduction instead of itemizing charitable giving. In this particularly difficult year, however, the CARES Act decided to encourage extra charitable giving. You may deduct up to $300 in charitable donations on top of your Standard Deduction.
Taxes may seem overwhelming this tax season. New tax laws have added a new layer of complexity to an already complex system. To make sure you file correctly, consult with Perry & Associates. Give us a call today.

Yes, it is true that external financial audits are only required for publicly traded companies, but that does not mean that you should skip one for your small business. Below we’ve outlined the ways that we see businesses benefit over and over again from an external audit. 

4 Rewards of External Financial Audits 

 

Unbiased Validation

External audits are required for publicly traded businesses so investors, both current and potential, can make an informed decision based upon real numbers about whether or not to continue or begin investing in the business. Because the audit is performed by an unaffiliated third party, the information can be trusted as impartial, as it truly speaks to the financial health (or lack thereof) of the organization. 
For this very same reason, it is ideal for privately owned businesses to seek an external audit as well. Though a local restaurant, non profit organization, or other small business may not be seeking investors in the traditional sense, it is likely that continued growth may dictate financial support from a bank, sponsor, partner, government, or grant source at some point. 
Having a professionally conducted external financial audit for those entities to review will set you apart from other similar organizations.  In fact, many grantors and lenders have begun requiring an audit as a part of the application process for funding. This provides a trustworthy and unbiased report as opposed to simply internal accounting records.

 

Compliance Check

Especially in today’s ever-changing tax compliance climate, it can never hurt to have a second set of eyes ensuring that your business accounting methods comply with current tax regulations. 
This is also an issue that often surfaces as your organization grows. One avenue may have been acceptable in the past because your company was not netting enough profit to need to report in a certain category, or you may have branched into a new sector of business, or a new state or city. All of these may require different regulation compliance, and it’s important you stay current on these issues.
 

Improving Efficiency

We know that as small business owners, managing your financial reports and bookkeeping can get pushed to the side as other pressing issues demand your immediate attention. Professional CPAs may be able to offer game-changing advice after analyzing your books for how to streamline or automate some of your financial processes. This is guaranteed to make life easier for your operations, your tax-time preparation, and the creation of your financial reports in the future. 
Finding where time and resources are being wasted is invaluable. As part of the external financial audit, the auditor will provide a report of all the necessary changes. An outside perspective and professional opinion can bring much-needed improvements. Business owners are often too far “in the weeds” to see where financial mistakes that are wasting both time and resources are being made.

 

Fraud Prevention

No one likes to dwell on the possibility of fraudulent behavior within your business, especially if your small business is operated by family and close friends. Unfortunately, fraud is a real possibility and can be even more prevalent in small organizations where fraud is unassumed. 
Businesses see great success by scheduling an external financial audit yearly. This not only keeps financial records in good order, but this audit can help to keep potential fraud at bay, simply by employees and partners knowing that it will be happening. 
If you do suspect possible fraud in your organization, an external auditor provides a buffer that makes it look less like you are targeting a specific person’s behavior by having someone look at the overall picture. Even if there is never any fraud in your business, an external auditor’s involvement in your business is invaluable.

Professional External Auditor Near You

At Perry & Associates, our forensic account team is directed by president, Jodey Altier. Our team holds the “Credited in Financial Forensics” (CFF) credential, signifying high expertise and knowledge in forensic accounting. We have had decades of experience in financial fraud investigations, prevention, detection, and deterrence that allow us to quickly and efficiently identify any red flags. Contact us to discuss your company’s external financial audit needs today.

How will CARES Act Funding impact your 2020 Taxes?

 
2020 was a year for the books, so it probably comes as no surprise to you that last year may have a unique impact on your books. If your business received a slice of the $5 billion+ pie that was the Paycheck Protection Plan in 2020, you’ll want to know about the PPP loan tax implications that will apply for 2020 filing. Will you be taxed on this income? Are you allowed to deduct expenses paid for with PPP? We’ve outlined a few of the common questions we have been receiving in hopes to help you gain a foundational understanding. As always, see your CPA for legal tax advice regarding your specific situation. 
 

Will my business be taxed on PPP income?

In December of 2020, the Coronavirus Response and Relief Supplemental Appropriations Act clarified that a forgiven PPP loan is entirely tax-exempt and is classified as non-taxable income. Your PPP loan is forgivable as long as the money was spent on payroll expenses, mortgage interest, utility payments, rent, operational expenses, property damage costs, (due to public disturbances in 2020), supplier costs, and/or worker protection expenditures.
 

Can my business deduct traditionally deductible expenses paid for with PPP Loan Income?

Yes. The Coronavirus Response and Relief Supplemental Appropriations Act passed in December 2020 reversed the original decision not to allow deduction of expenses paid for with PPP income. The decision was reversed due to the fact that some businesses may have had higher taxable revenue in 2020 than in previous years without being able to write off as many expenses. 
 

Can payroll taxes be deferred if my business received a PPP loan?

Yes, payroll taxes from March 27th, 2020, through December 31st, 2020. Even if your PPP loan is forgiven, you may still defer the payroll taxes. Fifty percent of the deferred taxes accumulated in 2020 must be paid by December 31st, 2021, and 50% of the deferred amount must be paid by December 31st, 2022.
 

Can my business use PPP funds to pay for 2020 taxes?

No. PPP loans can only be used to pay for specific outlined expenses outlined in the answer to question number one above, so taxes cannot be paid with PPP funds.
 

A note on other CARES ACT income:

 

PUA- Pandemic Unemployment Assistance

It often comes as a surprise to many, but unemployment benefits are considered taxable income. You will still owe state and federal taxes on any unemployment compensation that you have received. However, you will not owe any medicare or social security taxes. Some people opt to have the taxes automatically withheld from their benefits by filing a W-4V, but if you do not remember specifically requesting to have taxes automatically withheld, then you will still owe them when reporting the income you received on your 2020 tax return. You should have received a 1099-G from your state labor office stating how much PUA compensation you received and if any taxes were already withheld.
 

EIDL- Economic Injury Disaster Loan (and Grants)

EID Loans will be treated as any other loan when it comes to tax time, but EID grants have been declared tax-free and it is, therefore, unnecessary to include that grant amount in your taxable income total for 2020.
 
Still have questions?
The U.S. Chamber has released an updated guide to Small Business COVID-19 Emergency Loans that further explains the substantial changes passed into law in December 2020.

Looking for Professional Help Sorting Out PPP Loan Tax Implications?

Contact us for service you can trust! Perry & Associates CPAs has multiple offices throughout the Mid-Ohio Valley. 

Tax Advisor Near Me in Ohio and West Virginia

Every business and individual should have access to a local tax advisor. Not only are annual tax returns required by law, a qualified tax advisor can potentially save you thousands of dollars in deductions and rebates. An added benefit is that a tax advisor can keep your documents organized throughout the year. While other people struggle to find receipts and sales documents, you’ll breeze through tax season stress-free. 
If you’re searching for a “tax advisor near me” for any of your business or individual tax needs, take a look at all we have to offer. 
Perry & Associates serves corporations, small businesses, and individuals through our Ohio and West Virginia offices. We pride ourselves on providing personalized, quality service. With Perry & Associates, you will have convenient access to tax advisors near you. Our tax advisors understand your local economy and regulations and can help you succeed financially.
Below we’ve included an overview of our tax advisor services. 

TAX SERVICES

Receive the largest deductions and rebates on your tax returns with our year-round tax services. Perry & Associates tax advisors will work closely with you to catch tax issues early. Our comprehensive tax preparation ensures a no-stress filing process. With offices near you in Ohio and West Virginia, expert tax advice is just a quick drive, call, or email away.

FORENSIC AUDITING

Have you noticed some indescrepencies with your taxes or finances? You may need a tax advisor for forensic auditing.
Unfortunately, many financial crimes are committed by people closest to you. Our corporate clients use our firm to investigate suspicions of fraud and laundering. Individual clients often need help discovering a spouse’s hidden assets and income during divorce settlements.
Perry & Associates full forensic auditing services include Money Laundering, Terrorist Financing, Financial Crimes, Banking Operations (banking products, services, and customer behavior), Compliance Program Weaknesses, Financial Crimes, Divorce Hidden Income and Assets, and Lawsuits.
Read how our team uncovered one of the largest cases of fraud in Washington County.

ACCOUNTING SERVICES

Every successful tax return begins with professional accounting services. Because our team keeps your documents ordered throughout the year, filing your tax statement is a breeze.
Perry & Associates works with long-standing companies as well as brand new startups. If you are near the launch date of your business, our team of tax advisors can help set up your accounting system so that your financial reporting is accurate from the get-go. 

CONSULTING SERVICES

It’s important to consult a tax advisor before you make a major financial decision. Our team of tax advisors can guide you through the entire business lifecycle. We often give entrepreneurs advice on business entity selection and what each classification will mean for your tax burden. Later, we can consult you on mergers and acquisitions. Tax considerations are major components to these events.
Consulting isn’t just for businesses. We work closely with individuals to plan estates and manage debt. Call one of our tax advisors and we can make sure those near and dear to you are provided for. Because Perry & Associates is a regional firm with local offices, you can rest assured that you’ll receive the same amount of attention we give our business clients.
In addition to our traditional consulting services, we also consult on COVID-19 tax breaks and reporting requirements.

Tax Advisor Near Me in Ohio and West Virginia

Perry & Associates has convenient locations along the Ohio-West Virginia border. Find the office nearest to you and give us a call using the information below. If you’d like to send us an email, click here.
Marietta, OH
313 Second St
Marietta, OH 45750
Office: (740) 373-0056
Email: perrymta@perrycpas.net
 
Cambridge, OH
749 Wheeling Ave, Suite 300
Cambridge, OH 43725
Office: (740) 435-3417
Email: perrycam@perrycpas.net
 
St. Clairsville, OH
150 W Main St, Suite A
St. Clairsville, OH 43950
Office: (740) 695-1569
Email: perrystc@perrycpas.net
 
Vienna, WV
1907 Grand Central Avenue
Vienna, WV 26105
Office: (304) 422-2203
Email: perrypkg@perrycpas.net
 
Wheeling, WV
1310 Market St. Suite 300
Wheeling, WV 26003
Office: (304) 232-1358
Email: perrypkg@perrycpas.net

 

Tax CPA Explains 1099 Changes for 2020. Don’t Miss Them.

Preparing your W-2s and/or 1099s, like most things about the year 2020, will be slightly different. Below, we’ve outlined a brief overview of the changes; but as always, feel free to contact a tax CPA here at Perry & Associates if you have further questions after reviewing.
 
Preparing 1099s
More 1099s may be filed this year than any other year. Because of the many jobs lost to the COVID-19 pandemic, a great number of people took up contract work in order to help pay the bills. 
If your business hired anyone – or any non-incorporated partnerships or LLCs – to conduct contract work for you last year, you may need to prepare a 1099 form. This would apply to any hired work that received a cash or check compensation of $600 or more. 
Unlike previous reporting years, you will need to prepare a 1099-NEC (Non-Employee Compensation). This is different from the 1099-MISC you would have filed for contract work in the past. Notice that this excludes contract work payments made via credit card. All business credit card payments will be reported in 1099-Ks, which crediting merchant and third-party payment processors are responsible for generating. Do not generate 1099-NECs for contractors paid via credit card, only those paid with cash and/or check. 
 
Types of payments that warrant the filing of a 1099-NEC for reporting year 2020:

• Contract Labor, Commissions, Directors Fees, and any other like services provided to your business of $600 or more.
• Dividends, Interest, and Royalties of $10 or more.
• Professional Fees of $600 or more.
• Rents (other than to real-estate agents) of $600 or more.
• Attorney fees for legal services over $600.
• ALL payments to attorneys for settlements.

The deadline for submission of all 1099 forms to the IRS for reporting year 2020 is February 1, 2021. Your copies of these 1099s should also be distributed to their recipients on or before February 1, 2021.
 
If you have over 250 returns (W2s AND/OR 1099s) to file, it is required that you file all federal forms electronically. A tax CPA can quickly and efficiently assist you in your 1099 preparation.
 
Preparing W2s
The following wages must be included in Gross Wages on all employee W2s if applicable:

• Wages
• Bonuses
• Tips
• Any other compensation
• Business expenses paid in excess of allowed amounts
• Sick pay
• Automobiles
• Club dues
• Event tickets
• Plane flights
• Discounts on property or services
• Legal and educational services
• Value of life insurance group policy in excess of $50,000
• In some cases, moving expenses, educational assistance payments, and scholarships paid to an employee must be reported. Please contact us if you are unsure whether or not this applies to you.
• As always, employers’ contributions (matches) to retirement plans are not to be reported and are not taxable.

When to call a Tax CPA Instead of Using Software
There are many different online software options for preparing these forms; however, when it comes to all the unprecedented situations 2020 brought, a tax professional may be a wise choice for this year’s tax and employee form preparation. 
Non-compliance fees and late fees can pile up fast for innocent mistakes small business owners make when attempting to prepare their own W2s and 1099s. It will not only be costly to you if you miss something, but it can also affect your employee and contractor returns as well. It is undoubtedly worth paying a far less cumbersome amount to a Tax CPA than it is to be indebted to the IRS.

Looking for a Tax CPA Near You?

Contact us for service you can trust! Perry & Associates CPAs has multiple offices throughout the Mid-Ohio Valley. 
Marietta, OH
313 Second St
Marietta, OH 45750
Office: (740) 373-0056
Email: perrymta@perrycpas.net
 
Cambridge, OH
749 Wheeling Ave, Suite 300
Cambridge, OH 43725
Office: (740) 435-3417
Email: perrycam@perrycpas.net
 
St. Clairsville, OH
150 W Main St, Suite A
St. Clairsville, OH 43950
Office: (740) 695-1569
Email: perrystc@perrycpas.net
 
Vienna, WV
1907 Grand Central Avenue
Vienna, WV 26105
Office: (304) 422-2203
Email: perrypkg@perrycpas.net
 
Wheeling, WV
1310 Market St. Suite 300
Wheeling, WV
Office: (304) 232-1358
Email: perrywhg@perrycpas.net