Not-for-profit organizations need to be aware of some changes in the tax world. Form and filing changes may impact your organization's filings this year, as well as ongoing impacts of COVID-19 provisions, including payroll tax deferment and student loan assistance extensions. Not-for-profits can ensure their filings are accurate and complete by staying up to date on tax changes.
COVID-19 Provisions Still in Effect
While most of the COVID-19 relief provided by the federal government was distributed through 2020 and 2021, it can still affect your organization's upcoming tax filings.
One of the most important provisions affecting the nonprofit sector is the payment of deferred taxes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act, enacted by Congress two years ago as pandemic relief, allowed organizations to elect to defer their share of Social Security taxes. That payment is now due, and the IRS is strict on its deadlines.
The first 50% your organization deferred for 2020 should have been paid by Jan. 3, 2022, and the balance is due by Dec. 31, 2022. You must pay those taxes back on time and calculate the percentage you owe correctly; otherwise, you could face a substantial penalty.
Another benefit derived from the CARES Act was the expansion of the definition of educational assistance to include employer contributions to the repayment of student loans. Employers can help repay up to $5,250 of their employees’ student loans annually through the end of 2025. The new provision benefits both the employee and the employer because the income contributed to student loan payments is not taxable to the employee and the employer is not subject to payroll taxes on the student loan assistance.
Form and Filing Changes
The IRS is very specific about how forms are completed and filed. If there are any discrepancies or errors, it can lead to an audit of your organization. That's why it's essential to be aware of any changes to your required forms and make sure your filings are accurate and complete.
Recent changes include:
- 2020 Form 990: Numerous form updates were made to the not-for-profit information return, including further instructions for the CARES Act’s Paycheck Protection Program (PPP) loans.
- Excise Tax on Excess Compensation: Final regulations were issued on Jan. 21, 2021 and are applicable to tax years beginning after Dec. 31, 2021. Internal Revenue Code Section 4960 imposes an excise tax on applicable tax-exempt organizations (and related organizations) that pay remuneration in excess of $1 million, or any excess tax parachute payment to any covered employee. The tax also applies if severance greater than three times regular compensation is paid to a covered even if that amount is less than $1 million. Most should be familiar with these rules with the proposed regulations going into effect in 2018.
- Donor Disclosure Changes: Last summer, the U.S. Supreme Court struck down California's law requiring charitable organizations to disclose the names and addresses of donors who contributed more than $5,000. New Jersey and New York have posted on their websites that they will no longer require charities to fill out Schedule B with the Attorney General's office.
- 1023 Application: There are numerous changes that were made to the 1023 application.
To hear more details about Not-for-Profit Tax changes, watch this webinar.
It's important to be patient this tax season because the IRS is backed up, and only 7% of taxpayers can reach assistance. Electronic filing is required for the Form 990 and Form 990-PF and was recently made available for the Form 990-T because of the IRS’s bandwidth limitations. If you have any questions about your organization's return or need help with the filing process, be sure to contact us.
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