Every year the IRS makes amendments to the current tax codes in an attempt to make them easier and more efficient. Unfortunately, these changes mean booster club tax mistakes are very likely.
To keep on top of things and to avoid common tax preparation mistakes it’s important to look into new tax law changes that come into effect and see how they affect your booster club. Booster club tax preparation mistakes can come at a cost to your organization, so knowing how to avoid them is crucial to keeping your group up and running properly.
Avoiding Booster Club Tax Mistakes
Of course, the easiest way to avoid booster club tax mistakes is to hire a professional tax preparer to help with all of the annual paperwork. They know exactly what to look for, what to do and can help you to avoid issues, spot mistakes, or even make amendments if needed.
Hiring a professional tax service to do the legwork on behalf of your booster club can help you to avoid business tax mistakes, but it doesn’t always come for free. Even with your nonprofit status, you may need to pay upwards of a few hundred dollars for this service.
While hiring a pro may cost money, it can help to save you money in the long run because nonprofit tax preparation mistakes can come with a cash penalty, or worse.
You may be lucky enough to find a tax preparation service willing to give your group a discounted rate or free service in exchange for being able to use your nonprofit status as a charity write-off for their company. Even so, the more legwork you can put into the tax preparation, the less work they have to do, and the easier it can be to avoid booster club tax mistakes.
How to Make Tax Filing Easier
One of the simplest ways to avoid booster club tax mistakes is to make sure that you keep everything well documented and organized throughout the year. With booster clubs spending and receiving a lot of money every year there can be a lot of paperwork to keep on hand to show these income and expense reports.
Keep receipts, copies, and any necessary paper trails needed to help show where every dollar comes from and goes. A simple filing cabinet and record book can be an easy way to keep these documents easy enough to find at a moment’s notice, but making sure that they stay up to date and in line with the bank reports is vital. You want to make sure that the numbers all add up and that no big amounts of money are missing or unaccounted for.
The more organized your booster club is the more booster club tax mistakes you can avoid, so it’s important to have a good booster club management team to help keep everything in an ideal state.
Common Nonprofit Tax Mistakes
Besides the mistake of not being well organized, there is a whole host of other issues that could stem from improperly doing your taxes. While hiring a professional can help you to avoid these issues, it may not always be feasible as some booster clubs cannot afford the funds or would rather submit them themselves and save money.
Whichever option you choose, it’s important to know the common booster club tax mistakes so that you can avoid them.
Some common booster club tax mistakes made include:
Missing the deadline
Your 990 form is due on the 15th day of the 5th month after the organization’s year-end. 3-month extensions are available if needed, but if you miss these opportunities, you could find yourself penalized with a fee of up to $50,000 for filing late.
Not filing at all
If you fail to file your booster club tax return 3 years in a row, you will lose your nonprofit status. Losing this status will make it harder to operate as an organization and it is incredibly difficult to get the status back once lost so it’s important to always file your returns.
Using the wrong EIN
Your Federal Employer Identification Number is unique to your booster club as a business and it is your legal identification number that helps the government to keep track of your group. Using the wrong EIN number can cause your tax return to be rejected, which would count as a missed deadline.
Filing an incomplete return
Incomplete returns can be considered as a never filed return, which would mean that it would be considered late or missing. Even though you submitted something, it would still be penalized as if it never showed up, meaning that your booster club tax mistakes could cost you late filing penalty fees.
Failing to report unrelated business income
Your booster club will have expenses and various sources of income to include on your tax return. Your income may come from sponsorships, advertisers, fundraising, donations, membership fees, and other sources, and there is a big difference between each category. It’s very important to make sure that all of your booster clubs income is recorded and submitted properly so that all of the income is accounted for on the tax return.
Giving the wrong contact information
This would sound like a no-brainer, but it’s a very common mistake to make. Make sure that your return includes the exact address, phone numbers and contact information needed so that if the IRS has any issues with your return, they can contact you and help to get the issues corrected as soon as possible.
Make sure that the math adds up
Another reason to make sure that your booster club is well organized is to make sure that the math all adds up. Your bank statements should match your record books and receipts should match along with them.
Your tax return should show all of these numbers and everything should be exactly the same. If you stay well organized throughout the year, this shouldn’t be an issue. But if there is any discrepancies in the reports and return, you may find yourself spending hours tracking down a missing $20.
Whether your booster club decides to use a professional service or do the return themselves, make sure you’re educated on tax changes, organized and prepared so that you can avoid booster club tax mistakes.