Bookkeeping for 501c3 Organizations

Even though your 501c3 nonprofit organization is income tax-exempt with the IRS, you must file a yearly tax return. The easiest way to make sure you tax return is accurate each year, is to have an efficient bookkeeping system. Here are some basic tips for efficient bookkeeping throughout the year.

Know your fiscal year end. Most organizations choose December 31st, since it is also the calendar year end. But if your organization decided upon a different month as your year end, it is crucial to recall when that is. This will help when recording your data, as well as let you know when your year tax return with the IRS is due.

Keep track of your revenue and expenses. The revenues for 501c3 nonprofit organizations are different from most other types of businesses. These sources can include donations, program fees, sales income, membership dues, investment income, and proceeds from fundraising events. Whenever your organization receives revenue from any of the sources listed, you must keep detailed information about the revenue. For example, if a donor gives your organization a check, you will need to have the donor’s name and how much they donated. The expenses for your 501c3 nonprofit organization are also a bit different from for-profit businesses. These can include, but are not limited to, contributions to other charitable organizations, reimbursements, organization’s facility fees (utilities, rent), organization’s program expenses, and board of director’s compensation. Much like the revenue, these should be listed with details like what the expense is for, who it’s being paid to, etc. Keeping a good detailed list of your 501c3 organization’s revenue and expenses will be helpful for you in the future.

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501c3 Volunteer Recruitment Ideas

Most 501c3 nonprofit organizations rely on volunteers in order to keep their organization running smoothly. It’s estimated that about a hundred million people volunteer each year. Volunteers can help the nonprofit organization with multiple tasks like administrative work, fundraising, and spreading the word about your 501c3 organization. But recruiting and keeping people sometimes can seem like a big task if you aren’t sure where to start. Here are a few tips on some ways your nonprofit organization can find volunteers.


Post Information.

It’s essential to keep your social media sites up-to-date with things your organization is doing, hoping to achieve, and other events. It’s also a good idea to give your organization a presence physically in places. You can do this by printing out flyers or posters and putting them on local bulletin boards, restaurants, and shops. Having information on your organization both online and in physical locations will help people recognize and remember your nonprofit.

Ask People Directly.

Most people who want to volunteer aren’t too sure how to start the process. By reaching out to people directly, you give them an easy way to get started. It’s also good to try and ask people face-to-face. This way it shows you are serious about that person volunteering and it will also give you a better idea of where they would fit into your volunteer team. Places that are good to look for volunteers are schools/universities, businesses, clubs, community groups, and other local hotspots.

Read more: 501c3 Volunteer Recruitment Ideas

Keeping Your 501c3 in Compliance



Once you've navigated the path to obtaining 501c3 status, there are important measures required to maintain your exemption with the Internal Revenue Service (IRS). This overview is a starting point in understanding how to remain in compliance.





Fundraising and applying for grants to support the functions of your organization are all within the rules of operation; however, all funding received must go toward the activities and programs of the organization or toward salaries for its employees.

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Recordkeeping Part I – Organizational Records



 When speaking about requirements for recordkeeping, nonprofits do differ from profit businesses. Each nonprofit organization should keep:


1. Organizational/Permanent Records

2. Financial Records.

In this article, we focus on the organizational/permanent records.


Organizational/Permanent Records: this includes all the paperwork that the organization should keep from the day of establishing the organization.


Read more: Recordkeeping Part I – Organizational Records

Recordkeeping Part II – Financial Records


FinancialRecordsNonprofits should always maintain good financial records. Nonprofit organizations need financial statements for the following reasons:

 -         To prepare their annual tax returns with the IRS (form 990s);

-         To report the financials to their members;

-         To apply for grants;

-         To write a Business/Strategic Plan;

-         To evaluate the organization’s accomplishments; etc.


Based on the financial statements, the organization’s Board of Directors make educated decision on which tax return their organization is eligible to file with the IRS – f990-N, f990-EZ or f990s. The main financial statements are Profit & Loss Statement and a Balance Sheet. Most accounting softwares generate the financial statements for the reported period.


Read more: Recordkeeping Part II – Financial Records

Recordkeeping Part III - Policies



 Once you’ve become a nonprofit organization it is highly recommended that your Board of Directors adopt policies, in order to successfully manage the nonprofit activities. The Board of Directors’ decision on which policies to adopt should be based on the organization’s structure, size and type. Furthermore, nonprofit organizations that fail on adopting such policies have a greater chance of being audited by the IRS. 



Some of the policies that your nonprofit organization may adopt include:

Read more: Recordkeeping Part III - Policies

Operating in Different States


 50statesNonprofit organizations can operate nationwide, even though they are legally registered in one specific state as a domestic entity. Generally, charities      incorporate in the state either where their headquarters are located in or where the majority of their activities take place. As your 501c3 organization grows  and evolves, a need to operate in more than one state might often arise.

Read more: Operating in Different States

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