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Games of chance like bingo and raffles are often synonymous with tax-exempt organizations. However, the income from such "gaming" activities operated by charities is not automatically tax-free. The IRS has provided more insight into the key rules in this area in its Publication 3079, Tax-Exempt Organizations and Gaming.
To qualify as a tax-exempt entity, a not-for-profit organization must comply with certain federal income tax laws. And to prove compliance, you must maintain records. There's no required recordkeeping system. In fact, your organization can choose any system that suits its activities and clearly shows your income and expenses.
Organizations that are created to provide goods or services exclusively (or primarily) to Section 501(c)(3) organizations (or governmental entities) may think that this purpose is sufficient to also qualify them under tax law.
Documentation and accountability are always important in business, but possibly even more so for not-for-profits. The sheer number of duties can be daunting. That's why it's critical to have tools that allow you to stay on top of the details.
What should you do if your not-for-profit organization is short on employees and you don't have the funds or confidence in the future to return to full staffing? Outsourcing may be the answer.
Skip Steps One and Two
A contribution to a charity isn't always a tax-deductible contribution for the donor, as in the case of "quid pro quo" donations. This exchange of one thing for another happens when a charity receives a payment that includes a contribution and, in return, provides the donor with goods or services valued for less than the total payment.
It's no secret that the number of not-for-profit organizations is growing while the number of grant dollars is shrinking. Shifting from competing for grant funds to cooperating with other organizations can create substantial value for not-for-profits and the people they serve.
As your not-for-profit strives to use its resources as effectively as possible, you might at some point consider outsourcing the functions that fall under your accounting and financial umbrella. But wait: You'll first need to weigh the possible benefits and pitfalls.