What You Need To Know About Your Nonprofits Transparency

It is unfortunate to say, but many people do not trust charities to use their donations appropriately. In a world of instant news, we are often faced with corruption and scandals surrounding nonprofits. Charities are held to a higher standard and need to improve their transparency in order to maintain donor trust. 

When potential donors can easily find your organization’s information, they are usually willing to be more generous with their donations. Here is what you need to know about your nonprofits transparency.

What You Need to Know About Your Nonprofits Transparency

As featured on GuideStar.

1. Confirm Your IRS Tax-Exempt Listing

When the Internal Revenue Service (IRS) declares your nonprofit organization as a tax-exempt public charity, the organization is added to the 501(c)(3) nonprofits organization list. Charities that remain in good standing with the IRS are kept on the list. Confirming your IRS tax-exempt listing will provide transparency to the public and will, in turn, increase your donor base and donations.

2. Establish Your GuideStar Listing

If your organization is registered with the IRS as tax exempt, you have a Nonprofit Profile on GuideStar. In addition to GuideStar publishing your IRS Form 990 information, you can also include information about your organization’s accomplishments, board members, goals, mission, needs, and programs. It is important, especially if your organization is a smaller nonprofit, to regularly update your Nonprofit Profile in order to connect with new donors.

3. Become Accredited

You might believe the Better Business Bureau (BBB) is only for for-profit business, but there is also a division that specifically caters to the needs of nonprofits. This division, known as the Wise Giving Alliance, provides an at-a-glance accreditation seal for nonprofits to proudly display on their websites.

The Accredited Charity Seal is given to nonprofits that meet the BBB’s standards for accountability. Even if your nonprofit chooses not to apply for the Wise Giving Alliance Seal, its standard for accountability is an excellent guide for ethical practices.

4. File IRS Form 990

As a nonprofit, your IRS Form 990 is in the public domain. Some nonprofits choose to post their filed Form 990 on their websites for easy public access. You can also upload your Form 990 to your GuideStar Nonprofit Profile as soon as you file it with the IRS. When those in the public sector have questions regarding your financial efficacy, aside from contacting a board member or senior staff member, they can also see your tax return for themselves.

Your nonprofit’s tax exemption will be automatically revoked if you fail to file your 990 for three consecutive years. Failure to file is a red flag for donors. If you can’t be trusted to maintain your tax-exempt status, how can you be trusted with donor’s charitable gifts?

As a charitable organization, you must embrace the values of accountability and transparency as an ethical leader in addition to maintaining IRS compliance. By posting your tax return, you reinforce your organization’s dedication to accountability.

5. File Past Financial Information

If you have missed filing your 2015 or 2016 (or both) 990, file them immediately.

Small nonprofits whose gross receipts are less than $50,000 per year need to file IRS Form 990-N, the Electronic Notice (e-Postcard). There is a common misconception within the nonprofit community that small nonprofits do not need to file a Form 990-N annually; however, your nonprofit’s tax-exempt status will be revoked after three years of not filing Form 990-N.

Form 990-N must be filed online. If you have missed filing a Form 990-N for the 2015 and/or 2016 tax years, you will need to use an IRS-authorized e-filer to file the missing tax returns. The IRS filing system does not accommodate previous tax year filings.

To build on this list of five ways to improve your tax-exempt organization’s transparency as seen on GuideStar, here are five other achievable ways to improve your transparency.

6. More Visuals and Fewer Words

Let’s face it; most people are visual, so by avoiding blocks of text, you are more likely to grab the attention of your current and potential donors. Try conveying your nonprofit’s annual report and accomplishments through pictures or infographics.

The most impactful images are those with colorful and easy to understand messages that inform the reader in a meaningful way. Also, this shows that you are actively going above and beyond to be transparent with your donors.

tax-exempt board files Form 990

7. Lead By Example

People connect with stories and real situations. You need to make your organization’s mission relatable by telling potential donors about the real impact you have had on the lives of others. Use meaningful quotes and pictures that highlight your organization’s work in the community.

8. Open Door Policy For Donations Budget

Be specific about the donations your organization collects and how those funds/resources are being used. Your donors want to know how they are personally helping your cause. When possible use a personal approach to inspire donors by directly sighting where the money or items they gave were used.

9. Specific Actions

Specify what your donors can do to help support your organization. Give specific actions and include a variety of options so they can continue to lend a helping hand. Also, this shows that you are transparent about the needs of your organization.

10. Say “Thank You”

This may not seem directly related to transparency but saying “thank you” in your annual report or website goes a long way. Consider that several nonprofit organizations dedicate pages to individual and corporate donors.

Bonus Tip: Accurately File Nonprofit IRS Form 990

The most essential way to be transparent with the general public and your donors is to annually file your IRS Form 990. But this year forget about spending hours trying to figure out complicated tax forms or paying for an expensive accountant to handle it for you. Just create your free TaxBandits account and follow our step-by-step e-filing instructions to complete your Form 990 in a matter of minutes.

We’ve taken the time to design a quick and easy e-filing method that eliminates the time-consuming process of having to deal with extra steps. Plus, we provide helpful text along the way to answer all of your questions!  

We also offer exclusive e-filing features to simplify the entire process. For example, you can use the bulk upload feature to upload all of your information at once.

Also, our internal audit check will catch any basic mistakes before your Form 990 is transmitted to the IRS.

File IRS Form 990

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