Given your standing in the community—among donors, regulators, and those your nonprofit serves—it's critical to stay compliant. An unintentional misstep could damage your reputation and stability. At the same time, being overly cautious could mean not claiming deductions intended to help nonprofits make funding go further.
Whether your mistake is a W-2 to Form 941 mismatch, mislabeling contractors, not knowing when grant funds are taxable, or thinking an intern's job is to serve coffee, you could end up with an unexpected bill in the 10s of thousands (or more) from the IRS, withdrawn grant funds, and additional scrutiny over business practices. That's on top of the bad publicity.
Nonprofit payroll services are not an area of business to push to the back burner. It will catch up with you and limit your ability to live up to your mission. In this article, we'll explore the payroll services nonprofits need and why they are important.
Essential Payroll Features for Nonprofits
Non-profit payroll services every not-for-profit leader should consider include:
Tracking volunteer hours: Proper tracking can help you grow your business and increase the funding available to you. It's important to get these numbers right, including who, how many, what project they're spending those hours on, and how this contributes to your mission to satisfy grant requirements.
Managing grant allocations: To be a good steward of grant funds, you must identify resources, clearly define organizational roles, track grant requirements, maintain a comprehensive grant schedule, and record how grant funds are used as well as outcomes. This can get complicated fast.
Even if you're using funds correctly, failure to keep good records could result in clawbacks, lawsuits, and an inability to obtain future funding. When considering payroll services, it's critical to ensure they understand grant management payroll tax compliance for nonprofits, which is very different from working with a for-profit business.
Bookkeeping: Like any business, you have income, assets, and liabilities. Paying for bookkeeping services may seem like an expense, but more often than not, it enables non-profits to do more with their money. Build confidence in leadership among employees and volunteers alike and ensure the long-term stability of your company with accurate bookkeeping.
Handling wages for nonprofit employees: Employees must be classified and paid correctly according to the law regardless of for-profit or non-profit status. Overtime and fringe benefits must be calculated and reported. We've seen far too many companies in the news lately being forced to pay 10s of thousands in back wages due to inadequate wage management. Nonprofits are not immune and may even be more vulnerable due to the complex nature of their payrolls.
Handling taxes for nonprofit employees: Because you've invested in nonprofit payroll services year-round, quarterly and annual taxes are much easier. Non profits payroll services software pulls data directly from your cloud-based bookkeeping system, auto-populating fields. Now, that information simply needs to be cross-referenced and verified to ensure it's complete and accurate. This accounting automation reduces the risk of error and significantly cuts the time it takes to complete taxes.
Why Choose Exact Payroll for Nonprofits
As a non-profit, you have unique requirements and needs and every not-for-profit is different. While for-profit businesses can often get away with out-of-the-box payroll software and services, nonprofits require personalized payroll services that understand how their specific grants and volunteers work.
Exact Payroll takes the time to understand each nonprofit's unique needs and provides customized solutions that save time and reduce errors. For example, our non-profit experts make sure they understand a grant's requirements inside and out, so funds can be allocated as the grantor intends, and you have the records to prove it.
We recognize that as a non-profit, your focus is your mission. Nonprofit payroll services often become an afterthought as you put your heart, time, and energy toward a cause. That said, we encourage you to prioritize your payroll management and compliance. When you do, you'll often find you have a lot more resources to grow your organization and do the most good.
