How to Avoid Paying Personal Taxes on Your Nonprofit’s Donations

An important benefit of having a properly structured nonprofit is that you will be able to get tax-deductible donations. Even if you are planning on funding your nonprofit yourself, this is still a good feature to have. Doing this will help you avoid paying personal taxes on your nonprofit’s donations.

Structuring your nonprofit incorrectly could be detrimental. You could end up being personally responsible for paying taxes on all the money and donations for your nonprofit. So how do you make sure that you set up your nonprofit so that you do not end up being personally responsible for paying taxes on the money your nonprofit receives as donations? 

There are a few key documents that you will need. Let’s talk about them.

  1. Articles of Incorporation. Articles of Incorporation help to establish your nonprofit as its own entity. Therefore, when you receive donations, you will not be personally responsible.
  2. Federal Employer Tax Identification Number (FEIN). Apply for a Federal Employer Tax Identification Number (FEIN) for your nonprofit. I always tell my clients that your FEIN is like a social security number for your nonprofit. If donations that you collect for your nonprofit are linked to your personal social security number, then the I.R.S. will view those donations as personal income to you and they will want you to pay taxes for them personally as an individual. This is not what you want to happen because that income is not for your personal use. Money given to your nonprofit is for use by your nonprofit, and should be tax-exempt. 

If you have any questions about this paperwork, don’t hesitate to call us today to schedule your free consultation. At Chisholm Law Firm, we have a 100% success rate for our clients. You can rest assured that your nonprofit is in the best hands and that we’ll get everything done right the first time. 

It shouldn’t be this hard to be a superhero. 


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