Nonprofits must observe the rules laid out by the IRS to protect their status, treat everyone fairly and be transparent. The IRS has specific requirements for Non-profit accounting in New Jersey and this guide outlines them and suggests how your organization can mostly follow them. Before starting, we need to know Non-profit accounting in New Jersey basics and essentials 

What are the accounting standards for nonprofits?

All nonprofits in the United States must follow the Generally Accepted Accounting Principles (GAAP), set by the Financial Accounting Standards Board (FASB). The accounting standards within ASC 958 govern items such as debt in the nonprofit sector.

How financial statements are shown

1. Particularly for gifts, grants and contributions
2. If there are some (or no) donor restrictions
3. Costs are grouped into program, administrative and fundraising expenses.
4. Subjects about liquidity and the quantity of assets available
5. Thanks to GAAP, nonprofit finances are clear, can be compared and are consistently reported.

What is the formula for Non-profit accounting in New Jersey?

Instead of focusing on profits, nonprofits monitor their total assets. Nonprofits rely on the main rule:

• Assets = Liabilities + (Assets – Liabilities)

Net assets are organized into several groups:

1. Without donor restrictions
2. With donor restrictions

This equation reveals how much the nonprofit has in assets, how much it must pay back and what is left for its main goals.

These are the most important  7 Techniques for handling Non-profit accounting in New Jersey.

1. Annual Filing Requirements for Non-profits

One of the core responsibilities in Non-profit accounting in New Jersey is meeting annual IRS filing requirements based on your organization’s financial activity:

• Form 990-N (e-Postcard): For organizations with gross receipts normally $50,000 or less.
• Form 990-EZ: For organizations with gross receipts less than $200,000 and total assets less than $500,000.
• Form 990: For organizations with gross receipts of $200,000 or more or total assets of $500,000 or more. 

These forms are due on the 15th day of the 5th month after the end of your fiscal year. For example, if your fiscal year ends on December 31, the form is due by May 15. Electronic filing is mandatory for most organizations.   

2. Maintaining Tax-Exempt Status

A critical part of Non-profit accounting in New Jersey compliance is preserving your 501(c)(3) tax-exempt status. Here’s how:

• Operate Exclusively for Exempt Purposes: Ensure that your activities align with your stated mission.
• Avoid Private Benefit and Inurement: No part of your net earnings should benefit private individuals.
• Limit Political Activities: Engaging in political campaigns or substantial lobbying can jeopardize your status.
• File Annual Returns Timely: Failure to file for three consecutive years results in automatic revocation of tax-exempt status.  

3. Recordkeeping and Documentation

Accurate documentation is essential for sound Non-profit accounting in New Jersey and IRS audits:

• Financial Records: Maintain detailed records of income, expenses, and assets.
• Governance Documents: Keep bylaws, meeting minutes, and policies up to date.
• Donor Information: Document contributions, especially those requiring acknowledgments.

These records should be retained for at least three years and be available for IRS inspection upon request.  

4. Accounting Methods and Periods

Your organization must consistently use an accounting method: 

• Cash Method: Record income when received and expenses when paid.
• Accrual Method: Record income when earned and expenses when incurred. 

Choose a fiscal year (12-month period) and stick to it. To change your accounting period, file a return for the short period and, if necessary, submit Form 1128.  

5. Managing Non-profit accounting in New Jersey

Better management of organizations encourages people to comply and to trust them more.

• Create formal documents that outline conflict of interest, whistleblower and how to handle retention policies.
• Board Oversight: Ensure active and informed participation of board members.
• Be clear: Publish both your financial statements and Form 990 for view by the public.

To ensure you are responsible, the IRS supports these accounting practices in your Non-profit accounting in New Jersey system.

6. What is Form 990?

The 990 form provides all the information you need about your nonprofit’s work and financial situation.

• Part I: Summary of activities and governance.
• Part III: Program service accomplishments.
• Part VII: Compensation of officers and key employees.
• Part IX: Statement of functional expenses. 

Good reporting is necessary since your Form 990 is open to the public and used by regulators and interested parties to understand your organization.

7.IRS Resources for Non-profit accounting in New Jersey 

On its website, the IRS provides a free workshop for 501(c)(3) organizations that covers several topics.

• Applying for tax-exempt status.
• Maintaining compliance.
• Employment issues.
• Required disclosures. 

Conclusion

Skill in Non-profit accounting in New Jersey is needed to ensure open financial records, obey regulations and serve the mission well. If you follow these tips and stay informed about IRS rules, your organization will properly keep its reputation and be exempt from taxes.If you follow the rules and take action, your nonprofit can continue to be credible for years. You can check more topics on our linkedIn account