Nonprofit Breakdown: Frequently Asked Questions

What is the difference between a nonprofit and a non-governmental organization (NGO)? 

Think of this as a venn diagram. There is some overlap between which organizations are considered nonprofits and which are considered NGOs. Both types of organizations work towards the betterment of society, and often have similar focuses, such as education, human rights, and the environment. The difference between nonprofits and NGOs lies mostly within their scope, as nonprofits tend to have a more local or small-scale focus while many NGOs work on an international level or on widespread issues. By simple definition, NGOs are organizations that operate separate from any government, while nonprofits are organizations that operate without generating a profit for the members of the organization.   

Are all nonprofits tax-exempt? 

Not all nonprofits are tax-exempt, although the large majority are. The difference between simply being a nonprofit organization and having tax-exempt status is that organizations are granted nonprofit status by a state government, while they must receive tax-exempt status from the federal government (specifically the IRS). The most common type of nonprofit, 501(c)(3), is tax-exempt. 

Are all donations to nonprofits tax-deductible? 

Only donations to 501(c)(3) nonprofit organizations, also known as charitable organizations, are tax-deductible. To learn more about 501(c)(3) charities, you can read this blog post about the different types of 501(c) nonprofit organizations. Simply Virtuous is classified as a 501(c)(3) nonprofit, so all donations made through Simply Virtuous are tax-deductible!  

How should I vet a nonprofit? How do I know what my donation is being used for?

If you are donating time or money to a nonprofit, you want to make sure that it is being put to good use. Vetting a nonprofit requires researching the history, impact, and finances of the organization. Start with visiting the organization’s website and reading about their history as an organization, their projects, and their accomplishments. Make sure they seem professional, well-established, and effective. Try reaching out to other donors and volunteers to learn about their experience with the organization. When researching an organization’s finances, it is important to look at program spending, executive compensation, and documents such as their IRS Form 990. Transparency is important for a nonprofit, as that way you can truly know exactly what purpose your donation will be used for. This can be a long and at times confusing process, especially if you want to donate to multiple nonprofits. Simply Virtuous does the vetting process for you, and creates charity portfolios so you can easily support to multiple charities with a single donation. To learn more about Simply Virtous’s vetting process and donating, click here

What is IRS Form 990? 

IRS Form 990 is an annual reporting return filed by tax-exempt organizations that details their mission, programs, and finances. The large majority of nonprofits, including all 501(c)(3) organizations, are required to file a 990. Information from the 990 can be an important source of the finances of a nonprofit organization and can help you learn exactly what your donation is going towards. Nonprofit organizations file different types of Form 990 based on their financial status. Organizations whose gross income is less than or equal to $50,000 file Form 990-N; organizations whose gross income is less $200,000 and their total assets are less than $500,000 can file Form 990-EZ or Form 990; and organizations whose gross income is greater than or equal to $200,000, or whose total assets are greater than or equal to $500,000 file Form 990. Private foundations, regardless of gross income or assets, file Form 990-PF.

What is IRS Form 1040?

IRS Form 1040 is the annual tax income tax return form filed by US taxpayers. This is the form on which you can record your tax-deductible donations to nonprofit organizations by listing them on Schedule A lines 16-19. Simply Virtuous makes deducting charitable donations easy, as you only have to list your total yearly donation to Simply Virtuous instead of multiple donations to multiple different charities. To learn more about how tax-deductible donations to Simply Virtuous works, follow this link.  


Leave a comment

Please note, comments must be approved before they are published