April 15, 2002 | Read Time: 2 minutes
Q. I’d like to found a nonprofit organization in Florida, and in order to get under way, I need to purchase lots of office materials and other supplies. Should I wait until my charity is officially registered? If I buy them with my own money, before my charity is registered, will I be able to write them off on my taxes?
A. You don’t need to wait to buy supplies until your charity is officially registered, says Donald J. Butler, director of Rachlin Cohen & Holtz Certified Public Accountants and Consultants, in Miami, and chairman of the company’s nonprofit-services division.
When you’re buying supplies for your soon-to-be-charity, you’re either donating your own money or donating the supplies. You’re allowed to deduct the value of the donation to your charity before it receives charity status from the Internal Revenue Service, as long as you are certified within 15 months of the end of the month in which you made your donation. (You can automatically get a one-year extension if you file for it, which creates a larger buffer zone if you run into problems with your application.) Of course, if your organization doesn’t qualify for charity status, you won’t be able to deduct your donations from your taxes, so it’s a good idea to seek advice from an accountant before you spend your own money. “The answer to every tax question is, ‘It depends,’” Mr. Butler jokes.
Before you buy anything for your charity, it’s a good idea to establish a checking account for the organization, says Christine L. Manor, an accountant in Rockville, Md., who specializes in working with nonprofit groups. “Commingling funds is a bad, bad idea,” she says. Keep all of your receipts, and note on them whether you’ve spent the money for fund raising, operating, or program costs. All of this will help you at tax time. Ms. Manor recommends that you check out the Non-Profit Financial and Accounting Manual, available for $93 in print or $123 on CD-ROM from Practitioner’s Publishing Company. The publisher also takes phone orders at (800) 323-8724.
