What if I Am Running a Tax-Exempt Charitable Organization? Do My Employees or I Have to Pay Tax?

On: April 12, 2019

Yes. Your organization is still a business and is subject to the same requirements as a for-profit organization in terms of payroll, as well as your salary, office supplies and marketing. It is the bottom line that is affected by the non-profit status. To the extent that such profits are used to further the charitable cause the business exists to promote, they are not taxable. Valid donations are deductible when donated to a properly maintained 501(c)(3) and other organizations. Employees, however, are still taxed as employees, payroll withholding requirements are in force and, if the organization fails to rigorously adhere to the laws and regulations in place to maintain tax exempt status, it will lose that status, and liabilities, penalties and interest can be assessed against the entity, its officers and its directors.