3 Reasons Colleges And Universities Need Tax Consulting
Colleges and universities face multiple tax-related issues, which range from keeping documents organized to handling complex questions. A tax consulting firm can help colleges with many of the tax items that they must address. Here are three reasons why colleges and universities should consider using an outside tax firm and not just relying on their in-house accounting department.
Conduct Third-Party Audits
Third-party audits are an important part of managing any nonprofit budget because audits are how both the IRS and others can confirm that a nonprofit is acting above-board. Audits confirm that funds are used appropriately and show that a college or university is using all of their funds to support education in some way.
Additionally, audits help identify any embezzlement that might be occurring within a college or university. While unlikely, this is a risk that every school must be aware of and take measures to deter. Hiring an outside firm that will check all records is one of the best ways to deter internal financial theft at a school.
Both independent certified public accounts and larger tax consulting firms can technically conduct third-party audits. Only larger firms have the personnel and resources necessary to audit an organization as large as a college or university, though. The number of documents that must be checked would overwhelm most independent auditors.
Demonstrate Proper Nonprofit Handling of Financials
Many colleges and universities are classified as 501(c)3 nonprofit organizations and have tax-exempt status with the IRS.
Nonprofit tax-exempt status makes managing their taxes more involved than simply managing a for-profit business's taxes, as a nonprofit must show that it doesn't make money. If this can't be demonstrated, then the status could be jeopardized.
A tax consulting firm can help colleges and universities demonstrate to the IRS that they are operating as a nonprofit should. A firm can help show this both with supporting documents that are included in returns and more extensive documents that might be requested during an audit.
Answer Communications Tax Issues
Communications taxes are changing as technology advances, and these changes may impact colleges and universities that offer online education. The changes are often too much for an in-house accounting department to stay current on, but a tax consulting firm that specializes in communications taxes will be familiar with any new laws or regulations.
A tax firm will also be able to answer any communications tax-related questions that arise, and these can be fairly common when new laws and regulations go into effect. Reach out to a tax consulting firm to learn more.