This week the Washington Post reported that Donald Trump was fined $2,500 by the IRS for filing a false report to the IRS about the activities of his nonprofit foundation. Nonprofit organizations are not supposed to give money to political campaigns. He did, and then covered up the political donation by reporting it to the IRS under another name. The Trump controller says the series of accounting mistakes was unintentional. Yet forensic accountants generally recognize that an accounting error that covers up another underlying accounting error is statistically less likely to be unintentional. The statistical probability of one error occurring at random that happens to cover up another independent underlying illegal action is very small. Trump later dismissed the issue indicating that since he paid the tax fine, the incident should be forgotten. The problem with Trump’s logic is that we rely on a voluntary tax compliance system that should not require a taxpayer to be audited and caught in a misstatement before committing to the proper accounting and tax reporting.
The lesson for the rest of us is that correct and timely preparation of nonprofit tax filings is important and should be taken seriously. The filings typically known as Form 990 or 990PF can take a bit more time than a personal tax return but are an important responsibility of nonprofit officers and board members.
More information on improving the management and performance of nonprofit organizations, request a copy of my booklet “What Every Nonprofit Board Member Should Know”. The booklet is free to officers and directors of nonprofit organizations.