Electronic Document Filing Methods Required for Non-Profits in 2021

Posted on July 23, 2020


The world is rapidly becoming more digital. In most cases, this is a positive outcome. Electronic document filing methods are often more environmentally friendly, easier to organize, and cost-effective. Of course, change also presents some challenges. This is especially true with non-profits who often operate with limited staff and on thin budgets.

Regardless, one change taking effect for a large number of non-profit organizations in 2021 is Bill 39, or the Taxpayer First Act, which was signed into law by President Trump.  It was featured in a small announcement on the White House website and was not released with a lot of media attention. Still, despite not being the top story on news networks, Bill 39 lays out some pretty significant changes to the way nonprofits must file taxes beginning in 2021.

What is Bill 39?

The Taxpayer First Act brings significant changes to the way the IRS conducts business. Political junkies can check out all of the amendments to the bill here. The change that will affect non-profit organizations relates to mandatory e-filing of taxes beginning with the 2020 tax year.

Essentially, 501(c)(3) organizations must file Form 990 digitally and 527(e)(1) organizations will have to file Form 8872 digitally as well. Small organizations will be given a 2-year grace period to implement these changes but, regardless, the changes are coming.

According to the IRS, most non-profits already file their taxes digitally, but there are still hundreds of thousands of organizations that will need to make changes in order to be compliant with Bill 39.

What is the Concern for Non-Profits?

Many non-profits operate on small budgets with little wiggle room to make operational changes. Those that still complete forms manually and submit documents by mail do so because that’s the way it has always been done. It doesn’t cost these organizations money, time, or resources to maintain the status quo.

 Fora non-profit to be compliant with these new regulations means potentially implementing new electronic document filing methods. And, since many non-profits deal with sensitive information, these document storage methods must be secure. Especially when considering small non-profits, this could all prove to be somewhat challenging.

What is the Benefit of Bill 39?

Many people argue  that the IRS has been behind when it comes to technology for many years now. Bill 39 aims to improve many aspects of the IRS and the way taxpayers interact with the organization.

For non-profits, this means that taxpayers will have increased access to filing documents. Improving transparency among organizations that enjoy sweeping tax advantages from the IRS is important. Taxpayers should be able to trust that the system is not being taken advantage of.

Why Should Non-Profits Implement Electronic Document Filing Methods Now?

Whether a non-profit is small or large, implementing electronic document filing methods now can ensure they are prepared for these changes when they take effect. Plus, there are a number of additional benefits that come with making this important change:

Reduced Cost and Environmental Footprint

Some non-profit organizations file tax forms dozens, even hundreds, of times throughout the year. Printing off these documents on paper, storing them physically, and mailing them out regularly are all small costs that add up to be large expenses very quickly. With electronic filing and digital document storage, many of these small, ongoing costs are eliminated. Also, there is the reduced environmental footprint that goes along with digital storage and submission. No more printing, no more driving to the post office, and no more express delivery by air mail.

Improved Document Security and Accessibility

Properly storing documents digitally is much more secure than harboring physical documents. A physical piece of paper can be lost, damaged, or stolen. When stored digitally, the document can be protected in a number of different ways. Certain employees can be granted access, files can be password protected, and redundancies can be built into the system to protect against cyber-attacks or hardware failure.

Accessibility is also important, especially for non-profits with remote staff or multiple offices. Having a centralized digital filing system ensures everyone who needs access can get to the files they need, regardless of whether they are physically in the office or not.

Finding the Right Solution for Nonprofits

Organizational changes can initially appear costly and cumbersome. That’s where the experts at RJ Young steps in. We find cost effective, affordable, and easy-to-use solutions that are tailor made for each individual organization.

To learn more about electronic document filing methods, contact RJ Young today.

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