Pegasus provides full payment processing and tax reporting support for both 501(3)c charities and Non-profit corporations through its payment processor, Stripe.
Below is a summary of how Stripe manages the payments.
Overview of How Stripe Handles Non-Profits and Non-Profit Corporations
Stripe provides a versatile and secure platform for processing payments for both non-profits and non-profit corporations.
Although the core payment processing services are similar for all types of organizations, Stripe offers specific features and pricing to meet the needs of non-profits, especially those with 501(c)(3) tax-exempt status.
This summary outlines how Stripe supports non-profits and non-profit corporations, the paperwork Stripe provides to these entities, and their tax reporting obligations.
Payment Processing for Non-Profit Corporations
A non-profit corporation is a legal entity formed under state law that does not necessarily have tax-exempt status at the federal level. Unlike 501(c)(3) organizations, non-profit corporations are not automatically exempt from taxes and may not have tax-deductible donations. Nevertheless, these organizations can still use Stripe to process payments for:
Membership dues
Product sales
Event fees
Other income streams that are consistent with their non-profit mission
Handling Non-Profit Corporations That Are Not 501(c)(3)
For non-profit corporations that do not have 501(c)(3) status, Stripe treats them similarly to for-profit businesses when it comes to payment processing and tax reporting. These organizations do not receive discounted fees and are subject to standard Stripe pricing.
In addition, donations to non-profit corporations without 501(c)(3) status are not tax-deductible for the donor. This means that Stripe will not provide automated tax-deductible receipts unless the organization sets up its own receipt system.
Paperwork Stripe Provides to Non-Profits
Stripe’s involvement in paperwork and reporting to non-profits and non-profit corporations is generally related to payment processing. The most important document provided by Stripe for tax purposes is Form 1099-K.
Form 1099-K (Payment Processor Reporting)
The IRS requires Stripe, as a third-party payment processor, to report gross payment transactions for non-profits if they exceed a certain threshold. As of 2023, Stripe must issue Form 1099-K to any non-profit organization that processes more than $600 in gross payments during the calendar year.
This form is also provided to the IRS and includes:
Total gross payments for the year, including donations, membership dues, ticket sales, and other transactions.
Monthly breakdown of gross transaction amounts.
Form 1099-K is issued early in the following calendar year (typically by January 31), and the organization is responsible for ensuring that the reported income matches their own internal records.
Tax Filing Obligations for Non-Profits
Non-profits, depending on their status, have different tax filing requirements:
1. 501(c)(3) Charities:
501(c)(3) organizations must file Form 990 annually with the IRS. This form provides a detailed accounting of the non-profit’s income, expenses, and operations.
Form 990: For organizations with gross receipts of $200,000 or more.
Form 990-EZ: For organizations with gross receipts less than $200,000 but more than $50,000.
Form 990-N (e-Postcard)**: For organizations with gross receipts of $50,000 or less.
All income processed through Stripe, such as donations and fees, must be reported on Form 990.
If the organization earns income from unrelated business activities (e.g., selling products unrelated to its mission), it may need to file Form 990-T for unrelated business income tax.
2. Non-Profit Corporations Without 501(c)(3) Status:
Non-profit corporations that do not have tax-exempt status may still be required to file corporate tax returns (such as Form 1120 for C corporations) if they generate taxable income.
State filing requirements may also apply, as each state has different regulations for non-profit corporations.
Stripe will issue Form 1099-K if the organization exceeds the $600 payment threshold, and the non-profit corporation must reconcile this with their own income reporting.
Recordkeeping and Reporting
Stripe offers a range of reporting tools to help non-profits manage their finances, including transaction histories, financial summaries, and downloadable reports. These tools assist organizations in tracking income from various sources, managing recurring donations, and preparing for tax filings.
Non-profits using Pegasus can submit a request to Pegasus to pull these reports from Stripe. To do so, simply message the Pegasus team through our customer service portal.
Conclusion
Stripe provides essential payment processing services for both non-profits and non-profit corporations, including discounted fees for 501(c)(3) charities, recurring donation tools, and automated tax-deductible receipts for donors.
Non-profits receive Form 1099-K for tax reporting if they exceed $600 in gross payments, and must reconcile this with their own records when filing taxes (Form 990 for 501(c)(3)s or other corporate tax forms for non-profits without tax-exempt status).
If you want to pull a report from Stripe, simply message Pegasus customer service and submit a request.