This was a story told to us by another Tax Advisor that we promised to protect their privacy if they shared their story with us and allowed us to share it with our audience. Therefore, we are publishing this under my name and encourage your comments at the end of this blog post.
Archive for Non-Profit Tax
When one embarks on looking at what might happen with taxes, that path is fraught with many hazards. What a candidate says may not be what is actually proposed. What the elected candidate proposes may be modified or totally shot down by Congress. What Congress passes may not be signed by the President. However, I have my crystal ball and can foresee what the future holds in terms of future changes in taxes. Yeah, right. Unfortunately, that crystal ball is extremely cloudy and I cannot say with certainty what will happen.
College and high school students are frequently utilized by businesses and non-profit organizations as interns. These arrangements can be beneficial to the organization as the organization may get the services and insights from the intern, even though the organization receives no immediate tangible benefit. The intern may benefit by obtaining valuable on-the-job training, an entree into a permanent job, college credit, and maybe a few dollars in earnings. Internships vary greatly. They may be paid or unpaid; for college credit or not for credit; highly structured as in a college program, or an independent arrangement with less structure. Read more
As most people are aware, contributions to qualified not-for-profit organizations can be deducted on your income tax return. In order to get a tax benefit, however, you must have enough deductions to itemize rather than taking the standard deduction.
The IRS has some restrictions and guideline for charitable contributions. First, in order to take any charitable contribution, you must have a receipt from the organization, detailing the amount of the contribution and a statement that you received nothing in return. There is a new rule on this. Previously, any contribution of less than $250 did not have to be evidenced by a receipt. Now, a contribution of any amount requires one. This also means that if you pay the church $10 for a book that you purchase from the church, this is not a deductible contribution, as you have received $10 in value in return. In short, you cannot Read more
It is highly likely that you have recently received a new, updated credit card from at least one of your credit card vendors. If you did, it is almost certainly one of the new “chip-enabled cards.” You most likely are wondering “What is this all about?”
The United States is very late to the game in the chip card market. These have been in use in Europe for a number of years. It is all about security. After the cards were introduced in Europe, there was a sharp decline in credit card fraud. Without getting into too much technical detail, the old magnetic strip cards allowed the retailer to store card data in their systems, making them ripe for data theft. The chip cards, referred to as EMV (Europay, Mastercard, Visa) utilize a process referred to as tokenization to increase security. In lieu of recording the credit card number a one-time “token” number is substituted in the Read more
Under current tax law, a donor may deduct fair market value for certain non-cash contributions of a capital asset to IRS qualified tax-exempt organizations. This provision in the law has been a great benefit to organizations as well as donors.
For example, assume a taxpayer owns a capital asset such as a tract of unimproved land. The land has a cost basis to the taxpayer of $10,000 but its fair market value is $50,000. If this land has been owned by the taxpayer for more than 12 months, he or she gets a deduction equal to the fair market value when donated to an IRS qualified tax-exempt organization. So the taxpayer gets a $50,000 deduction for an asset costing him or her $10,000 and does not pay any tax on the appreciated amount. Read more
Many churches and other non-profit organizations now accept online and credit card contributions. Typically, the credit card transactions can be made through the organization’s website or through a kiosk located within the organization’s facilities. In recent months the availability of mobile pay devices has become more widely available. These devices allow the organization to use smart phones, tablets, or other devices for accepting payments. The most common providers of this technology are PayPal Here and Square. Typically, after signing an agreement with the company, the appropriate hardware will be provided to the organization, giving them the ability to accept mobile payments. There may be a charge for the hardware. And, the organization does charge a fee based on the dollar amounts that are processed. Read more
Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity.
• Qualified Charities. In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate. You can also use the Select Check tool on IRS.gov to check the group’s status. Read more
Last fall we wrote about the increased enforcement of the German Church Tax (German Church Tax Causes Controversy), in particular the enforcement of this tax on capital gains. The tax is levied by the state at 8-9% of the regular income tax for members of certain mainline churches – primarily Catholic and Lutheran church members. This tax is then passed on to the churches for use in their operations and charitable activities. The tax is only levied against registered members of Catholic, Protestant, or Jewish churches. The system does not rely on self-reporting as some churches have gotten rather aggressive against those who are alleged members of the Church but do not report being a member of a church.
As enforcement of the tax has increased, more and more church members are Read more
When a church or religious organization loses its tax-exempt status, the obvious consequences are that donations to the organizations can no longer be deducted by donors. In addition, loss of tax-exempt status means that the organization is subject to federal and state income taxes on its net income. That last statement is not quite as bad as it sounds, though because the tax is on net income, not the gross. Most such organizations tend to spend most, if not all, of their income on programs and infrastructure. Therefore, there would be little or no net income and no income tax to pay.
There are numerous other consequences involved with losing one’s tax-exempt status that can affect the organization significantly. Read more
Many people, particularly those involved in 501(c)(3) tax-exempt charitable organizations, are familiar with the process of applying to the IRS in order to receive tax-exempt status. Organizations that have obtained this status can accept tax-deductible contributions from donors. Obviously, this is critical to such organizations.
Tax-exempt status should not be taken for granted. When obtained, it is for an indefinite period. However, an organization can lose its tax exempt status, either by voluntarily surrendering it or having it revoked by the IRS. If revoked by the IRS, it may be retroactive if the church or organization omitted or misstated material facts or operated in a manner significantly different than originally represented. More frequently, however, the revocation will be effective no earlier than the date on which the organization received written notice Read more
Until 1969, there was no legal requirement that an organization must file with the IRS to obtain tax-exempt status. This status was automatic if the organization could demonstrate that it met the requirements set forth in Section 501(c)(3) of the tax code. In other words, an organization claiming tax exempt status was presumed to be qualified unless the IRS determined to the contrary. However, in 1969, Section 508 was added to the tax code, specifying that no organization would be treated as tax-exempt unless it applied to the IRS for tax-exempt status. Thus Form 1023 was born as the tax-exempt status application.
Some exceptions were carved out, however. Three classes of organizations do not have to apply for tax exempt status: Read more