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
Even though non-profit organizations can be tax-exempt, they are still required to file a return with the IRS. Many individuals, including those associated with non-profit organizations, do not understand the tax obligations of a non-profit organization.
I have compiled a top ten list of mistakes made in regard to taxes for these organizations.
• Not understanding the difference in non-profit and tax-exempt. An organization is a non-profit when it registers with the state as a non-profit organization. This state registration does not confer on it tax-exempt status. The organization must file a Form 1023 with the IRS to apply for, and receive tax-exempt status.
• Not filing a return. Because the organization is tax-exempt, some have a belief that the organization is not required to file a tax return. All tax exempt organizations, with the exception of churches, must file a Form 990 annually with the IRS. Read More
It is not uncommon for a United Stated-based organization to have activities in other countries. Indeed, for many organizations international activity is their primary reason for existence and the thrust of their mission. Sometimes, these international activities may take the form of grant from the U S-based organization to an organization in another country. These grants may present some issues for the U S organization if they are not handled properly.
Federal law is not clear in regard to documentation requirements for grants made by a 501(c)(3) public charity to foreign organizations. Specific laws do apply to 501(c)(3) private foundations. The IRS has taken the position, however, that public charities should follow the expenditure responsibility rules that apply to private foundations in regard to foreign Read More
When someone gives you a gift, social protocol states that you should acknowledge the gift, expressing thanks to the donor for his or her thoughtfulness and generosity. It’s the right thing to do. That same protocol holds when the recipient is a charitable organization. However, in this case, legal requirements are added to social expectations. An IRS tax-exempt organization must fulfill certain legal obligations in acknowledging contributions from donors. So, in this case it’s not just the right thing to do, it’s the legal thing to do.
Let’s start simple with the most common type of contribution, one of cash. Cash contributions include payment in cash, by check, or through use of a credit card. Regardless of the form of the contribution, the organization is in essence receiving Read More
If an organization receives non-profit status from the state upon its organization, it must take another step if it wishes to have the ability to accept tax-deductible contributions from potential donors. It must apply to the Internal Revenue Service for tax-exempt status. Many are unaware that non-profit and tax-exempt are not interchangeable terms.
When an organization that will operate as a non-profit corporation is initially formed, it applies to the state for a corporate charter as a non-profit corporation. This assures that any excess revenues received over expenses incurred will not be taxable income to the organization or its owners. This status does not confer on the organization the right or ability to accept tax-deductible contributions from outsiders. Read More
Now here is a fact that is not so widely known – the National Football Association which you figure makes a ton of money is recognized by the IRS as a tax-exempt entity.
Besides the match-up of the Seahawks and the Patriots in Super Bowl 49, people are excited over the entertainment and half-time show, what celebrities will be attending the game and of course – the commercials.
Sponsors present their best commercials during the Super Bowl, and the big game wouldn’t be the same without them. For the advertising community, the Super Bowl is their Super Bowl, and often creates commercials specifically for the enormous viewership that the game provides. For many, watching the commercials is the most entertaining part of Read More
In a previous article, we discussed the concept of Unrelated Business Taxable Income (UBTI) as it relates to non-profit organizations. If you have a self-directed IRA, you may be surprised to know that UBTI may also apply to your IRA. An IRA is a tax-exempt entity, under IRS rules. Note that the IRA itself is the tax exempt entity and the tax would be paid by the IRA, not the owner of the IRA.
The basic rules for UBTI in an IRA are pretty much the same as for any non-profit organization, but there are a couple of issues that may be encountered more commonly with an IRA. If a non-profit entity has UBTI, it will be subject to tax on that income at the applicable corporate rates. The purpose of this is to level the playing field for for-profit entities that must pay tax on their income. Read More
Non-profit organizations in the United States do not pay income tax on their “income.” However, when a non-profit ventures into certain business activities, it will owe income tax on this income, termed “unrelated business taxable income (UBTI).” This is only fair, as the non-profit is now competing with profit-making organizations that must pay tax on its income. UBTI levels the playing field.
What is Unrelated Business Taxable Income?
The IRS defines unrelated business taxable income as “gross income derived from any unrelated trade or business regularly conducted by the exempt organization, less the deductions directly connected with carrying on the trade or business.” Let’s unpack this definition and see how it applies in particular cases. Read More
Each year, more than 50,000 organizations apply to the IRS for tax exempt status. There are several steps involved in becoming tax exempt. Many do not realize that there is a difference in a non-profit organization and one that is tax exempt. Not all non-profit organizations hold tax-exempt status. According to IRS statistics, there were slightly over 189,000 returns filed in 2011 by tax-exempt organizations. However, the National Center for Charitable Statistics lists a total of 1,427,807 non-profit organizations. Obviously, many non-profits are not tax exempt, or at least, are failing to file a return.
Forming a Non-Profit Organization
The first step in forming a non-profit organization is to form a non-profit corporation. This involves filing an application with an appropriate official in the state in which the Read More
Hello Readers! A two month hiatus from tax-blogging is a long time to be away. Especially at this time with so many changes- exciting or scary- happening in the tax-world! My first born heading to college was definitely more challenging than I expected and yes, that’s my excuse and I am sure you would agree that it’s a good one?
Well, as if sending off my son to college wasn’t exciting enough, I filed for non-profit status for a client using the new Form 1023-EZ. This process used to be a long, arduous and complicated one. Most organizations contemplating going down that route had to wait months after filing for determination of non-profit status to hear back from the Internal Revenue Service, often not being able to raise as much capital as they expected. Read More