Urgent News for Nonprofit Organizations

Urgent News for Non-Profit OrganizationsThe IRS will be revoking not for profit status on several nonprofit organizations that have failed to file information returns for the past three years.  As of July 2010, it appears that more than 355,000 nonprofits were facing revocation.  If you are involved with a nonprofit organization, you need to make sure that your organization is safe.

What happened?  For decades, once an organization received a determination from the IRS that it was tax exempt, that status was final, unless specifically revoked by the IRS.  Although many nonprofits do file information returns every year, small organizations with receipts of less than $25,000 were exempt.  This changed with the Pension Protection Act of 2006.  The PPA had a lot of provisions about taxes, but the relevant one here was that it required almost all exempt organizations to file information returns with the IRS every year starting in 2008.  If an organization didn’t file for three years, then the IRS is required to revoke the tax exempt status.

If your organization loses its tax exempt status, then it will be required to pay income taxes.  If it’s a charity, it will no longer be able to accept tax-deductible contributions.  Revocation is serious business.

The deadline for filing was May 17th, which has already passed.  Fortunately, the IRS is offering one time relief for filers of form 990N (the e-Postcard) for nonprofits with receipts of less than $25,000.  And also for filers of 990EZ for organizations with receipts of less than $1,000,000 but more than $25,000.   The new deadline is Octobr 15, 2010.

What can you do?  First, check to see if your organization is on the IRS revocation list.  Click on the link to the IRS website, scroll down to find your state and open the file.  The organizations are listed alphabetically.  http://www.irs.gov/charities/article/0,,id=225889,00.html

If you’re on the list, then you’ll need to determine what type of filer you are and then you can go from there.  Do not let your organization be a victim of “Oops, I didn’t know.”  Call me, I can help.

Back to School Time

Whho’s Back to School Time

 

In my neighborhood it’s back to school week!  Here’s some tax tips related to sending the kids back to school.

 

It seems like if they start school on Monday, then the gift wrap/candy sale starts on Tuesday.  If you have a choice, you’re better off writing a check directly to the PTO for whatever donation you’d like to make to the school rather than buying whatever the kids are selling.  For one thing, the school will get all of your donation instead of the money going to some fundraiser sales company.  For another, your check to the PTO will be 100% tax deductible.  (I would argue that 50% of whatever you pay for the gift wrap should be counted as tax deductible as well, but the fund raising companies will argue that their gift wrap really is worth $7 per roll so it’s an iffy deduction.)

 

If you’re a school volunteer, the money you spend for the classroom counts as a charitable contribution.  For example, let’s say you’re the “Halloween Party Mom.”  You spend $30 on candy, $20 on art supplies, and $15 on face paint.  Save those receipts because that’s a $65 contribution to the school.  The same goes for scouts and church groups.  Hold on to those receipts for  those projects as well.

 

Now if the kids pay an activity fee and you’re using the kids’ activity money to buy supplies, then you can’t deduct those receipts.  But if you’re spending your own money on projects, then you definitely can use that as a deduction.   Scout leaders–your uniform is deductible, your kids uniform isn’t.

 

Remember that the mileage you put on your car for volunteering is also deductible with your contributions.  Charity miles are counted as 14 cents per mile.  It doesn’t seem like much, but for some people it really adds up.

 

Welcome back and have a great year!

 

IRS Plans to Remove Debt Indicator for 2011

IRS Plans to Remove Debt Indicator for 2011

Have you ever gotten one of those Refund Anticipation Loans (also known as RALs) with your tax return? Those are the “fast money” refunds where you pay a fee and get your refund immediately, or perhaps in one or two days instead of waiting for two weeks. What the IRS has just announced could pretty much put and end to those types of loans.

In the past, the IRS has provided tax preparer firms and financial institutions with a “debt indicator” tool. Basically, when a tax return was prepared, if a person applied for the RAL, there would be a response about any government debt owed by the individual. Basically, if debt was owed, the RAL would be denied because the loan is secured by the anticipated refund.

According to the IRS, they no longer see a need for these Rapid Refund Loans since a person can receive his or her refund in 10 days.  There’s been a great deal of public pressure against RALs.  Consumer groups such as the National Consumer Law Center and the Consumer Federation of America have opposed RALs for years.  One reason is that RALS are usually targeted at low income households and the fees are often very high in relation to the loan provided.   The profit motive in RALS can sometimes lead to predatory and even fraudulent activity.  In 2008, the latest year that I could get figures for, 8.4 million RAL loans were made.  $738 million was spent on loan fees.  $68 million was spent on other related fees.

Individuals will still have access to their own personal information concerning debt via the “Where’s My Refund?” application on the IRS website.

For a look at the IRS press release dated August 5, 2010, click here:  http://www.irs.gov/newsroom/article/0,,id=226310,00.html