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IRS Special Edition Tax Tip 2013-09: IRS Warns Donors about Charity Scams Following Recent Tragedies in Boston and Texas

It’s sad but true. Following major disasters and tragedies, scam artists impersonate charities to steal money or get private information from well-intentioned taxpayers. Fraudulent schemes involve solicitations by phone, social media, email or in-person.

Scam artists use a variety of tactics. Some operate bogus charities that contact people by telephone to solicit money or financial information. Others use emails to steer people to bogus websites to solicit funds, allegedly for the benefit of tragedy victims. The fraudulent websites often mimic the sites of legitimate charities or use names similar to legitimate charities. They may claim affiliation with legitimate charities to persuade members of the public to send money or provide personal financial information. Scammers then use that information to steal the identities or money of their victims.

The IRS offers the following tips to help taxpayers who wish to donate to victims of the recent tragedies at the Boston Marathon and a Texas fertilizer plant:

  • Donate to qualified charities.  Use the Exempt Organizations Select Check tool at IRS.gov to find qualified charities. Only donations to qualified charitable organizations are tax-deductible. You can also find legitimate charities on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
  • Be wary of charities with similar names.  Some phony charities use names that are similar to familiar or nationally known organizations. They may use names or websites that sound or look like those of legitimate organizations.
  • Don’t give out personal financial information.  Do not give your Social Security number, credit card and bank account numbers and passwords to anyone who solicits a contribution from you. Scam artists use this information to steal your identity and money.
  • Don’t give or send cash.  For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
  • Report suspected fraud.  Taxpayers suspecting tax or charity-related fraud should visit IRS.gov and perform a search using the keywords “Report Phishing.”

More information about tax scams and schemes is available at IRS.gov using the keywords “scams and schemes.”

Not All Giving is Deductible

Stacie Kitts, CPA is a partner at Katherman Kitts & Co. LLP

On occasion I run across a taxpayer who “helped” out a family or a friend and wants to deduct the money given as a charitable contribution.  They are always shocked to find out that helping your neighbor isn’t tax deductible unless its through a charitable organization.

Charity is good, but if you want to deduct it, be sure to check out the items below.

If you make a donation to a charity this year, you may be able to take a deduction for it on your 2011 tax return. Here are the top nine things the IRS wants every taxpayer to know before deducting charitable donations.

  1. Make sure the organization qualifies Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization or check IRS Publication 78, Cumulative List of Organizations. It is available at www.IRS.gov.
  2. You must itemize Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
  3. What you can deduct You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
  4. When you receive something in return If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
  5. Recordkeeping Keep good records of any contribution you make, regardless of the amount. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity containing the date and amount of the contribution and the name of the organization.
  6. Pledges and payments Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, you can only deduct $200.
  7. Donations made near the end of the year Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
  8. Large donations For any contribution of $250 or more, you need more than a bank record. You must have a written acknowledgment from the organization. It must include the amount of cash and say whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.
  9. Tax Exemption Revoked Approximately 275,000 organizations automatically lost their tax-exempt status recently because they did not file required annual reports for three consecutive years, as required by law. Donations made prior to an organization’s automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions.

For the list of organizations whose tax-exempt status was revoked, visit www.IRS.gov. For general information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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IRS Presents:Ten Things Tax-Exempt Organizations Need to Know About the Oct. 15 Due Date (This is a how to on keeping your exempt status)

 

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Stacie says: This tax tip is some particularly good information from the IRS for tax exempt organizations to help them keep their exempt status.   The time period to fix your delinquent Form 990 filings for years 2007, 2008 or 2009 will expire on October 15.  That’s just a few more days.  You are encouraged to take advantage and keep your tax exempt status.

A crucial filing deadline of Oct. 15 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked. Nonprofit organizations that are at risk can preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program.

The Pension Protection Act of 2006 mandates that most tax-exempt organizations must file an annual return or submit an electronic notice, with the IRS and it also requires that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

Here are 10 facts to help nonprofit organizations maintain their tax-exempt status.

  1. Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15, 2010.
  2. Among the organizations that could lose their tax-exempt status are local sports associations and community support groups, volunteer fire and ambulance associations and their auxiliaries, social clubs, educational societies, veterans groups, church-affiliated groups, groups designed to assist those with special needs and a variety of others.
  3. A list of the organizations that were at-risk as of the end of July is posted at IRS.gov along with instructions on how to comply with the new law.
  4. Two types of relief are available for small exempt organizations — a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice and a voluntary compliance program for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.
  5. Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N also known as the e-Postcard. To file the e-Postcard go to the IRS website and supply the eight information items called for on the form.
  6. Under the voluntary compliance program, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by Oct. 15 and pay a compliance fee.
  7. The relief is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.
  8. Organizations that have not filed the required information return by the extended Oct. 15 due date will have their tax-exempt status revoked.
  9. If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status and any income received between the revocation date and renewed exemption may be taxable.
  10. Donors who contribute to at-risk organizations are protected until the final revocation list is published by the IRS.

Links:

One-Time Filing Relief for Small Organizations That Failed to File for Three Consecutive Years

Filing Relief – 990-N Filers

Filing Relief/Voluntary Compliance Program – 990-EZ Filers

IR-2010-101: Taxpayers Face Oct. 15 Deadlines: Due Dates for Extension Filers, Non-Profits Approach

YouTube Videos:

Small Tax-Exempt Orgs Revised Deadline: English

Time Is Running Out – Three Deadlines: English

IRS Patrol:IRS to Hold Special Open House Saturday, Sept. 25 for Veterans and Persons with Disabilities

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WASHINGTON — The Internal Revenue Service will host a special nationwide open house on Saturday, Sept. 25 to help taxpayers –– especially veterans and people with disabilities –– solve tax problems and respond to IRS notices.

One hundred offices, at least one in every state, will be open from 9 a.m. to 2 p.m. local time. IRS staff will be available on site or by telephone to help taxpayers work through issues and leave with solutions.

In many locations, the IRS will partner with organizations that serve veterans and the disabled to offer additional help and information to people in these communities. Partner organizations include the National Disability Institute (NDI), Vets First, Department of Veterans Affairs, National Council on Independent Living and the American Legion.

“Taxpayers have tremendous success solving their tax issues at our open houses,” IRS Commissioner Doug Shulman said. “I want to encourage veterans and people with disabilities to come in on Sept. 25. Just like we reached out earlier this year to small businesses and victims of the Gulf Oil Spill, we want to help other taxpayers put their toughest problems behind them.”

IRS locations will be equipped to handle issues involving notices and payments, return preparation, audits and a variety of other issues. At a previous IRS open house on June 5, over 6,700 taxpayers sought and received assistance and 96 percent had their issues resolved the same day.

At the Sept. 25 open house, anyone who has a tax question or has received a notice can speak with an IRS employee to get an answer to their question or a clear explanation of what is necessary to satisfy the request. A taxpayer who cannot pay a balance due can find out whether an installment agreement is appropriate and, if so, fill out the paperwork then and there. Assistance with offers-in-compromise — an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed — will also be available. Likewise, a taxpayer struggling to complete a certain IRS form or schedule can work directly with IRS staff to get the job done.

Taxpayers requiring special services, such as interpretation for the deaf or hard of hearing, should check local listings and call the local IRS Office/Taxpayer Assistance Center ahead of time to schedule an appointment.

The open house on Sept. 25 is the third of three events scheduled after this year’s tax season. Plans are underway for similar events next year. Details will be available at a later date.

Reminder for Small Tax-Exempt Organizations

The IRS also encourages representatives of small tax-exempt charitable community organizations, many of which serve people with disabilities and veterans, to file Form 990-N before the Oct. 15 deadline. Community organizations that fail to file a Form 990-N by this date risk losing their tax exempt status. As of June 30, more than 320,000 organizations were at risk of losing their exempt status.

IRS Patrol: New Form 8941 -IRS Releases Form to Help Small Businesses Claim New Health Care Tax Credit

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WASHINGTON –– The Internal Revenue Service today released a draft version of the form that small businesses and tax-exempt organizations will use to calculate the small business health care tax credit when they file income tax returns next year. The IRS also announced how eligible tax-exempt organizations –– which do not generally file income tax returns –– will claim the credit during the 2011 filing season.

The IRS has posted a draft of Form 8941 on IRS.gov. Both small businesses and tax-exempt organizations will use the form to calculate the credit. A small business will then include the amount of the credit as part of the general business credit on its income tax return.

Tax-exempt organizations will instead claim the small business health care tax credit on a revised Form 990-T. The Form 990-T is currently used by tax-exempt organizations to report and pay the tax on unrelated business income. Form 990-T will be revised for the 2011 filing season to enable eligible tax-exempt organizations –– even those that owe no tax on unrelated business income –– also to claim the small business health care tax credit.

The final version of Form 8941 and its instructions will be available later this year.

The small business health care tax credit was included in the Affordable Care Act signed by the President in March and is effective this year. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

In 2010, the credit is generally available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years.  The maximum credit goes to smaller employers ¬¬–– those with 10 or fewer full-time equivalent (FTE) employees ––¬¬ paying annual average wages of $25,000 or less.

The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.

More information about the credit, including a step-by-step guide and answers to frequently asked questions, is available on the Affordable Care Act page on the IRS website.

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