OOPS!
My previous blog gave the wrong website address for ECFA (the Evalgelical Council for Financial Accountability) – the correct address is www.ecfa.org. Sorry about that – unless you're interested in the Ethan Cohon Fine Arts Center in NYC!
My previous blog gave the wrong website address for ECFA (the Evalgelical Council for Financial Accountability) – the correct address is www.ecfa.org. Sorry about that – unless you're interested in the Ethan Cohon Fine Arts Center in NYC!
Just finished listening to a webcast of the Evangelical Council for Financial Accountability (ECFA) – www.ecfa.com – on the commission it's been asked to set up by Sen. Charles Grassley (R-Iowa). For several years, Grassley's been pushing hard on some high-profile tele-evangelists on some big questions. Now, he's asking the ECFA to be an independent group and offer suggested solutions to some key issues. A couple of the areas to be examined:
1. Should churches be required to file an IRS form 990, like other nonprofits?
2. Should the ministerial housing allowance exclusion be modified/limited?
3. Should the prohibition against political campaign intervention by churches be repealed?
4. Sould there be tighter requirements related to "love offerings"?
I think the ECFA is very much on our side, so they'll protect the interests of churches in general. Still, because it is a long-standing advocate of financial accountability by churches, the ECFA will probably advocate some tightening up in certain areas.
PSK is planning on being involved with the commission, at least in providing input. Thoughts anyone?
Tax exempt organizations are required to file an annual return with the IRS. If the organization fails to do so for three consecutive years, the exempt organization automatically loses its exempt status. The IRS announced today one-time relief benefits for Form 990-N and Form 990-EZ filers that have failed to file for the previous three years.
Please note that the relief does not include organizations that are required to file a Form 990. To read more about this one time exemption, click here. The IRS provided a list of organizations that are at risk of automatic revocation. You can view the list here.
If you need help with your annual filing requirements, please contact us. We will walk you through the process and help you stay in compliance.
As you may know, the IRS revamped the Form 990 a few years ago. During this process a law was passed that requires an automatic revocation of tax exempt status for failure to file form 990, 990-EZ, 990-N or 990-PF for three consecutive years. Did you get that? You will lose your tax exempt status if you do not file your annual return three years in a row? If you do lose your status, you have to start the application process again. The IRS cannot reverse the revocation.
So let's review the rules on who must file. Most tax exempt organizations must file an annual return (except for these organizations). Here are four types of returns – 990, 990-EZ, 990-N, and 990-PF. The following thresholds are for the tax year 2009. The 990 must be filed if the tax exempt organization has gross receipts equal to or greater than $500,000 OR total assets equal to or greater than $1.25 million. The 990-EZ can be filed if the tax exempt organization has gross receipts equal to or less than $500,000 OR total assets equal to or less than $1.25 million. The 990-N must be filed if the tax exempt organization has gross receipts equal to or less than $25,000. Private foundations must file a 990-PF regardless of financial activity.
The 2010 tax year thresholds drop to $200,000 for gross receipts and $500,000 for total assets. The 990-N threshold increases to gross receipts equal to or less than $50,000. This can be confusing so I recommend you use the IRS charts.
Here is where this might affect you or someone you know. The 990-N is a relatively new form and small organizations simply may not be aware of the new filing requirements. Another example includes organizations with volunteer officers that rotate frequently. It is important that all tax exempt organizations, regardless of size have a process in place to ensure annual compliance. As you can see, annual compliance has become critical.
You can find more information on the annual filing requirements here. PSK is here to help. Please call to schedule an appointment if you need help with your organization’s annual filings.
Good morning,
I hope everyone is finding a way to keep cool in this brutal summer heat. Unfortunately, what I am about to tell you may cause your thermometer to pop up a few degrees!
Over the last year and a half or so, we have been advising our church clients and breakfast attendees that the IRS’s attitude towards churches and ministries appeared to be taking a less than desirable turn. Our fear was that due to some high-profile cases of abuse, the IRS would begin taking a closer look at churches, ministries and individual ministers. This week, our fears were confirmed by a brief comment in The Kiplinger Tax Letter. The following is a quote from the July 10, 2009 issue.
“Ministers will get special attention from auditors as well: A new audit guide tells examiners to be on the lookout for several potential trouble spots. Among them: Incorrectly figuring the tax free housing allowance and failing to pay SECA tax on it. Wrongfully claiming to be exempt from SECA tax, and deducting business expenses that are attributable to tax-exempt income. Go to the IRS's guide to check out the complete list of tax issues that examiners will be looking for.”
You might want to follow the link above to make sure you will come out ok should your church or any of its ministers receive one of those very inconvenient letters from our friends at the IRS.
If you need any help interpreting any of the IRS gibberish don’t hesitate to give us a call.
Also, this might be a good time to consider having PSK perform an IRS compliance review. In a compliance review we perform many of the tests that an IRS auditor would perform with one huge difference. If we find areas of noncompliance we help you get it fixed. If the IRS finds it… Well you know.
Stay cool…
Verne
Related to the last post on IRS & Cell Phones, I read the actual IRS Notice 2009-46. The IRS is considering three possible approaches, and they will allow public comment through September 4, 2009. Go here to see the details. What approach would you suggest?
The IRS Commissioner released this statement last week regarding the taxability of employer provided cell phones. There has been much confusion on this topic. The current law requires that the employee keep records supporting business use and personal use of employer provided cell phones. The employer is then required to include the value of personal use as wages.
These requirements can easily become overwhelming and impractical in this culture. It is good to see the IRS is agreeing that the rule is outdated and simplification is needed. Now it is up to Congress to fix it.
State requirements for exempt organizations vary from state to state. In Texas, a charitable organization can apply for exemption from sales tax paid on purchases and franchise tax. The application can vary depending on the type of organization. The exemption is granted based on the organization’s federal exemption.
Click here for a link to the guidelines for exempt organizations published by the Texas Comptroller of Public Accounts.
It is important to note that exempt organizations must collect tax on most of their sales. There are a variety of exceptions to this, so you really must research what you are selling. The state has a publication to guide exempt organizations on this matter.
One last piece of information I will leave with you is that you can search for exempt organizations registered with the state at the Comptroller’s website at this link.
Call us if you need help with your tax exempt organization’s state requirements.
The IRS has issued the 2009 version of IRS Publication 919, How Do I Adjust My Tax Withholding? as a result of the "Making Work Pay" credit in the American Recovery and Reinvestment Act of 2009 (ARRA).
Employees can use this publication to help them determine if their federal income tax withholding is sufficient, and, if necessary, prepare a new Form W-4 to adjust their withholding. The publication includes worksheets for projecting 2009 tax, withholding, and deductions. For 2009, a new worksheet (Worksheet 12) has been added on the "Making Work Pay" credit.The amount of the "Making Work Pay" credit is $400 (unless the person makes under $6,450; then it’s 6,2% of compensation). Because the credit is refundable (people can get it even if they owe no tax), most low-income workers will also qualify for the full credit. The credit is phased out for a married couple filing a joint return whose modified adjusted gross income (AGI) is between $150,000 and $190,000, and for other taxpayers whose modified AGI is between $75,000 and $95,000.
It is a good idea to look at Publication 15T and print out the employee notice (on page 73 of the publication) that you should provide to your employees explaining the changes. Some employees are beginning to discover after filing their 2008 personal income tax returns that they didn't have enough money withheld from their paychecks. Employees may really feel the shortfall in 2009 with the changes in the withholding rates.
… and charitable organizations make the 2008 list.
The IRS listed the misuse of charitable organizations as one of the 12 most egregious tax scams by taxpayers. Abuse by donors who try to maintain control over donated assets or income from donated assets is just one example. Taxpayers are also claiming overvalued property donations for a larger deduction. Finally, taxpayers are disguising private tuition payments as contributions to charitable or religious organizations.
This information is good to keep in mind. We all like to think that our donors have the best intentions but the IRS is saying that these scams are happening on a large scale basis. If you have someone who wants to control how their donation is used, you should know that the donation is considered a donor advised fund and is subject to strict rules.
Noncash contributions also have certain requirements. Individuals are required to file a form 8283 for noncash donations over $500. A form 8282 is generally required to be completed by the charitable organization (aka you) to report dispositions of certain charitable property made within 3 years after the donor contributed the property. Yes, I did say 3 years. Certain charitable property is any donated property other than money and publicly traded securities over $5,000.
Remember there are usually exceptions to the rules but I have listed the general rules.
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