Archive for John Stancil

I’m Crowdfunding! Is it Taxable?

Crowdfunding through Internet sites such as gofundme.com and kickstarter.com have become convenient and often successful vehicles for fund raising. Would-be businesses use them for start-up funding to get a business off the ground. Others attempt to raise money to fund a new project, frequently a book or musical recording. On the other hand, crowdfunding is also utilized by individuals to help in the event of a personal disaster, for medical bills, or other reasons.  A question that is frequently posed is “are these funds taxable income?” Right now, the answer is “I don’t know.” There is no guidance from the IRS on this, and nothing definitive is likely to be forthcoming until there is a test case that is heard in the court system. And, of course, the IRS is not bound to follow court decisions as they relate to future situations and may announce an acquiescence or Read More

Written by | Posted in Income Tax • IRS • Tax Controversy

Accounting For Donor-Restricted Funds

Frequently, a charitable organization will be offered a contribution with restrictions on the use of that contribution.  The gift can be cash or any other asset. The organization is under no obligation to accept the gift with restrictions, but if it does, the donor restrictions must be honored. A distinction should be made between a conditional donation and a restricted one. A conditional donation is predicated on the occurrence or non-occurrence of a specific event. For example, the donor may specify that a contribution will be made to the organization’s building fund if a certain amount of additional funds are raised within a specified period of time. A doctor-restricted contribution may only be used for the purpose specified by the donor. As an example, the donor may make a contribution to a university scholarship fund, specifying that the funds will be awarded only to junior accounting majors with a GPA of 3.0 Read More

Written by | Posted in IRS • Non-Profit Tax

International Grant Making – Watch Your Step

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

Written by | Posted in International • Non-Profit Tax

How To Get A Larger Deduction For Non-Cash Contributions

It seems that everyone has “stuff” around the house that they want to get rid of. One option is to back the truck up to your front door, dump it all in the truck and head for the landfill. And for some items, that is a good alternative, maybe the only one. But some of your things may have value. It’s still in good shape and someone could make good use of it.

A garage sale may be in order. This can put some cash in your pocket, but it can be a lot of work. You’ve got to display and price your wares which takes a good bit of time and thought.  Then you have to sit out all day, answering questions, negotiating prices, and hopefully making sales. The good news is that this is probably not taxable income unless you sold an item for more than it cost. Not likely. You do need to be aware of any local restrictions or licensing of this type of activity. Read More

Written by | Posted in Individual • Non-Profit Tax

Acknowledging Charitable Contributions

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

Written by | Posted in Individual • IRS • Non-Profit Tax

Non-Profit Is Not The Same As Tax-Exempt

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

Written by | Posted in IRS • Non-Profit Tax

The IRS Has Special Rules For Vehicle Donations

From time-to-time, nonprofit organizations may be donated a vehicle, boat, or airplane as a charitable contribution.  The IRS realized that this was an area in which taxpayers were abusing the law, often taking a deduction far in excess of the actual value of the vehicle being donated.  For example, in one instance a vehicle was ready for the junk pile but the donor gave it to a charitable organization. Based on the Kelley Blue Book Value it had a fair market value of $1,200, which the donor used as a charitable contribution deduction on his Form 1040.  So several years ago, more restrictive rules were put in place in regard to the amount that may be deducted as a charitable contribution.

The long-standing rule for non-cash charitable contributions states that any such contribution valued in excess of $500 must be reported on Form 8283 and included Read More

Written by | Posted in Individual • IRS • Non-Profit Tax

Church And Non-Profit Political Activity – An Update

An unusual alliance of religious and secular groups has recently called for the IRS to clarify its rules regarding non-profit organizations and their political activity. Leaders from the Evangelical Council for Financial Accountability (ECFA), Alliance Defending Freedom (ADF), the Public Citizen, and the Center for American Progress (CAP) met in Washington to discuss what the IRS could do to lend some clarity to this issue. ECFA seeks to make Christian non-profit organizations accountable through adherence to its Seven Standards of Responsible Stewardship; ADF has long advocated more freedom for ministers in addressing political issues from the pulpit. The Public Citizen is a non-profit, consumer rights advocacy group and think tank while the Center for American Progress is a progressive public policy research and advocacy organization. According to CAP, the Read More

Written by | Posted in IRS • Non-Profit Tax • Tax Controversy

Rules For Taking A Dependency Exemption

It would seem that the issue of whether a person can be a dependent on your 1040 would be a fairly simple issue.  However, that is not the case.  The IRS has some very precise rules regarding who may be claimed as a dependent and the circumstances under which they may be claimed.

The first test that must be met for any person to be claimed as a dependent is the citizenship or resident test.  This test simply states that the person being claimed as a dependent must be a United States citizen or a resident of the United States, Canada, or Mexico for some part of the year.  A non-resident may not be claimed as a dependent regardless of the support you provide or your relationship to that person. Read More

Written by | Posted in Individual

Political Campaign Activity by Non Profit Organizations – Part 3

Despite the IRS ban on church political activity, there is a large and growing group of pastors and churches who are actively supporting the repeal of the Johnson Amendment banning church and non-profit political activity.

Each year in October, the Alliance Defending Freedom (ADF) sponsors Pulpit Freedom Sunday, in which pastors take to the pulpit and engage in banned political activity.  In 2014, over 1,800 pastors participated with the large majority of them preaching sermons presenting their view of the biblical perspectives on the positions of elected candidates and signed a statement agreeing that the IRS should not control the content of a pastor’s sermon.  Additional pastors signed the statement, but did not preach to that effect. Read More

Written by | Posted in IRS • Non-Profit Tax • Tax Controversy

Injured Spouse Relief Is Available

The terms “innocent spouse” and “injured spouse” are frequently misunderstood. These are two different situations under our current tax code.  A previous blog discussed the concept of an innocent spouse under IRS rules (See Innocent Spouse Relief by John Stancil). An innocent spouse is one who stands has filed a joint return and is exposed to liability for additional taxes due to fraudulent activity on the part of the other spouse.  An injured spouse is someone whose refund is captured by the IRS to satisfy a debt owed by the other spouse.  An injured spouse claim, if accepted by the IRS, can prevent this from happening.  A claim is made by filing Form 8379 with the IRS.

First, some background.  When spouses file joint returns, each spouse is liable for anything that is included on the return.  In addition, there is joint liability for any Read More

Written by | Posted in Individual • IRS

Political Campaign Activity by Non-profit Organizations – Part 2

We previously discussed the prohibition against a church or religious organization from participating in political campaign activities.  The specific prohibitions that are a part of the law were discussed.  However, a church or religious organization is not being placed in a situation where is cannot express opinions on the issues of the day, nor are they expected to “put its head in the sand” in regard to the political process.

Lobbying Activities

A church or religious organization is permitted to engage in lobbying activities.  These activities are limited, however, as the organization must maintain a focus on its exempt purpose.  If the IRS determines that the organization is devoting more than an “insubstantial” part of its total activities during the year to lobbying activities, its tax-exempt Read More

Written by | Posted in IRS • Non-Profit Tax • Tax Controversy
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