As if planning for a fundraising event, such as a silent auction or an annual dinner, wasn’t already one of the busiest times on the calendar for a charity organization, there is the required records and correspondence that needs to be addressed to keep your organization on the up and up with IRS rules. IRS rules? I didn’t know the IRS had rules regarding my fundraising event! What do I do now? How do I comply?
Here is a short summary of some of the records and bookkeeping that fundraising generates:
It’s fairly common knowledge that a nonprofit has to provide a written acknowledgment letter to a donor for any single contribution of $250 or more before the donor can deduct the gift. Lessor known is the responsibility of a charity to provide the value of goods and services provided in exchange for contributions of $75 or more, which is usually the case for fundraising ticket sales. A token exception exists for items of low cost given to entice donors to donate. There are more complicated rules for donation of a car, boat or airplane. And donations of items valued by a donor at more than $5,000 may trigger a requirement for the donor to obtain a qualified appraisal and complete of Form 8283, of which the charitable organization will be asked to complete Part IV.
Many of the required correspondence are for information that needs to be determined before the event occurs, such as the donative portion of a ticket sale or sponsorship contribution. Coordination between those with this knowledge and those who are organizing the fundraising event or contributions in general are vital to a smooth outcome.
For more information contact Kathy Cuddapah at 301-231-6200.
Learn more about us here: http://www.aronsonllc.com/industries/nonprofit-accounting
On December 18, 2015 the President signed the PATH Act (Protecting Americans from Tax Hikes Act). While generally considered an extenders bill (multiple tax incentives were extended one year at a time), this Act makes permanent some of the provisions which promote charitable giving by individuals and businesses.
Please contact our office if you have any questions about these provisions at 301-231-6200.
With the fickle business environment, businesses must be able to adapt to the various changes that occur in order to be efficient and successful and with a new tax called the “Cadillac Tax”, it will put all existing businesses’ ability to adapt to a dynamic business environment to the test.
The “Cadillac Tax” was proposed to achieve multiple goals such as: bringing uniformity between the different social classes due to employers of lower income employees typically not providing or providing very minimal subsidized employer sponsored health insurance for those employees; cutting costs on healthcare spending due to some taking advantage of their employer sponsored healthcare plan by going to the doctor when they don’t necessarily need to; and encouraging employers to shift funds used to subsidized health plans towards providing high salaries or wages to their employees. This new tax, which is expected to be ratified in 2018, imposes a 40% excise tax on employer sponsored health plans that exceed a threshold of $10,200 for individuals and $27,500 for families. Although the 40% tax is directly effecting the health insurance companies, this tax will ultimately be passed onto the employers that are sponsoring their health plans. This tax will surely have a big impact on a large amount of employers business operations due to employers most likely being inclined to take preventative measures to avoid having this “Cadillac Tax” passed onto them.
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In one of the more interesting nonprofit stories in the news recently, the First Church of Cannabis in Indianapolis has received its tax exempt status from the IRS. The IRS determination letter, which has been published online, dates from March 27, 2015 and grants 501(c)(3) status to the organization as a church. According to Wikipedia, the First Church of Cannabis was formed in March 2015 by Bill Levin, who titles himself “Grand Poobah” of the church. The church has a list of twelve commandments called the “Deity Dozen”, which includes abstention from Internet trolling.
We make no editorial comments on this development other than that it is a changing world!
The U.S. Financial Crimes Enforcement Network (FinCEN) Form 114 is the Report of Foreign Bank and Financial Accounts. The FinCEN Form 114 is commonly referred to as the “FBAR,” which replaces the prior Form TD F 90-22.1. A U.S. person must file an FBAR if the U.S. person has a financial interest in or signature authority over foreign financial accounts and the aggregate highest balance or value of all reportable foreign accounts exceeds $10,000 USD during the calendar year.
A U.S. person has a financial interest in a foreign account if:
Signature authority generally means that the U.S. person has the right to control the disposition of funds or assets in the foreign account with a written or verbal communication to the bank or financial institution which maintains the account.
The due date for the 2014 FBAR is Tuesday, June 30, 2015. The due date of the FBAR cannot be extended. Effective as of July 1, 2013, all FBARs must be filed electronically. The Form 114 is filed through the FinCEN’s BSA E-filing System. Some tax return preparation software applications are compatible to e-file FBARs with the FinCEN.
The highest balance or value of a foreign account during the calendar year must be reported in U.S. dollars on the FBAR. If a foreign account is denominated in a foreign currency, then it is necessary to convert the highest balance or value of the foreign account during the year into U.S. dollars. A specific exchange rate must be used for the currency conversion. Click here to see the required 12/31/2014 exchange rates by country for each foreign currency. The foreign currency is divided by the required 12/31 exchange rate to obtain the highest balance or value of the foreign account in U.S. dollars to report on the FBAR.
A foreign financial account reportable on the FBAR includes, but is not limited to, a checking, savings, demand, deposit, time deposit, securities, brokerage, investment or other account maintained with a financial institution. An account reportable on the FBAR also includes a commodity futures or options account, an insurance policy or annuity with a cash value and shares in a mutual fund or similar pooled fund that is available to the general public with a net asset value and regular redemptions. An account is a foreign account if it is located outside the United States or if it is maintained with a branch of a U.S. bank located outside the United States. An account is not a foreign account if it is maintained with a U.S. branch of a foreign bank located in the United States.
There is a $10,000 USD civil penalty that applies for the non-willful failure to file the FBAR. The penalty for the willful failure to file the FBAR is the greater of $100,000 USD or 50% of the balance in the account at the time of the violation. The willful failure to file the FBAR also may result in criminal penalties including criminal prosecution and imprisonment. The IRS currently has some amnesty programs available for U.S. individuals who have failed to file their FBARs and report the corresponding taxable income.