Copyright 2009 Vern Hoven Tax Seminars. US Youth Soccer Federal Tax Update for Non Profit Entities. Vern Hoven, CPA w/ Masters in Tax

Transcription

1 US Youth Soccer 2009 Federal Tax Update for Non Profit Entities Vern Hoven, CPA w/ Masters in Tax

2 Exempt Organizations Tax tip chart on keeping non-profits out of trouble New Form 990 (longer and meaner) New filing requirements for 990EZ New Form 990-N (for small charities) 2

3 Exempt Orgs <$25,000 Income New Form 990-N (e-postcard) [electronic only!] Due 15 th day of 5 th month E.g., due May 15 for calendar year non-profit Form requires Name and address Principal officer s name and address Annual tax period Attest gross income <$25,000 ($50,000 in 2010) If applicable, website and EIN Penalty for non-compliance lose status! Where are these organizations? Search 3

4 New Form 990 in 2008! 11 pages with 16 schedules including: Public charity status Contributors Political and lobbying activities Supplemental financial statement detail Fundraising and Gaming Grants Compensation Non-cash contributions Related organizations 4

5 New Form 990 Issues Watch out for numerous trigger questions No: red flag Yes: schedule needed Good governance must be proven Public inspection of all UBIT returns now required (PPA), but not non-ubit attachments Watch for private inurement New regs on excess benefit transactions Unrelated Business Income Tax (UBIT) 5

6 Reasonable Compensation C, S & Nonprofit Corporations

7 C & S Corp Reasonable Comp Factors 1. Employee s role in company 2. External comparison with other companies 3. Character and condition of the company 4. Potential conflicts of interest, a.k.a. hypothetical independent investor test (Exacto Springs) 5. Internal consistency in compensation, e.g., prior earnings as self-employed and prior years compensation paid by corp. Vitamin Village TCM Elliotts, Inc USTC

8 Use of Expert Witnesses Beiner, Inc. paid $1.1 & $1.35 million salary No compensation plan, no dividend Brewer Quality Home, Inc. Court accepted low salary + high bonus Expert witness determines reasonableness Prevailing salary for comparable work

9 Charitable Contributions See new chart with required documentation for various contributions! 9

10 All Cash Gifts Must Have Receipts All cash gifts <$250 need: Receipt from charitable organization or Bank record, e.g. cancelled check, bank statement or credit card statement with name of charity, date, etc. All cash gifts >$250: Receipt required by due date of return (with extensions) Receipt must also say no goods and services received for contribution (Gomez) 10

11 Payroll Deduction for Charity Payroll deduction needs pay stub, etc. with pledge card showing no goods or services provided (Notice ) 11

12 Required Documentation Non-cash contributions <$250 = reliable record >$250, but <$500 = receipt from charity >$500 but <$5,000 = receipt + Form 8283 >$5,000 = receipt + Form appraisal >$500,000 = receipt + Form attach appraisal Donation of credit card rebates qualify (LTR ) 12

13 Contributing IRA Funds Tax-Free to Charities Transfer can t exceed $100,000 per year Must be distributed by trustee IRA owner must be at least 70½ Distribution considered part of RMD Custodian isn t to issue Form 1099-R Planning points: 1. Non-itemizers get benefit 2. No phase-out of itemized deduction (regular & AMT) 3. No impact on 30%/50% base contribution limit 4. No impact on making social security taxable 5. Lowers IRD 6. Lowers Medicare Part B income 13

14 Employee v. Independent Contractor Three categories of evidence: Does behavioral control over worker exist? Instruction given/taken? Who provides training? Does financial control over worker exist? Can worker realize profit/loss? Worker have significant investment? How is worker paid hourly, daily, by job? How do the parties view the relationship? Written contract? State law determination irrelevant (IcorE) Trucker is IC, court uses 8 factors (Byers) 14

15 530 Safe Harbor Consistency Requirements IF: Worker consistently receives Form 1099 Workers consistently treated as IC for employment tax purposes No similar workers treated as employee since 1977, THEN: Business can use 530 safe harbor rules 15

16 Four 530 Safe Harbors If prior court (or IRS ruling) says IC If past IRS audit when deducted as IC Long-standing industry practice as IC It is only reasonable to treat worker as IC Note Congress says reasonable to be construed liberally in favor of taxpayer 16

17 530 Safe Harbors What? No evidence submitted? (Ramirez) What? Trucking company: Issued Form 1099 s to all truckers Always consistent (Peno Trucking): Peno Trucking Wins on Appeal! US-CT-APP-6, USTC 50,580 17

18 FICA Tax for Misclassified Workers New Form 8919 Misclassified Workers pay 7.65%, not 15.3% 4 requirements Worker performed services for firm, Firm didn t withhold worker s share of FICA, Worker is not an independent contractor, AND One of 7 Reason Codes apply 18

19 FICA Tax for Misclassified Workers The 7 Reason Codes 1. Worker ruled employee by IRS 2. Worker called 530 employee 3. IRS, in writing, says worker is employee 4. Worker was previously treated as employee in similar job 5. Co-worker(s) doing similar job are employees 6. Co-worker(s) doing similar job filed SS-8 7. Worker filed SS-8 and waiting for IRS reply 19

20 100% Trust Fund Penalty % trust fund recovery penalty Be a responsible person Acting willfully Penalty isn t forgiven in bankruptcy! Looney CPA/Controller found responsible Erwin Shareholder fined $265,000 Verret Non-owner board chair fined $409,000 Tornes President/CEO fined $233,000 20

21 Requirements to Use Per Diem Adequate accounting to employer required Need recap sheet Record: who, what, when, where, how much for each expenditure Timely; within days after trip [ (c)] Per diem cannot be more than IRS-specified rates Return unspent monies 21

22 Federal Mileage Per Diem Rates (IR ) Jan June 2008 July-Dec Business Mileage Medical/Movi ngmileage Charitable Mileage

23 Federal Lodging and Meal Per Diem Rates (to 10/1/2009) Government rate $109 to $424 (Manhattan); Seasonal rates apply Simplified high/low rates (M&IE) $158/$256 (Rev. Proc ) Meals & IE only rates $39/$44/$49/$54/$59 & $64 Self-employed may use Truckers: $52 (Rev. Proc ) -Per Diem Rates 23

24 Listed Property Automobiles Home Computers Cellular Phone 24

25 Proper Substantiation For Listed Property Amount of each Separate expenditure Separate use Date of each expenditure or use Business purpose of each expenditure or use T(b)(6) No deduction without auto log (Larson; Kolapo) No deduction: log for flat-fee cell phone lacking (Fo and Runels, but Nguyen allowed to use the Cohan rule) But no log required for laptop (Soholt) Sen. Kerry: wants cell phones delisted (Sen. 2668) Lack of contemporaneous records, e.g, American Express yearend credit card statements, not sufficient (Morris) 25

26 Deducting Commute Miles Can t deduct transportation expenses between residence and regular work location 220 daily drive not deductible commute (Green) Temporary assignment within city Temporary - One year or less 100 average daily commute deductible (Lease) Temporary assignment outside city Working from office-in-home Deductible office-in-home OK Not deductible - Walker Away-from-home overnight Transporting tools and equipment 26

27 Away-from Home Travel Expenses Ordinary & Necessary In Pursuit of Your Business While Away From Home Overnight In-town meals not deductible Home is Business Location (Tucker) Home is Where Family Lives (Zbylut) Temporarily Away, not Indefinitely Away More than 1 year away from home is indefinite (Rev. Rul ; Cornelius; Burski) Problem with being an Itinerant - no home! (Walker) 27

28 Thank you! That concludes the 2009 Non Profit Tax Update. 28