Tag Archives: non profit organizations

Volunteer Expenses — Are They Deductible?

volunteerDonating money isn’t the only way to help out an organization whose cause is important to you. Volunteering your time and expertise can be valuable to the charity and rewarding for you. And, as a bonus, you may be able to deduct some of your out-of-pocket expenses on your income tax return.

What’s Deductible

If you use your car while performing services for the charity, you can deduct gas, oil, and other unreimbursed auto expenses or take the standard charitable mileage deduction (14 cents per mile). If you travel out of town on the charity’s behalf, your travel, lodging, and meal costs may be deductible. The cost of uniforms worn while volunteering is also deductible as long as the uniforms aren’t suitable for everyday use.

What’s Not

You can’t deduct your time or the value of any services you perform. And it goes without saying that you can’t deduct expenses that have been reimbursed by the organization.

You must itemize your deductions to claim a deduction for charitable contributions.


Deducting Charitable Donations: What You Need to Know

The end of the year will be here before we know it and if you are like most taxpayers, you will be scrambling for some last minute tax deductions. A taxpayer can itemize and deduct such items as medical expenses, state & local taxes, real estate taxes, mortgage interest and charitable contributions. While some of those items are added back if you are subject to alternative minimum tax (AMT) or as in the case of medical expenses, they are only deductible if they exceed 10% of income (7.5% for ages 65 and older); charitable contributions are not affected by these restrictions.

Nonprofit_Donation2Come year-end, some taxpayers frantically search for additional deductions. However, charitable organizations can use these donations all year around. So I’m sure the question you’re asking is, “do all donations qualify?” Here are a few general rules that you need to follow if you want your donation to qualify on your Schedule A of your Form 1040.

Cash Donations:
• Donations must be made to a qualified organization. Click here to check to see if your organization qualifies.
• Most donations are deductible up to 50% of adjusted gross income (in some cases 20% and 30% ceilings).
• For all cash donations over $250, the taxpayer needs to keep a record of a receipt or cancelled check with the donation amount, date and qualified organization.

Non-Cash Donations:
• As with cash donations, non-cash donations also need a written acknowledgement of the donation for all donations over $250. If the donation is between $500 and $5,000, additional records for cost basis, acquisition date, and fair market value will be needed. Donations over $5,000, along with the information mentioned above, may need an appraisal.
• Non-cash donations over $500 need to be reported on the Form 8283
• You can donate used clothing and household items, but they have to be in good condition or better. Those items count as a donation up to the current fair market value and not the cost of the item

Nondeductible Donations:
• Donations made to an individual are never deductible
• Donations to foreign charitable organizations are not considered to be a qualified organization
• Any donations made to a political campaign are not considered to be a deductible charitable contribution
• Any donations where you are provided benefit over your donation, is not deductible
• If you donate more than the value of the benefit, you can deduct the difference as a charitable contribution.

There are more specific rules based on different types of charitable contributions, so be sure to consult your tax advisor with any detailed questions you may have regarding your donation.

By: Jill Blakeman, CPA

Year-End Charitable Contributions: Food For Thought

In the spirit of the holidays, many American give to those in need. The average charity receives about 40 percent of its annual contributions between Thanksgiving and New Year’s Day, according to Charity Navigator, a not-for-profit watchdog organization.

Charitable Deductions: IRS Gift to Taxpayers

deductionOne of the biggest reasons people decide to open their pocketbooks at year-end — beyond the altruistic spirit of the holidays — is that charitable gifts are tax deductible if you itemize on your tax return. You may generally deduct up to 50 percent of your adjusted gross income — without regard to net operating loss carrybacks — but 20 percent and 30 percent limitations apply in some cases.

If you want a contribution to reduce your 2013 tax bill, you need to act before you ring in the New Year, however. A donation paid by credit card is deductible in 2013 as long as it posts on your statement before Jan. 1, 2104 — even if you don’t actually pay the bill until later in 2014. Payments by check can be deducted in 2013 as long as they’re postmarked by December 31, 2013.

Securing Your Deduction

If you’re audited by the IRS, the tax agency will probably scrutinize your charitable deductions. So, always keep copies of all supporting documents. For example, cash contributions require a bank record or written communication from the charity that details the name of the charity, as well as the date and amount of the contribution. Bank records include:

  • Canceled checks,
  • Bank or credit union statements, and
  • Credit card statements.

If you donate cash or property worth $250 or more, ask the charity for a contemporaneous written acknowledgement (in other words, a receipt) that describes the nature of the donation and a good faith estimate of the value of the goods or services.

The value of cash gifts is easily determined, but the value of other goods and services is less clear. All clothing and household items (such as furniture, electronics, appliances and linens) must typically be in “good used” condition (or better). If not and you deduct more than $500 for the item, you must include a “qualified appraisal” with the return.

Deductions of non-cash items worth more than $500 require you to attach a completed IRS Form 8283 with your return. Non-cash property worth more than $5,000 requires you to obtain a qualified appraisal. If an item’s worth more than $500,000, attach a copy of the qualified appraisal to your tax return. Special rules apply for donations of vehicles, boats and planes.

You also can deduct only the fair market value of a donation to the extent that it exceeds the benefits you receive with the donation (for example, if a contribution entitles you to admission to a charity ball or a sporting event).

Additional Due Diligence

Donation_CheckBefore writing a check or donating new or used items, visit the IRS website to confirm that the recipient is a “qualified” exempt organization. If not, your contribution isn’t tax deductible. Contributions made to foreign organizations — except donations made to certain Canadian not-for-profits — are generally not tax deductible either.

To protect your donations from bogus charities — such as the disaster relief frauds discussed in the above sidebar — also research these three attributes about your preferred charity:

Accountability and transparency. The charity should make it easy for you to research its good deeds and spending habits. Be skeptical of charities that don’t openly share information — including financial records — with stakeholders.

Fiscal health. Charities that know how to effectively solicit donations (think, cash inflows) and are efficiently run (think, cash outflows) have money left over to pursue their goals and reach more of those in need.

Results. Charities have good intentions, but the proof is in the results, not the mission. Talk to volunteers. Visit the organization’s website. See how many activities they’ve organized and people they’ve served over the last year. Testimonials speak volumes about the difference a charity is really making.

Consult your tax adviser regarding any questions you have about your year-end charitable gifts.

Congress May Intercept ‘Free Pass’ for Tax-Exempt NFL

nfl-logoWhat does a not-for-profit organization have in common with the National Football League (NFL)?

Even though it doesn’t fill up football stadiums with tens of thousands of fervent fans on Sundays in the fall, a not-for-profit organization and the NFL are treated as tax-exempt groups by the IRS. Now, a movement is afoot in Congress to level the playing field. Senator Tom Coburn (Rep.-Oklahoma) recently introduced an amendment to the Marketplace Fairness Act that would prevent professional sports leagues from qualifying for tax-exempt status.

The NFL currently generates about $10 billion in revenue annually, but nevertheless has operated as a not-for-profit organization since 1966 when iconic commissioner Pete Rozelle managed to incorporate the request for the tax exemption with an anti-trust action.

Technically, the NFL, which merged with the American Football League (AFL) that year, qualified as a 501(c)(6) not-for-profit organization. Under that section of the tax code, an exemption is available to “business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”

The NFL has maintained its status as a tax-exempt organization despite the fact that the league is essentially a collection of for-profit entities banding together for common goals. In fact, the NFL itself has asserted a conflicting position when it was in its best interests to do so. In one case decided by the Ninth Circuit Court of Appeals (Los Angeles Memorial Coliseum Commission v. NFL, 726 F.2d 1381, 2/28/84), the NFL argued that it was a separate entity that should be exempt from certain anti-trust laws. The court determined that the NFL, under the direction of Rozelle, had acted in bad faith by blocking an attempted move out of Oakland by the Raiders’ owner, Al Davis.

Similarly, the U.S. Supreme Court ruled against the NFL in another case (American Needle v. NFL, No. 08-661, 5/24/10) involving a claim by the league for anti-trust immunity. In the opinion, Justice John Paul Stevens stated that NFL teams don’t possess either the decision-making quality or the single aggregation of economic power characteristic of independent action.

Therefore, even though individual teams are seemingly operating as for-profit entities, the league still argues that it is not. One way to avoid profitability on the books is to reward top executives with high compensation. Significantly, the NFL paid out a total of approximately $53.8 million to officials in 2012, including $8.5 million to former commissioner Paul Tagliabue, the replacement for Rozelle in1989, and $11.6 million to current commissioner Roger Goodell, who succeeded Tagliabue in 2006.

What do you think?

Boosting Social Media Presence for Non-Profits

PrintTraditional media outlets such as newspapers, radio, and television, have long served the purpose of delivering one-way messages, like not-for-profit advertising. Social media, by contrast, uses Web-based platforms to not only deliver your message, but to allow recipients to participate.

You’ll find a number of technologies under the umbrella of social media, including e-mail, instant messaging, blogs and social networking Web sites. In fact, sites like Facebook, Twitter and LinkedIn have now surpassed traditional search engines when it comes to reaching some segments of the public.

How Social Media Puts Your Group Out Front

Establishing a presence on social networking sites can give your agency a competitive edge in several ways, including:

1. Image Enhancement. Profiles, fan pages and participation in groups all serve to build awareness about your organization’s image. They also provide an opportunity to interact with current supporters as well as begin the relationship-building process with prospects.

2. Open Communication. Social media, including social networking, is based on the principle of two-way communication. Your agency can benefit from both the positive experiences and negative feedback that customers voluntarily share. Not only can you address these customer concerns publicly, but you then have the chance to make any necessary improvements. You have the unique opportunity to make lemonade out of lemons.

3. Target Marketing. Establishing a presence on social networking sites can help you identify, and subsequently target, potential supporters. While the need for advertising through traditional media outlets may not be eliminated, the ability to target marketing communications reduces overall costs and provides a greater return on your marketing investment.

Tapping into social networking analysis tools may also assist with targeted marketing efforts. You may learn, for example, through online discussions that one service your agency provides is more likely to draw volunteers and supporters than other services you have been promoting. For example, if your agency deals with rescue animals, perhaps your community is more responsive to advertising that features dogs rather than cats. You can get real mileage out of that information that will help to develop your marketing message. Just go easy on overt advertising on social networking sites, or your efforts could backfire.

Tis’ the Season for “Charitable” Giving

With the holiday season in full swing many charitable organizations are reaching out to people seeking charitable contributions.  Charitable contributions are a great way to reduce your taxable income, while giving to those organizations that are in need.  Below are a few things to remember during this season of giving:

696304Before donating to any charitable organization it is important to do your research.  A donation is only deductible if it is given to a qualified charitable organization, as determined by the Internal Revenue Service.  The Internal Revenue Service has an on-line search tool available that allows you to select an exempt organization to view their federal tax status and filings.  This will provide you with information as to whether an organization is eligible to receive tax-deductible charitable contributions amount other things.

A couple of good websites to research charitable organizations can be found at: www.givewell.org and www.guidestar.org

Both of the above websites gather information and publicize it for the public to learn more information about nonprofit organizations.

So, now that you have decided which organization to contribute to, it is important to consider what type of donation you would like to make.  Unrestricted charitable contributions are donations that are available to the organization to use toward any purpose.  This type of contribution can be used by the organization toward general operating expenses, or for expenses that are incurred from carrying out its charitable mission.  A restricted charitable contribution must be used for a specific purpose or project.  If you choose to make a restricted contribution, the organization must administer the gift in accordance with your specifications.  An example of a restricted gift would be a contribution to a particular scholarship fund at a university.

Money is not the only contribution that charitable organizations are seeking to carry out their purpose.  Many organizations are also interested in individuals donating their time and talents to their organizations.  There are countless ways to donate service to organizations.  Some examples of these would be to serve food at a local soup kitchen, read to school children, tutor children after school, etc.  Although the value of your services is not tax deductible, some out-of-pocket costs incurred while doing this service work may be deductible (subject to the deduction limit that applies to charitable contributions).

Feel free to contact us for more information regarding the above information.

Happy Gift Giving!

By: Kristin Metzger, CPA