Presentation on theme: "IRS and Your Chapter/District Informational Purposes Only."— Presentation transcript:
IRS and Your Chapter/District Informational Purposes Only
IRS has many different tax exempt or non- profit classifications known as 501(c) status All 501(c) organizations are exempt from federal income tax But not all income received is tax deductible by the donor
501(c) 3 organizations (the most well known) exist and operate for charitable purposes Examples: the American Red Cross and United Way Donations to these organizations are tax deductible to the donor These organizations are required to give amounts received - less operating costs - to their charitable causes
AHEPA is tax exempt as a 501(c) 10 organization not a 501(c) 3 organization 501(c)10 entity is a Fraternal organization operating under the lodge system AHEPA has a 501 (c)10 group exemption for all of its chapters and districts. This exempts them from paying federal tax on the income received by the chapter or district
Chapters and Districts are exempt from paying federal tax on member dues and interest income received However, dues paid by members is not tax deductible to the member
Section 170 allows deductible contributions Secton 170 (c) defines a qualified contribution Section 170 (c)4 defines a qualified contribution as one that is given to an organization operating under the lodge system if the gift is to be used exclusively for religious, charitable, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals.
What does this mean for your Chapter? The Chapter does not have to setup a separate 501(c)3 organization for charitable purposes because: The IRS allows a tax deduction to members or donors contributing to a Chapter’s charitable event The Chapter cannot comingle the charitable funds with chapter operating funds (separate bank accounts are required) And proceeds must be used for a charitable purpose
Per the IRS: Scholarship funds must be used for: 1. Tuition and fees required for enrollment, and 2. Fees, books, supplies, and equipment required for courses of instruction at the educational organization The Scholarship check should be made payable to the school or university. To be IRS compliant, when a check is payable to the student a release form must be signed by the student acknowledging that they understand and agree to the above conditions (#1 and #2) of the scholarship Always check with a tax advisor if in doubt
Existing filing requirement: If a Chapter or District receives more than $25,000 a year in total gross receipts a Form 990 must be filed annually with the IRS. New filing requirement: If a Chapter or District receives less than $25,000 a year in total gross receipts: ◦ Each Chapter or District must file an annual online IRS Form 990-N known as an e-postcard - this is an informational return only
The Pension Protection Act of 2006 added this filing requirement to ensure that the IRS and potential donors have current information about an organization. The first e-Postcards were due in 2008 for tax years ending on or after December 31, 2007. The e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, 2007, the e-Postcard is due May 15, 2008. You cannot file the e-Postcard until after your tax year ends.tax year
If you do not file your e-Postcard on time, you will not be assessed a penalty. However, an organization that fails to file required e-Postcards for three consecutive years will automatically lose its tax-exempt status. After the first e-Postcard has been filed, if you do not file your e-Postcard on time, the IRS will send you a reminder notice This is an important return for all Chapters and Districts to file online annually. This is not a function of AHEPA Headquarters.
The e-Postcard is a simple, Internet-based form that asks a few identifying questions about your organization. You can only file the e-Postcard online – there is no paper form. All you need is access to a computer and an e-mail address. No special software is necessary, and there is no cost to file an e-Postcard. It’s free!
To file the e-Postcard, go to www.irs.gov/eo, and click on “Annual Electronic Filing Requirement for Small Exempt Organizations – Form 990-N (e-Postcard),” where you’ll find a link to the e-Postcard filing system. Clicking on the link will take you to the e- Postcard form through the Web site of the IRS’s trusted partner, the Urban Institute.
The e-Postcard is easy to complete. It only requires the following information about your organization: 1. Organization’s legal name, (Order of AHEPA) 2. Any other names the organization uses, (Chapter/District Number) 3. Organization’s mailing address, (Chapter/District address ) 4. Organization’s Web site address - if it has one, (Chapter/District) 5. Organization’s employer identification number (also referred to as a taxpayer identification number), 6. The name and address of a principal officer of the organization, 7. Organization’s annual tax year, and 8. Answers to the following questions: o Are your gross receipts normally $25,000 or less? o Has your organization terminated or gone out of business? That’s it!
1. What is the Chapter’s EIN (Employer Identification Number) ? If you do not know the EIN, please contact AHEPA or DOP Headquarters 2. What is the Chapter’s tax period? Each Chapter is different. The tax period was established when the EIN number was issued by the IRS If you know the EIN, when you process the online Form 990-N the tax period will be shown automatically
3. When I attempted to file the e-Postcard, I received an error message indicating that the EIN was incorrect. What should we do? Contact AHEPA or DOP Headquarters 4. Is the Chapter State sales tax exempt? Each state is different, but usually a 501(c) 10 status does not get a chapter sales tax exemption Always, consult a tax advisor if need
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