1. Reporting Issues for Nonprofit Organizations DeAnna R. Moss, CPA, CGMA

4. 1. Application A. Form 1023 B. Form 1023EZ (new as of August 2014) C. Form 1024 2. Private Benefit or Inurement 3. Political Activities

5. 1. Federal A. 990-N Postcard – Gross receipts < $50K B. 990-EZ – Gross receipts < $200K and Total Assets < $500K C. 990 – Gross receipts > $200K or Total Assets > $500K D. Automatic Revocation 2. State – South Carolina A. Annual Financial Report – no filing fee B. Annual Charitable Registration Statement - $50 filing fee C. Professional Fundraisers and Solicitors D. Raffles – Registration and Financial Report

6. 1. Application for Exemption – Form 1023 or Form 1024 2. Tax Return – Form 990, 990-EZ, 990-N, 990-PF A. Last three (3) years must be made available B. Schedule B – Schedule of Contributors 3. Methods of providing Information A. Organization website B. Other website – such as Guidestar.org C. Hard copies – can charge for providing information 4. Penalties

8.  For an activity to be taxable, all three of the following conditions must exist: 1. Conduct of a trade or business 2. Regularly carried on 3. Unrelated to exempt purpose

9. 1. Volunteer Labor – Activities in which substantially all of the work is performed by volunteers. (per IRS 88% volunteer labor will qualify) 2. Donated Merchandise Sales – Received as contributions 3. Conventions & Trade Shows – Conducted to educate and promote products/services of members 4. Sponsorship – Payment without an “arrangement or expectation” that the sponsor will receive any “substantial return benefit” 5. Members’ Convenience – Activity carried on primarily for convenience of members, students, patients, or employees

11.  Nonprofit Raffles are legal as of April 4, 2015  Must be a tax-exempt organization under 501(c) (3), (4), (6), (7), (8), (10), (19) or a class, department or organization of an educational institution.  Must be organized for one of the following purposes:  Religious  Charitable  Scientific  Literacy  Educational  Amateur sports  Prevention of cruelty to children or animals

12.  Two types of Exempt Raffles  A noncash prize has been donated to the organization and the total value of a single raffle event is not more than $500.00.  50/50 raffles – The proceeds are split evenly between the organization and the winner and the total value of proceeds collected is not more than $950 and the raffle tickets are sold only to members or their guests and not to the general public.  Exempt raffles do not require any annual registration form with the SC Secretary of the State

13.  Required to file an annual registration form each year  Form is due by the 15 th day of the 5 th month (4 ½ months)after the end of the fiscal or calendar year  There is a $50 filing fee for the annual registration  Required to file an annual raffle financial report – due the same time as the annual registration form – no filing fee

14.  Limited to four (4) nonexempt raffles per year  Purchase price per ticket cannot exceed $100  For each event, the total fair market value of prizes cannot exceed $250,000  An individual prize per winner per raffle cannot exceed $40,000  Cannot offer real property as a prize  The drawing must be held no later than 9 months from date the first ticket is sold  No drawing may be held on Christmas Day

16.  Donor is not allowed a charitable deduction without a receipt or written acknowledgement from the organization  Contributions of more than $250 or more in one day MUST have a written acknowledgement from the organization  Received by the filing of the tax return (including extensions)  Statement that no goods or services were provided in exchange for contribution  State amount and date of contribution

17.  Donor MUST have receipt from organization  The DONOR provides the fair market value of the donation – not the organization.  Goodwill has a valuation guide (http://www.goodwill.org/wp- content/uploads/2010/12/Donation_Valuation_Guide.pdf)http://www.goodwill.org/wp- content/uploads/2010/12/Donation_Valuation_Guide.pdf  Donor must have an appraisal if value donated exceeds $5,000  Volunteers can deduct out-of-pocket expenses incurred while volunteering (including mileage)  Written acknowledgement from charity if value exceeds $250  Best practice to provide a yearend letter to volunteers substantiating the type of services performed.

18.  A payment made to a charity partly as a contribution and partly for goods or services  Disclosure statement required when amount exceeds $75  Statement must include:  A good faith estimate of the fair market value of the goods or services that the donor received and a statement that any amount over the FMV is considered a contribution that is deductible for federal income tax purposes.

20. 1. High Interest Area for Internal Revenue Service (Misclassification of Workers) 2. Information that provides evidence of control & independence: A. Behavioral – Does organization control what the worker does and how it is done? B. Financial – Business aspects controlled by organization (i.e. expenses are reimbursed, how worker is paid, who provides tools to work) C. Type of Relationship – Written contracts or employee type benefits (i.e. pension plan, insurance, paid time off)

21. 1. Form 940 – Federal Unemployment – Section 501(c)(3) organizations are excluded A. Filed Annually – Due Jan 31 st of following year B. Paid quarterly if more than $500 per year, otherwise annually 2. Form 941 – Income Tax Withholding A. Filed Quarterly (Jan 31/Apr 30/Jul 31/Oct 31) B. Paid either monthly or semi-weekly based on amount remitted C. Paid quarterly if amount due is less than $2,500 3. Form W-2 & W-3 – Annual Wage Statements A. Filed Annually – due Jan 31 st to the employees – due Feb 28 th to Social Security Administration

22. 1. Form 1099-MISC – used to report payments to independent contractors (unincorporated entities) who provide trade or business services if amounts paid exceed $600. A. Filed Annually – due Jan 31 st to contractors – due Feb 28 th to IRS 2. Small Business Health Care Tax Credit (Form 8491) – in the Health care Act enacted in March 2010. To encourage small businesses to purchase health insurance for employees A. Up to 25% of the lesser of amount contributed or small business benchmark premium B. Must file 990-T to claim tax credit and get refund

23. 1. Form WH-1605 and WH-1606 – Withholding A. Filed quarterly B. Paid the same as your federal deposits requirement 2. Form UCE-120 – Unemployment A. Organizations exempt under 501(c)(3) that employs four or more individuals for any 20 weeks within the current or preceding calendar B. Can chose to become liable by filing the election form (UCE-154) C. Can chose to become a Reimbursable Employer by filing Form UCE-155 D. Filed and paid quarterly

25. 1. Form 1098-C – Required by organizations receiving donations of vehicles, boats, and airplanes valued > $500 A. Must be given to donor within 30 days of the sale or with 30 days of receipt if an exception applies 2. Form 8282 – Donee Information Return: Used to report information to the IRS and donors about the dispositions of donated property > $500 made within three years after the donor contributed the property. A. Filed within 125 days of disposition B. Copy must be given to the original donor (IRC §6050L)

26. 3. Form 8283 – Noncash Charitable Contributions – organizations is required to sign page 2 if appraised value > $5,000. Donor must attach form to their individual tax return to claim deduction. 4. Form 8899 – Notice of Income from Donated Intellectual Property – required by organizations receiving gifts of intellectual property (patents, copyrights, software or similar property)

27. Report of Foreign Bank and Financial Accounts (FBAR) An organization with foreign interest in or signature authority over a foreign financial account exceeding $10,000 anytime during the year maybe required to report the account yearly to the Department of the Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114 report.

28. 1. Racial Nondiscrimination for Exempt Private School – Any religious organization or church that operates, supervised or controls a school must file an annual certification. If filed with Form 990 – Schedule E is used. If no 990 if filed Form 5578 is filed. A. Must be filed by the 15 th day of the fifth month after the end of the year.

29. 2. Prohibited Tax Shelter – Form 8886-T A. Used to specifically report its participation in a prohibited tax shelter transaction. B. Due on or before May 15 th following the close of the calendar year A prohibited transaction is a transaction that is a listed transaction, a confidential transaction, or a transaction with contractual protection. Listed transactions have been determined by the IRS to be tax avoidance transactions and are identified by notice, regulation or other form of published guidance.

30. 3. Personal Benefit Contract – Form 8870 – Organization must report detailed information concerning paid premiums. A. Personal Benefit Contract is generally any life insurance, annuity or endowment contract that benefits, directly or indirectly, a transferor, a transferor’s family member, or any other person designated by the transferor.

31. DeAnna R. Moss, CPA, CGMA Moss & Yantis CPA PA 843-606-2349 dmoss@mycpafirm.org