Category

charitable organizations

Category

While most taxpayers are focused on the individual tax filing due date, there’s another deadline looming. In addition to being the revised individual and corporate due date for the 2019 tax year, July 15, 2020, marks the filing deadline for many tax-exempt organizations.

Information returns for tax-exempt organizations are ordinarily due on the 15th day of the fifth month after the close of the tax year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. This means that May 15 is usually the deadline for most tax-exempt organizations to file. However, for the 2019 tax year, the deadline for tax-exempt organizations was pushed to July 15, 2020.

A regular filing requirement used to only apply to organizations that brought in a lot of donations or held significant assets. However, that changed with the Pension Protection Act of 2006, which made it mandatory for most tax-exempt organizations to file an annual information return with the Internal Revenue Service (IRS) regardless of how little income the organization receives. Failure to do so for three consecutive years results in an automatic loss of tax-exempt status (exceptions apply for churches and some church-related organizations).

Small tax-exempt organizations with average annual receipts of $50,000 or less have the option of filing a Form 990-N, e-Postcard. If you want to skip the e-Postcard, you can submit a longer form 990 or 990-EZ, but you have to complete the entire form.

The e-Postcard only takes a few moments to fill out and requires just a few pieces of information:

  1. Name of the organization (including any alternative names);
  2. The mailing address for the organization;
  3. The organization’s Employer Identification Number (EIN);
  4. Tax year (typically, if you’re filing in 2020, the tax year is 2019);
  5. Name and address of a principal officer;
  6. The website address for the organization, if any;
  7. Confirmation that the organization’s annual gross receipts are $50,000 or less; and
  8. Confirmation that the organization has terminated or is going out of business, if applicable.

Filing the e-Postcard is free and is only available online via the IRS website here (there is no paper version). If you haven’t completed an e-Postcard before, you’ll need to register online before you can proceed. If you registered last year, just log into the site using your existing user ID. If you’re still not sure how to proceed, the Internal Revenue Service (IRS) created a reference guide (Pub 5248 downloads as a pdf).

For all other tax-exempt organizations, the filing requirements are as follows:

  • For tax-exempt organizations with annual gross receipts of less than $200,000 and total assets of less than $500,000, file form 990-EZ or a form 990-EZ.
  • For tax-exempt organizations with annual gross receipts of $200,000 or more or total assets of $500,000 or more, file form 990 (downloads as pdf).
  • Organizations classed as private foundations must file a form 990-PF (downloads as pdf) regardless of assets or receipts.

Failure to file for three consecutive years will result in an automatic loss of tax-exempt status. If that happens, the organization will not be eligible to receive tax-deductible contributions. There is no appeal process: The organization will have to file for reinstatement, even if it was not originally required to apply for an exemption. In other words, be sure to file since reinstatement can be time consuming and expensive.

If you need more time to file a Form 990, you can request a six-month extension (remember, though, that the extension will only extend the filing deadline from the original due date of May 15, not the revised due date of July 15). Simply file form 8868, Application for Extension of Time to File an Exempt Organization Return (downloads as a pdf) on or before the due date. There is no extension available for Form 990-N (e-Postcard), but there is also no penalty if you file it late.

It’s also important to note that parts of forms in the 990 series will be available for public inspection. Some information on Form 990-N is also available to the public via the new IRS Tax Exempt Organization Search (TEOS) tool on the IRS website. Some forms 990, 990-EZ, and 990-PF are also available online using TEOS, and more will be added this year as they are filed. That means that you should not include Social Security Numbers (SSNs) of officers, donors, clients, or other individuals on the series 990 forms for privacy reasons.

Finally, even though there’s no tax due for most tax-exempt organizations, be sure to file a complete or accurate return. If the return is incomplete or if you use the wrong form for the organization, the IRS will send it back.

Feeling generous?

The COVID-19 pandemic has put millions of taxpayers out of work, putting a strain on charitable organizations. To provide some relief, as part of the CARES Act, Congress made a temporary – but important – change to the charitable giving laws.

Now, taxpayers can donate up to $300 in cash to qualifying charitable organizations and claim a charitable deduction – even if you don’t separately itemize deductions. In a post-Tax Cuts and Jobs Act (TCJA) world, about 85% of taxpayers claim the standard deduction, leaving those who give to charity without a deduction. Under the new law, for 2020, you can claim the standard deduction and still benefit from a charitable deduction.

Only cash or cash-equivalent gifts are eligible for the $300 deduction (no personal property, stocks, or art). Additionally, donations to donor-advised funds (DAFs) do not qualify.

And, of course, the regular rules regarding charitable giving still apply. You must donate to a qualifying charitable organization (no individuals, no matter how deserving), and you must keep good records.

(Note: Updated March 24, 2020)

If you’re like me, you’re self-quarantining – perhaps with your family – in your home in response to COVID-19. It’s a weird new normal. And for many, it’s an anxious time. But as we worry about the health – physical and financial – of our friends and family, most of us want to know: How can we help?

Some times, that can result in a tax break. But some of the tax rules are good to know, even if you’re not claiming a deduction. Here are a few tips to keep in mind:

  • Cash is king. For many organizations, cash, or cash equivalent, is preferred. Keep receipts if you intend to claim those donations on your tax return.
  • Stay put. Yes, we all want to help, but many states have restrictions on travel, and the federal government has asked that we stay at home when possible. Ask first. If your volunteer services are needed, remember that you can claim a tax deduction for out-of-pocket expenses but not for your time.
  • Be smart. Be wary of personal solicitations. Make sure that gifts made by checks or credit card gifts are secure. And don’t send money by text or apps like Venmo without verifying the organization and contact info. Keep excellent records for tax purposes – and having the information available is handy if you want to follow up with another donation.
  • Do your homework. Check the credentials of a potential charitable organization before you donate. Charity Navigator is useful for gathering information about existing charities and has published a Coronavirus Hot Topic, featuring organizations that are responding to COVID-19.
  • Confirm charitable status. If the tax deduction matters to you, make sure that your donation goes to a qualified charitable organization. You can search using IRS’ Tax Exempt Organization Search (formerly Select Check).
  • Check with the organization first. Wish lists may change as needs are assessed, and storage may be limited. Check with the organization before you send or drop off anything. And if you’re planning to claim a tax deduction for any in-kind goods, be sure to keep receipts showing what you paid for the items.
  • Use caution when donating to individuals. For tax purposes, you can only deduct contributions to qualified charitable organizations. Donations to individuals are never deductible for tax purposes, even if those folks are deserving. But there’s a non-tax reason to use caution: money solicited for individuals could be part of a scam, and you have no control over how it might be used. For more, the Federal Trade Commission has a tip sheet on how to avoid scams.
  • Rely on oldies but goodies. There’s nothing wrong with new charitable organizations, but there is something to be said for those that have been around, like the Red Cross. Brand new organizations may not have the facilities in place to offer the most effective relief – or they could be scams.
  • Pay attention to the rules. The rules for charitable giving apply even in extraordinary situations. However, sometimes those rules may be tweaked to allow for more generosity, so check with reliable sources for updates.

If you want to help but aren’t sure where to start, some tax-exempt charities that are accepting Coronavirus relief donations include:

  • American Red Cross. To make a financial donation, visit their website or call 1.800.RED CROSS.
  • Boys & Girls Clubs of America is helping feed kids participating in its clubs and is providing virtual academic support. You can donate here.
  • The CDC Foundation supports the Centers for Disease Control and Prevention. You can donate here.
  • In the US, Direct Relief is delivering protective masks – along with exam gloves and isolation gowns – to health care organizations in areas with confirmed COVID-19 cases. You can donate here.
  • Donors Choose. With schools closed across the country, teachers need supplies for students at home to keep them learning. Here’s how you can help.
  • Feeding America supports hunger relief efforts through food banks and food pantries. To make a donation, visit their website.
  • First Book is working on getting 7 million books to kids in need, who don’t have home libraries or Internet access for home learning. You can help here: firstbook.org/cv
  • Give Directly is delivering cash to families impacted by COVID-19 in the US. You can donate through their website.
  • International Medical Corps is scaling up as this outbreak continues to grow with equipment, training, disease surveillance operations and more. You can donate through their website.
  • Meals On Wheels deliver meals to keep seniors safe amid COVID-19. You can donate through their website.
  • Oxfam is currently working with ministries of health in 65 countries to increase the delivery of soap, clean water, and sanitation services, including building and upgrading hand-washing facilities with a special focus on people in higher-risk areas and at health facilities. You can find out more on their website
  • Salvation Army. To donate, visit the COVID-19 specific donation page on their website.
  • Save the Children has a response to schools shutting down due to the coronavirus pandemic. To help fill minds and bellies, visit their website.
  • United Way has established a COVID-19 Community Response and Recovery Fund. To give, visit their website.

(Please note that these are not endorsements. If you’re not a fan of these organizations, many other charities will welcome your support.)

Corporate donor sites and giving challenges include:

  • Citi Foundation is donating $5 million to help No Kid Hungry feed children who are missing out on school lunches. Citi will match donations up to $2 million: you can give here.
  • GoFundMe has created a landing page that aggregates the campaigns to help those affected by the coronavirus.

In addition to financial donations, what else can you do?

  • The Red Cross reports there is a severe blood shortage due to blood drive cancellations. Healthy individuals are needed to donate. You can’t claim a tax deduction for giving blood, but it sure is a terrific way to help. Find your nearest Red Cross donation center by entering your zip code here.
  • If you’re able to write a handwritten note to send to those who are on the front lines, including hospitals, police and fire departments, to offer your good wishes, it is typically appreciated (but ask first since). No tax consequences, just warm fuzzies.

And a few more tips:

  • Be generous to those who are delivering your food, etc. You can easily help out folks who might be experiencing a financial downturn by offering up a few extra dollars at the door. You can’t deduct tips to the paperboy or the pizza delivery girl, but who cares? They are bringing you food and other useful things. Be generous.
  • And what if you just want to help out your neighbor or your favorite driver? Don’t overthink this. If you’re helping out of the kindness of your heart (or with “detached and disinterested generosity“) and not expecting anything in return, it’s a gift: gifts are not taxable for income tax purposes. And unless you make a habit of giving individuals gifts above the annual gift tax exclusion ($15,000 for 2020), you’re fine when it comes to the gift tax, too. And yes, that includes GoFundMe and similar fundraisers.
  • What about gifts to tide over employees? No matter what you want to call it (a thank you, a perk), a donation made to an employee is considered compensation. That’s especially true for cash or cash equivalent. There’s an exception for small non-cash gifts considered de minimis: Those gifts are not taxable. So, a small basket of fruit would be de minimis and nontaxable—a massive box of your favorite treats, likely taxable, though clearly still delicious.
  • What about donating your services virtually? Some folks are creating videos that offer essential information about taxes, working from home, and the like. If you’re sharing your expertise for free, there are no tax consequences to you. If you share your skills on behalf of a charitable organization, you can claim a tax deduction for your out-of-pocket expenses but not for your time. And if your video offers no practical knowledge and is just you being silly? We like watching those, too – still no tax consequences!

Check back regularly: I’ll continue to update you as information becomes available. If you have an update or tip, here’s how to reach me (including secure methods).

Looking to reduce your taxable income with a donation of virtual currency to charity? The Internal Revenue Service (IRS) has issued guidance for donors (and charities) on the FAQ page of its website.

The IRS addressed whether gifting virtual currency to a charity could result in income, gain, or loss. The IRS confirmed that if you donate virtual currency to a charitable organization, you will not recognize income, gain, or loss from the donation. That’s the same result as giving stock or other appreciated assets, which are also characterized as capital assets.

The IRS also explained how to calculate the value of a gift of virtual currency to a charity. It’s fairly simple: your charitable contribution deduction is generally equal to the fair market value of the virtual currency at the time of the donation. That’s only true, however, if you have held the virtual currency for more than one year. If you have kept the virtual currency for one year or less, your deduction is the less of your basis (cost plus adjustments) in the virtual currency or its fair market value at the time of the contribution.

The IRS also addressed the charity’s responsibilities for gifts of virtual currency (you’ll see those answers at 35 and 36 of the FAQ). We all know that keeping records is super important for charities and donors. Typically, a charitable organization should provide a contemporaneous written acknowledgment for donations of more than $250; that remains true for virtual currency donations. And, the rules don’t change at higher dollar levels. A charitable organization is generally required to sign a donor’s Form 8283, Non-cash Charitable Contributions, acknowledging receipt of the property if the donor is claiming a deduction of more than $5,000; that’s still true for gifts of virtual currency. The signature confirms the date and receipt of the property and is not a confirmation of the value of the contributed property (that remains the responsibility of the donor).

What about the charity’s reporting requirements to the IRS? A charitable organization that receives virtual currency should treat the donation as a non-cash contribution. Those are reported on a Form 990-series annual return. Also, charities must file Form 8282, Donee Information Return, if they sell, exchange or otherwise dispose of charitable deduction property – and that includes the sale of virtual currency for real currency – within three years after the date they initially received the property. The donor also gets a copy of the form.

The IRS previously issued guidance in 2014 to taxpayers, making it clear that virtual currency will be treated as a capital asset, provided they are convertible into cash. In simple terms, this means that capital gains rules apply to any gains or losses. (You can read more on the taxation of cryptocurrencies like Bitcoin here.)

The 12 Days of Charitable Giving for 2019 has officially wrapped. Here’s the complete list of charities in the series: 

Thank you to everyone who submitted a nomination for their favorite charity. This was one of the busiest years for the series: I received numerous submissions. I reviewed every nomination carefully and tried to capture a selection that represented the diversity of the nominees. If you don’t see your nomination, please consider trying again next year.

I would encourage you to click through this year’s charities and find out more about the individual charities. For more on making charitable donations, click here.

It’s the twelfth (and last) day of my 12 Days of Charitable Giving for 2019. Readers have suggested deserving charities over the past few weeks, and I’ll be posting the results here. Today’s charity is Legal Aid of North Carolina.

Legal Aid of North Carolina (LANC) provides free legal help to low-income North Carolinians in civil cases involving basic human needs like safety, shelter, income and more. According to LANC, almost a quarter of North Carolina’s population struggles to make ends meet. In 2016, Legal Services Corporation (LSC) estimated that 71% of low-income families will experience at least one civil legal issue every year including problems with health care, housing conditions, disability access, veterans’ benefits, and domestic violence. The rate is even higher for households with survivors of domestic violence or sexual assault (97%,) with parents/guardians of kids under 18 (80%), and with disabled persons (80%.) To make matters worse, most Americans incorrectly believe that they have a right to an attorney in any court case (that’s not true in most civil cases).

Not having access to legal assistance can put folks at an even greater disadvantage. LANC helps clients protect their legal rights, from homeowners at risk of foreclosure to victims of domestic violence and sexual assault. LANC also helps clients gain and retain safe employment and protect benefits they are legally entitled to receive. The Senior Law Project at LANC helps with wills and powers of attorney, as well as abuse and neglect. Through the Veterans Law Project, LANC also helps military veterans with cases involving disability compensation, discharge upgrades, VA overpayments, and pension benefits. The majority of LANC’s assistance (59%) goes to those with household incomes of less than $15,000.

I know a little something about the services that LANC provides. Regular readers know that I’m a North Carolina girl. In 2018, Hurricane Florence brought devastating rains and flooding to my home state, closing roads, businesses, and schools for weeks. Entire communities were evacuated and when folks were able to return home, many found that their homes and businesses were no longer safe. The need was so great that LANC was recruiting volunteer attorneys – even those not licensed to practice in North Carolina – and I signed up to help. When the program ended, I petitioned the NC State Bar to continue to provide assistance. I am now a regular volunteer attorney with LANC’s Lawyer on the Line program. I know how great the need is for quality legal representation for the most vulnerable populations.

So how can you help? To make a one-time or monthly donation, click over to the website

For federal income tax purposes, if you plan to claim a deduction for a cash contribution, you’ll want to keep a record of the donation. Ideally, the organization will provide a written record with the name of the charity, date, and amount of the contribution.

You can also donate your services. There are available opportunities for lawyers, paralegals, law students and others who want to donate their time and talents. You can find out more here. Remember that you cannot deduct the value of your time for providing services to a charity – even if you can easily put a dollar value on your time. You can, however, deduct related expenses, like mileage.

Do your homework. As always, you want to make sure that your donation is going to a qualified charitable organization. A search using the IRS’ new Tax Exempt Organization Search (formerly Select Check) reveals that Legal Aid Of North Carolina is on the list

To find out more about the work of the organization, check out their website, like them on Facebook, or follow them on Twitter.

I often suggest checking out third-party sites like Charity Navigator for more information about charitable organizations, including evaluations and access to tax forms and other financials. Legal Aid Of North Carolina is not ranked on Charity Navigator (you can find out how to evaluate an unrated charity here).

Remember: Readers nominate their favorite charities to the 12 Days of Charitable Giving, and in most cases, I can’t personally vouch for the organizations. So be generous but be smart: Do your homework.

For more on making charitable donations, click here.

Taxpayer asks:

Hi! Thank you for your time.

My husband and I are volunteering at a charity event for a few days, and we have to have a babysitter. She’s babysitting at no cost to us (she’s family), but can she deduct any of her babysitting expenses? Would it be charitable giving on her part? Thank you!

Taxgirl says:

Unfortunately, no. You cannot claim the value of your time as a charitable deduction on your federal income tax return even if you’re volunteering directly for a charity. This is true even if you can value your time (for example, $10/hour for babysitting or $60/hour for house painting).

You can typically deduct associated expenses, like mileage, for volunteering with a qualified charitable organization; in this case, however, your babysitter is doing this as a favor for you (which is super nice) and not as a direct benefit to the charity. Those expenses would not be deductible.

(On the plus side, your babysitter is not missing out on much. Congress hasn’t changed the charitable mileage deduction since the Clinton era, and it remains just 14 cents per mile.)

Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.

It’s the eleventh day of my 12 Days of Charitable Giving for 2019. Readers have suggested deserving charities over the past few weeks, and I’ll be posting the results here. Today’s charity is Hands Up for Haiti.

Hands Up For Haiti (HUFH) began in 2010 when a small team of doctors, nurses and other health professionals led by co-founder Dr. Jill Ratner volunteered to contribute their medical knowledge and skills to help heal communities shattered after the devastating earthquake. This first group of medical volunteers was directed to Cap Haitien, located on the northern coast, a city spared much of the earthquake’s destruction but still very much in need of medical care for its residents and the many refugees who fled there, especially the children.

During the past nine years, HUFH has sent over 100 medical teams to Cap Haitien and the surrounding region. Today, HUFH supports a Haitian staff of more than 40 medical and other professionals as well as community health workers and lay staff. Programs include fighting malnutrition, cervical cancer screen and treat, hypertension screen and treat, prenatal care, the community water project, community health education, and a hospital and surgical fund. HUFH has also made a commitment to train the next generation of doctors and nurses.

So how can you help? To make a one-time donation, click over to the website

For federal income tax purposes, if you plan to claim a deduction for a cash contribution, you’ll want to keep a record of the donation. Ideally, the organization will provide a written record with the name of the charity, date, and amount of the contribution.

HUFH also aims to supply medical and laboratory equipment and supplies to their Haitian clinical staff. If you’d like to donate in-kind goods, you can claim the purchase price of new items, but you must value used items at their fair market value.

Do your homework. As always, you want to make sure that your donation is going to a qualified charitable organization. A search using the IRS’ new Tax Exempt Organization Search (formerly Select Check) reveals that Hands Up For Haiti is on the list. Even though HUFH provides services in a foreign country, it is a 501(c)3 non-profit organization incorporated in the United States of America. That means that donations are tax-deductible for US federal income tax purposes. You cannot deduct donations made to foreign charities.

To find out more about the work of the organization, check out their website, like them on Facebook, or follow them on Twitter.

I often suggest checking out third-party sites like Charity Navigator for more information about charitable organizations, including evaluations and access to tax forms and other financials. Hands Up For Haiti is not ranked on Charity Navigator because it has less than $1 million in annual revenue (you can find out how to evaluate an unrated charity here).

Remember: Readers nominate their favorite charities to the 12 Days of Charitable Giving, and in most cases, I can’t personally vouch for the organizations. So be generous but be smart: Do your homework.

For more on making charitable donations, click here.

It’s the tenth day of my 12 Days of Charitable Giving for 2019. Readers have suggested deserving charities over the past few weeks, and I’ll be posting the results here. Today’s charity is The Sunday Love Project.

The Mission of The Sunday Love Project is to share food amongst the homeless, while simultaneously building community. The organization’s efforts aim to break bread with those who are struggling to make their way back into society as contributing members. They serve as a liaison between a hungry, struggling mind and a focused, nourished soul. Each week, The Sunday Love Project serves between 600 and 800 meals to those in need.

The organization began on Christmas morning in 2014, when Margaux Murphy overslept. She had planned to help serve breakfast at church but missed the deadline. Instead, she headed to Boston Market, bought a dozen meals, and gave them out to homeless people in her own neighborhood. She realized that more folks needed help and recruited help on Facebook. Ten days later, Murphy and friends were serving 40 meals every Sunday outside the Parkway Central Library.

So how can you help? To make a one-time donation, click over to the website and look for the red “donate now” button. 

For federal income tax purposes, if you plan to claim a deduction for a cash contribution, you’ll want to keep a record of the donation. Ideally, the organization will provide a written record with the name of the charity, date, and amount of the contribution.

The organization also has a wish list on Amazon. You can find it here. When you donate new items from the wishlist, keep receipts: the full value of the items may be tax-deductible.

If you’d like to donate in-kind goods, there is a list of needed items on the website. If you’re looking for a tax deduction, you can claim the purchase price of new items, but you must value used items at their fair market value.

Finally, you live in the Greater Philadelphia area, you can also sign up to help serve meals. Remember that you may not deduct the value of your time, but you may deduct out-of-pocket expenses like mileage and parking.

Do your homework. As always, you want to make sure that your donation is going to a qualified charitable organization. A search using the IRS’ new Tax Exempt Organization Search (formerly Select Check) reveals that The Sunday Love Project is on the list. A heads up: The Sunday Love Project is listed as Sunday Love Project and The Sunday Love Project. Remember to check alternate spellings and capitalizations when searching if you don’t succeed at first – or check using an organization’s employer identification number (EIN) which is typically available on their website.

To find out more about the work of the organization, check out their website or like them on Facebook.

I often suggest checking out third-party sites like Charity Navigator for more information about charitable organizations, including evaluations and access to tax forms and other financials. The Sunday Love Project is not ranked on Charity Navigator because it files a Form 990-N, sometimes called an e-postcard. Organizations file a Form 990-N when they receive less than $50,000 in annual revenue. E-postcards are quite simple, and they do not provide the needed information to complete a Charity Navigator rating (you can find out how to evaluate an unrated charity here).

Remember: Readers nominate their favorite charities to the 12 Days of Charitable Giving, and in most cases, I can’t personally vouch for the organizations. So be generous but be smart: Do your homework.

For more on making charitable donations, click here.

It’s Fix the Tax Code Friday! Charitable deductions have been limited to taxpayers who itemize their deductions rather than claim the standard deduction. With the doubling of the standard deduction under the Taxpayers Cuts and Jobs Act, fewer taxpayers itemize their deduction. That means that fewer taxpayers have a tax incentive to make a charitable donation.

Earlier this year, I reported that the total number of taxpayers claiming the charitable donation deduction has dropped. For some organizations, that can – but does not necessarily – result in a dip in donations.

Some taxpayers have called for the deduction to be extended to apply to all taxpayers in the form of an above-the-line deduction (meaning that you don’t have to itemize to claim the deduction). Others argue that charitable donations should be made out of generosity alone and that tax incentives aren’t necessary.

That leads to this week’s question:

Should Congress extend the deduction for charitable donations to non-itemizers, and make it an above-the-line deduction (like the student loan interest deduction)?