Come May 15th, the charity you donated to may not be tax exempt anymore. Accordingly, any donations you made in the past three years to affected organizations may not be tax deductible and may require you to file amended tax returns. Check with your tax advisor or the IRS for exact information.
photo credit Rickydavid on Flickr
When a long standing non profit loses its tax exempt status, your donations are no longer tax deductible. If you donate to charity or serve on any board for a 503(c)(3), you need to reexamine your relationship with the non profit to make sure that they are in compliance with the IRS for 2010.
The Pension Protection Act of 2006 changed reporting requirements for non profits. Up to 25% of the nation’s non profits could lose their tax exempt status by not filing tax returns. The deadline to fix this is May 15th. Many non profits have been out of compliance since 2006. According to the New York Times, in 2007, the IRS sent out 665,000 reminder letters.
As a director on the board of a non profit, you carry liability for not doing your due diligence and oversight of the non profit.
The types of organization at risk includes charities, trade associations and membership groups.
Previously, non profits with revenue of less than $25,000 were not required to file. In addition, Form 990, the return that many charities and other tax-exempt organizations are required to file annually, went through a significant redesign. If the form is filed incorrectly or any section is missing, a non profit may also lose its status. Instructions on the form are here.
If charities lose their exemptions, they will have to reapply with the IRS and start over. Until the tax exempt status is reissued, donors would not be able to claim charitable deductions for their gifts. In addition, the non profit organization could incur additional cost in the form of income taxes.
Organizations with annual receipts greater than $25,000 must file the Form 990 or the Form 990-EZ. Small charities with annual receipts of $25,000 or less may file the Form 990-N.
The IRS Exempt Organizations Department is offering a one-day workshop for small and mid-sized non profits (section 501(c)(3) exempt organizations). Each workshop, presented by experienced Exempt Organizations specialists, will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. This introductory workshop is designed for administrators or volunteers who are responsible for an organization’s tax compliance. Pre-registration is required.
Even as we donate our hard earn income to help others, we need to maintain awareness to make sure that we are connecting emotionally and benefiting financially if appropriate (charitable deductions).
