IRS & running your club -- HEADS UP

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  #1  
Old 03-14-2015, 06:13 AM
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Exclamation IRS & running your club -- HEADS UP

We started our club a little over a year ago, at that time I called several clubs asking how they handle their not or non profit status and tax returns.

I was told by all I called that we just open a back account in the club name with an EIN # and that's it.

Well IRS says that if your EIN number is not listed with them as a tax exempt organization within 3 years the officers will be responsible for the clubs income as taxable revenue.

The clubs president has to call IRS and have them update your status before May 15th along with the responsible parties info......

Here's what I learned, if anyone can chime in with more info please do so we have a 2000 clubs here I wonder how many are doing their books correctly.

Any nonprofit organization with less than $25,000 in annual gross receipts did not have an annual filing requirement. That rule changed with the 990-N which requires that even these small organizations must file (note that there are exceptions for certain organizations such as churches).

Small social club organizations (for example, a softball league) fall under Section 501(c)(7) of the Internal Revenue Code. 501(c)(7) organizations include social and recreation clubs, organized for pleasure, recreation, and other similar nonprofitable purposes. If a social clubs chooses to be recognized officially as a tax exempt entity, they must file Form 1024 (Application for Recognition of Exemption Under Section 501(a)). However, filing this 1024 application is not required- it is optional.

The important point here is that whether or not a small organization, such as a social club, chooses to file Form 1024, the organization is still REQUIRED to file the Form 990-N at a minimum (unless it meets one of the exceptions, such as being a church). This is also true for a small 501(c)(3) organization that has less than $5,000 in gross receipts.

That small 501(c)(3) is not required to file a Form 1023 for application of tax exempt status, that small 501(c)(3) organization is still required to file the Form 990-N at a minimum.

When I say at a minimum, this means that if you have less than $50,000 in gross income in 2014, you file a Form 990-N. If you have more than $50,000 in gross income in 2014, you are required to file either the Form 990-EZ or the Form 990.

Remember if you don't file or you go three years without filing, the IRS will treat your organization as a taxable entity.

Guess the officers will need to pay up the taxes
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  #2  
Old 03-14-2015, 07:26 AM
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Did you or a club member received a letter from the IRS indicating that your club is violating the statutes? Your explanation is very thorough, I'm just wondering if the IRS is actively enforcing this matter with clubs anywhere.
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Old 03-14-2015, 09:40 AM
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No notice, don't think there would be until 3+ years passed.

Then you or your club would pay tax as income, even if you were an officer in the past you're on the hook for all taxes & penalties the way I understand it

I just asked my accountant if there's anything to do for the '14 tax year.
He immediately said absolutely.
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Old 03-14-2015, 09:42 AM
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Quote:
Originally Posted by jimbo2012 View Post
No notice, don't think there would be until 3+ years passed.

Then you or your club would pay tax as income, even if you were an officer in the past you're on the hook for all taxes & penalties the way I understand it

I just asked my accountant if there's anything to do for the '14 tax year.
He immediately said absolutely.
I think if you keep the amount you collect very low, there is no problem. We just use ours for napkins and paper plates and table cloths etc... and collect five bucks from everyone about once a year. If we are collecting for the Ocala Forest people or other things, we immediately disperse it to them.
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Old 03-14-2015, 09:46 AM
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Gracie, that's incorrect.

ESPECIALLY $$ to charity, the charity gives IRS a paper trail to you!

IRS has no low limit in $$$

If you want to run it wrong just have no bank account pay cash

The Villages Florida



. Seriously it cost nothing for club to do it right
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Old 03-14-2015, 10:35 AM
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Originally Posted by jimbo2012 View Post
Gracie, that's incorrect.

ESPECIALLY $$ to charity, the charity gives IRS a paper trail to you!

IRS has no low limit in $$$

If you want to run it wrong just have no bank account pay cash

The Villages Florida



. Seriously it cost nothing for club to do it right

OH.

I am no longer in charge of ANYTHING. I just kvech from the side lines. Did I spell that right?
  #7  
Old 03-14-2015, 10:57 AM
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Thanks for the heads up, Jimbo.



I am involved in my high school reunion committee, we have an EIN #, checking account, and low funds balance.



Looks like we have to file the 990-N epostcard to stay tax exempt. Never would have known this. Right on time too as we set this up in 2012 and the 3 year clock is ticking.
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  #8  
Old 03-14-2015, 11:12 AM
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Forgot, call IRS Tax Exempt and Government Entities Customer Account Services at (877) 829-5500.

Explain that you want your club considered or listed within IRS as tax exempt.

this takes upto 6 weeks to process, your 990 return is due 5/15, so time is limited.
  #9  
Old 03-14-2015, 11:33 AM
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Bob,
Our neighborhood has had an association for over 20 years. We have 85 houses and collect a voluntary contribution of $10 per home. We have monthly neighborhood covered dishes, annual Christmas party, picnic, get well cards, etc. We also have a 50/50 drawing every so often.

The money goes for buying paper plates, etc and entry decorations, our entry Flag, etc. We have a checking account. We have a President, secretary, treasurer, etc. There is never more than a few hundred dollars in the account. We are not tax exempt, and have never filed anything.

In your opinion, (and I know you are not a tax attorney, etc), Are we not doing something we should be doing? I find it hard to believe the Federal Gov't has nothing better to do then to want to know about a little neighborhood association of old folks.

We are not an HOA or anything....that is different. Any thoughts? With all the clubs, etc we all have around to be involved in, does every tiny club have a concern here? George Orwell was just 31 years too early......

Frank
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  #10  
Old 03-14-2015, 12:06 PM
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Frank, it's just too simple to comply, IMO you should file since U have a bank account.

See 501 C7 of the code

All it takes is one member making a call and all the current & past officers are responsible for all revenues collected for 20 years as taxable income(they can reach back that far because no returns were filed, if returns are filed the reach back is only 3 years I think).

quick math $850 dues x 20 years almost $20,000 may be taxable plus fines & penalties, can be $50,000.

As you said I'm not by any stretch an expert just an officer of a club that rather not be looking over his shoulder for a liability and protect the other officers within our club.

Please consult a tax professional to be sure, I'm only alerting folks to avert a problem down the road.


.
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Old 03-14-2015, 12:26 PM
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Thanks...I just saw my CPA yesterday and will speak to her about it. Thanks again!

Frank
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Old 03-14-2015, 06:02 PM
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Remember that wonderful Patriot Act (and related stuff)? From it flowed all manner of crackdowns on "not-for-profit" clubs and other organizations that "might" actually be pipelines to terrorist organizations.

Now, you are probably saying it is silly. However, the only way the IRS knows who you are and what you do is by your club's filings. Meanwhile, having an EIN means that your bank is filing lists of accounts and you will have to file a return anyway - the not-for-profit status just directs it into the "they don't have to pay taxes" pile.

Remember, Al Capone thought that the IRS was a joke when they went after him (stories aside, the FBI never had a hope of convicting him for anything).
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