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On Fri, 2011-03-25 at 21:56 -0400, Rich Freeman wrote: |
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> |
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> So, I would definitely consult with professionals before doing |
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> anything, |
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It can't hurt, other than any costs. Also it helps to pass on liability |
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if they are the ones signing their name to the financial statements, |
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doing the filings. They become responsible for the accuracy and |
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correctness of the filing. Doesn't mean you won't get audited by the |
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IRS. Just means someone else has signed off on it, and they are liable |
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for inaccuracies, fraud, etc. |
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|
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Its why there are few CPAs who operate in gray areas, usually stick to |
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just black and white. |
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|
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> but from the little reading I've been able to do so far it |
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> seems like organizations can go ahead and start filing taxes like they |
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> are exempt before they get official recognition as such. |
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|
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Sort of, in a sense there is a probationary period, which seems to be |
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5yrs. After which they the IRS does an audit, and if you fail. You get |
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classified as a non-charitable tax exempt organization. Just not a |
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charitable one. Gentoo would still be tax-exempt. But no one can write |
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off donations as charitable contributions. Which is how its basically |
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always been. Though anyone contributing can write off the contributions |
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in other ways, just not as a charitable donation. |
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|
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Now the failure to file in 3yrs in a row can still cause you to lose |
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non-exempt status either way. But that is likely much harder once passed |
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the initial 5yrs. That would be like the 8th year... :) |
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|
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> Now, I'm sure that makes you subject to penalties/etc if it turns out |
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> you aren't exempt. However, I doubt it costs a dime more than what |
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> you'd be subject to for not filing taxes at all once they catch up |
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> with us (and unless we're raking in a lot of cash after expenses that |
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> may not actually be much - it looks to me that unless criminal charges |
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> are filed the liability is whatever we'd pay in taxes anyway, interest |
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> at a rate that isn't that bad, and a penalty of up to 25% more - so |
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> you basically pay what you should have paid all along plus enough of a |
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> fine to make it not worth your while to delay). |
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|
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Correct |
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> As others have said I |
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> doubt criminal charges are likely unless somebody is pocketing funds |
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> or using the organization to launder money or something - if you pay |
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> your penalties the IRS is probably happy to cash the check and wait |
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> for your next return. |
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|
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No criminal charges, as this is not a breach in any law. You do not have |
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to be a non-profit/tax exempt. Worse case you just get classified and |
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treated as for profit. |
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|
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> The terminology used in the IRS publications/etc is "recognition of |
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> tax-exempt status." The logic is that tax-exempt organizations are |
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> tax-exempt by virtue of law, and not because they are certified as |
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> such (tax deductions for contributors are probably a different story). |
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> So, basically you're just asking the IRS to acknowledge what is |
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> already true. |
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|
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In a nutshell, and also on the other end allowing the IRS to count |
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others contributions to Gentoo as charitable. If someone claims an |
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expense is charitable, to an entity that is not classified as a charity. |
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The IRS could take minor action against the entity/person claiming the |
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expense as a charitable contribution. Really does not effect Gentoo, |
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just anyone who donated money. |
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|
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There are several forms of tax-exempt entities. The different statuses |
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really just apply to the donors. |
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> That said, I have no doubts that issues from the past will make |
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> getting this recognition more difficult. |
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To an extent, but I believe worse case can just dissolve the current |
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entity and form a new one. Which is really only a change as far as the |
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State and IRS is concerned. Doesn't have any effect on anything else |
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really. But I could be wrong there. I am more familiar with for profit |
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companies there. |
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|
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> Even so, the sooner we get |
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> squeaky-clean with the paperwork the sooner we can move back in that |
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> direction. I'm sure the IRS looks differently at an application by an |
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> organization that has had the forms in on time for 5 years in a row |
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> than one that is struggling to show compliance, regardless of the |
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> history of either. |
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|
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Yes, and if things are not in order for 5yrs, you cannot be classified |
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as 501c3. That does not mean you lose tax exempt status. You just do not |
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get charity status, donations cannot be deducted from the donors taxes |
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as a charitable expense. |
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> I've been slowly working my way through the IRS website as their |
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> publications aren't actually all that bad and of course they are |
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> official. |
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|
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Excellent, and its basically no different than reading technical |
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documentation. Its just on tax laws vs code, etc. |
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|
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Difference between like a CPA and us, is they are familiar with the |
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stuff. Kinda like a Gentoo dev making an ebuild, vs someone new to |
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Gentoo. It can be done, but a bit harder, more time, than someone |
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experience and in the know. |
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> If somebody is aware of a good place to find trustworthy |
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> tips/etc for NFPs/etc let me know. |
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|
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There quite many resources if you google. Most information should be |
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accurate. I came across many more other sites providing more straight |
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forward information than the IRS. I am sure the IRS provides the same |
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information, but much more detailed and in more locations. |
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I did not provide links to that stuff, since the potential does exist |
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for it to be inaccurate. Thus stuck to just IRS links, short of the one |
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regarding the 5yr audit. I can not find that on the IRS site for some |
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odd reason, though recall coming across it before. I am unable to find |
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it in past emails sent as well :( |
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-- |
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William L. Thomson Jr. |
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Obsidian-Studios, Inc. |
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http://www.obsidian-studios.com |