Category Archives: Non-Profit

Steps a Charity Needs to Take When Receiving a Donated Vehicle

Posted on May 1, 2012 | Leave a comment

So you are an employee or Board member of a nonprofit organization and learn that someone wants to donate a vehicle to your organization.  As a tax-exempt organization, you may be asking, “what is the organization required to do after accepting the vehicle donation, and is there any risk of it being taxable to the organization?” The IRS does, in fact, have specific rules spelled out in a user-friendly pamphlet (even with pictures)  for charities who receive donated vehicles.  To summarize the items in the pamphlet:

Q. What can a charity do with a donated vehicle so not to affect its tax-exempt status?

There are four actions a charity can take with a donated vehicle that have no adverse effect on its tax-exempt status:

  1. Sell the donated vehicle and use the proceeds to fund its charitable programs.
  2. Use the vehicle for a significant period of time to conduct activities that further its charitable programs.
  3. Make significant improvements to the vehicle, then sell it and use the proceeds to exclusively further its charitable programs.
  4. Distribute the vehicle at a price significantly below fair value to needy individuals if its charitable purpose is to provide the needy with means of transportation.

Q. What filings and disclosures are required of a charity receiving a donated vehicle?

Scenario 1 – Vehicles with a fair value of less than $250 - no filings or disclosures are required by the charity.

Scenario 2 – Vehicles with a fair value of at least $250 but not more than $500 – the charity must send by the date on which the donor files his or her individual federal income tax return an acknowledgment (using its own written or electronic statement or Form 1098-C – Copy C only) to the donor that includes the name of the charity, a description (but not value) of the vehicle, and one of the following:

  • A statement that no goods or services were provided by the charity in return for the donation, if that was the case
  • A description and good faith and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or
  • A statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case

Scenario 3 – Vehicles with a fair value of more than $500 up to $5,000 – the charity must send within 30 days of the date it sells the vehicle or, if it does not intend to sell the vehicle, 30 days from the date of the contribution, an acknowledgment (using its own written or electronic statement or Form 1098-C – Copy C only) to the donor that includes the donor’s name and taxpayer ID number, the vehicle identification number, the date of the contribution, and one of the three bullet points noted above in Scenario 2.

All Scenario 3 acknowledgements must also include information on what the charity did or intends to do with the vehicle (see pages 5-8 in the pamphlet for additional required information) AND the charity must also report to the IRS on Form 1098-C – Copy A by February 28 (March 31 if filing electronically) of the year following the year in which the charity provides the acknowledgment to the donor.

Scenario 4 – Vehicles with a fair value of more than $5,000 – the charity must prepare the same information as in Scenario 3, plus an authorized official of the charity must complete  a portion of Section B of Form 8283 provided by the donor and sign it.   If the charity sells or otherwise disposes of the vehicle within three years after the date it received the vehicle, it must file Form 8282, Donee Information Return with the IRS within 125 days after the charity disposes of the vehicle.  The charity must give the donor a copy of the completed Form 8282.

By: Brent Ringenberg

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Posted in Non-Profit, Tax

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Did You Get a Penalty Notice for Late Filing Form 990?

Posted on April 10, 2012 | Leave a comment

Many tax-exempt organizations are receiving penalty notices from the IRS for late filing of Forms 990, 990-EZ, 990-PF, and 1120-POL, even though they received an automatic extension and filed during March, as instructed by the IRS in IRS Notice 2010-4.

In December 2011, the IRS announced that its e-filing computer system would be unavailable for filing Forms 990, 990-EZ, 990-PF, and 1120-POL from January 1, 2012, through February 29, 2012.  Because the system was being taken down, the IRS extended the filing deadline for Form 990 until March 30, 2012, for many tax-exempt organizations with a filing due date during the first two months of 2012. The January and February due dates applied to organizations with year ends on August 31 or September 30, respectively, or organizations with May 31 or June 30 year ends, respectively, that had filed for the first three-month extension.  The extension applied to Forms 990, 990-EZ, 990-PF, and 1120-POL whether or not the organizations were required to file electronically.

Some of the organizations that filed during March have received penalty notices (Notice Number: CP141L) from the IRS. Notice CP141L is sent to taxpayers who according to the IRS’s system have filed a late return.

If an organization had a due date of January 17 or February 15, 2012, and filed a Form 990, 990-EZ, 990-PF, or 1120-POL in March and received Notice CP141L, they should call the number listed at the top of the notice: 1-877-829-5500 and request that the IRS abate the penalty in accordance with Notice 2012-4.

By: Tracie Youngless, CPA

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Posted in Non-Profit, Tax

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Does Your Tax-Exempt Organization’s Form 990 Have a Due Date in January or February 2012?

Posted on December 27, 2011 | Leave a comment

The Internal Revenue Service (IRS) has recently announced that its e-file system that processes tax-exempt returns will be off-line in January and February 2012.  Forms 990, 990-EZ, 990-PF and 1120-POL (the 990-N is not affected) cannot be electronically filed during these months. Therefore, the IRS is granting an automatic extended due date of March 30, 2012 for returns that have an original or first three- month extension due date on either January 17 or February 15.  January and February due dates apply to organizations with year ends on August 31 or September 30, respectively, or organizations with May 31 or June 30 year ends, respectively, that have filed for a first three-month extension.  No additional forms need to be filed for the March 30 automatic extension; the return just needs to be filed by that date.

If you are still reading, there’s a good chance this additional automatic extension applies to you.  Your organization can still act quickly and e-file before January 1st, otherwise, you can prepare the return in January or February, but you’ll have to wait until March before e-filing it.   The IRS is allowing returns to be paper filed during January and February 2012, if an organization should find it necessary to do so.

What about an organization with a second three-month extension due date in January or February 2012?  The March 30, 2012 automatic extension does NOT technically apply to such an organization.  But, unless an organization can e-file before January 1, it will have to wait until March 2012 to e-file, so the IRS is granting relief from a late filing penalty.  In order to avoid receiving a system-generated penalty notice for late filing, these organizations should attach a Reasonable Cause Statement to the return.  Appendix A of IRS Notice 2010-4 provides an example of such a statement.

Does an organization with a January or February 2012 due date have until March 30, 2012 to file a first or second extension if it needs more time?   If your organization needs more time, a first or second three-month extension must be filed by January 17 or February 15; the March 30 date does not apply to the filing of extensions.  And, keep in mind that if a tax liability should happen to be due, this payment is always due on the original due date with no extensions allowed.

For those tax-exempt organizations with Ohio filing requirements, the State of Ohio has not yet officially made known whether the March 30, 2012 federal extended due date will be honored.

By: Brent Ringenberg, CPA

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990 filing requirements are changing-do you know what to do?

Posted on December 20, 2011 | Leave a comment

Changes are coming to the way Ohio charities and non-profits register with the Ohio Attorney General’s Office.  Organizations with a fiscal year end AFTER December 1, 2011 WILL BE REQUIRED to complete filings online.  

How does this differ from what Organizations have done in the past: Prior to this change, Organizations were able to simply mail a copy of their Federal Form 990, Form 990 EZ or complete the one page “Verification of Filing with the Internal Revenue Service” provided by the Attorney General’s Office accompanied with a check for the appropriate sliding scale fee based on the Organization’s total assets.

 The new process requires all Organizations to complete a five page “Charitable Trust Registration Form (CFR-1) and Annual Financial Report”.  The new form asks many questions similar to the Federal Form 990, just a little different presentation and format so it will take some additional time annually to complete.  For the Federal Form 990EZ and 990N filers this will be much more time consuming and detailed than what they are accustomed to preparing and providing. 

The Attorney General’s Office has also prepared an “Charitable Registration User Guide” and “Charitable Registration Tool Tips” which answer questions Organizations may have about the registration process. 

Why is the State requiring the new registration process:The new process will eliminate paper forms and more accurately determine applicable statutes and required fees.  The new system will also provide email confirmations on filings and reminders of upcoming deadlines.  They system is capable of having multiple representatives registered to receive updates and reminders to avoid oversights during periods of management transition.  

The new process will allow potential donors to verify if an organization is registered and in good standing. As organizations file online within the next year, potential donors will also be able to review financial reports and see how much of every dollar donated goes to charitable work. 

Who has to file:In general, Ohio 501(c)(3) organizations and 501(c)(4) health-care organizations must register under the Ohio Charitable Trust Act unless they meet one of eight exemptions. Out-of-state entities may be required to register if they have assets in Ohio or a majority of the governing body is in this state. After filing the initial registration with the office, the organization must file an annual financial report. A sliding scale for fees is based on the organization’s total assets. 

Nonprofits that intend to solicit contributions from Ohioans must register and submit financial reports with the Ohio Attorney General’s Office each year under the Charitable Organizations Act. Ohio 501(c)(3) organizations that have been in operation for two or more years are not required to file under the Charitable Organizations Act if they have properly filed under the Charitable Trust Act each year. The fee is based on contributions received each year. 

There are circumstances when Ohio charities might be required to file under both provisions. 

By: Tracie Youngless, CPA

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Helping Those Less Fortunate: Do we Know Where our Money Is Going?

Posted on December 8, 2011 | Leave a comment

It is that time of year, when despite how little cash we may have in our own pocket, we try to give to others who may be in a less fortunate position than ourselves.  With the seemingly disproportionate amount of 501(c) 3 organizations in the Northwest Ohio region, deciding which charity to give that money to can be a daunting task.

Personally, I tend to revert to the big names that I know have a good record for actually benefitting their stated cause.  There are many organizations that by name or promotion appear to benefit a good cause, but unless I spend a lot of time researching the actual statistics, I don’t know where my money is going.   There was an article in the Wall Street Journal a few weeks ago titled “Putting Charities to the Financial Test”.    The purpose of the article in essence states just what I summarized- you need to do your homework before opening up your wallet.   The article recommends “digging into the charity’s financial statements, visiting the organization, meeting with management, and talking to third-party observers”.  Really? 

I can’t even find time to finish my Christmas shopping let alone do all of the above before I decide to write a check.  What this article did NOT mention was that the Better Business Bureau (BBB) publishes a Wise Giving Guide  to help people just like me make the right choice about where my money goes!   The Better Business Bureau rates hundreds of charities, both local and national. We use the 20 BBB Standards for Charitable Accountability, the toughest evaluation system for charities in America. They look at governance and oversight, effectiveness, finances, fundraising and informational materials in order to assign each charity a letter grade. Grades go from A+ to F, with charities that meet all Standards receiving A+.  All BBB ratings are free, and charities do not ever pay a penny for a BBB rating.  If you meander through the BBB website, you will note that they provide the specifics on these Accountability Standards that Charities have to meet to qualify.  Using the giving guide and following the letter ratings is a much shorter route to follow than as advised by the WSJ article.

The Toledo BBB has done the work for us!  If, like me, you are planning on writing a check to help out those less fortunate than yourself during this holiday season, you are guaranteed to make a good investment if you write the check to one of these local charities that has been given an A+ grade from the Better Business Bureau.   

In addition, in case you want to give to a local charity that is not on this list, you can find it at the Toledo web site,  or call Mollie Morris at the BBB, (419) 531-3116 or 800-743-4222.  Make your giving worthwhile!

By: Jennifer Kinzel, CPA, CMA

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Posted in Financial Planning, Non-Profit, Tax

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How can you support change in private company financial reporting?

Posted on June 15, 2011 | Leave a comment

The basic fact is that too much of what is included in current financial statements in not useful to private company owners, lenders or private company investors. Plain and simple, the current system does not adequately consider the needs of the private-company sector. You have read prior posts on the Blue Ribbon Panel on Private Company Financial Reporting; thier mission being to assess the standard setting process from a policy level vs. changes to individual standards.

Here are the conclusions from the panel:

  • Substantive changes and modifications in existing and future U.S. GAAP  for private companies, where appropriate.
  • A new, separate standard-setting board reporting directly into FAF (as opposed to the FASB) and consisting of people with private company experience.

Be part of the change!

If you support the panel’s recommendations for differential standards and a seperate, autonomous standard-setting body, then write the Financial Accounting Foundation. In effort to make the process as easy as possible, the AICPA has created an online letter writing tool in which you can submit electronically. 

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Posted in Audit & Accounting, Non-Profit

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