Are Contributions Deductible?

March 5, 2014

If your charity does not have 501(c)(3) status, you should inform donors that their contributions are not tax-deductible. Be aware that some potential donors may not be comfortable giving money to an organization that is not officially exempt.

If your 501(c)(3) status is pending, you should also inform donors of its pending status. Once you receive your exempt status, donations received while your application was pending may be treated as tax-deductible contributions retroactive to the date of your organization’s formation. However, if your application is not approved, contributions will not be considered tax-deductible for donors.

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Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.

She is also the author of the

Attorney Karmen A. Booker has developed the “Nonprofit Sample Templates” e-book that provides templates for the following:

  • Sample Mission Statements
  • Sample Business Plans
  • Sample Donor Solicitation Letter
  • Sample Thank You Donor Letter
  • Sample Press Release
  • Sample Letter of Inquiry
  • Sample Corporate Donation Letter
  • Sample Board Member Application
  • Sample Board Member Agreement
  • Sample Volunteer Application
  • Sample Volunteer Agreement
  • AND MORE

This “Nonprofit Sample Templates” is a valuable resource for all Nonprofit Organizations who desire to use effective tools that will undoubtedly help them acquire funding and provide quality services for their target markets.

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Getting Funding for Your Nonprofit Organization

February 19, 2014

Can I get funding for my nonprofit while I am in the process of incorporating or getting tax-exempt status?

Technically, yes. However, your initial support will probably not come from foundation grants since most institutional funders generally require proof of 501(c)(3) status and prefer to support organizations with a proven track record of fiscal responsibility and programming successes.

Most of your startup funding will likely come from your nonprofit’s founders, board members, volunteers, community members, or other interested individuals.

State agencies, like the secretary of state or the attorney general’s office, generally require organizations to register before soliciting charitable contributions, and will impose fines on unregistered fundraisers.  Contact Attorney Karmen A. Booker at (301) 408-1082 or e-mail her at kbooker1000@yaho.com  so she can complete the Charitable Solicitation Registration for you.

You will therefore need to think creatively about how to finance the initial stages of your organization’s growth. Here are a few ideas:

  • Create a list of family, friends, businesses, and other potential supporters who might be interested in your organization’s mission, and think of ways to get them involved.
  • Identify types of support other than money that might assist your startup venture. In-kind gifts, such as free services, space, equipment, and other non-financial donations, can come from local businesses, professionals (i.e., pro bono legal or accounting help), or other community entities.

Are contributions tax-deductible?

If your charity does not have 501(c)(3) status, you should inform donors that their contributions are not tax-deductible. Be aware that some potential donors may not be comfortable giving money to an organization that is not officially exempt.

If your 501(c)(3) status is pending, you should also inform donors of its pending satuts. Once you receive your exempt status, donations received while your application was pending may be treated as tax-deductible contributions retroactive to the date of your organization’s formation. However, if your application is not approved, contributions will not be considered tax-deductible.

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Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.

Attorney Karmen A. Booker has developed an E-book  called “Fundraising for Nonprofits”. It  provides Fundraising Tips that include but are not limited to:

  • Developing a Fundraising Plan
  • Writing a Fundraising Letter
  • Over 15 Specific Fundraising Projects, and more.

GET YOUR COPY TODAY – $5.00

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What are Limits on Nonprofit Activities?

December 8, 2012

In addition to keeping corporate records, nonprofit corporations must follow some additional rules and abide by certain prohibitions in order to retain their tax-exempt status:

*  Nonprofit corporations cannot contribute money to political campaigns or participate in political campaigns. If they do, the IRS can revoke their nonprofit status, and can assess a special excise tax against the organization and its managers.

*  Nonprofit corporations can engage in only limited lobbying activities. Tax-exempt 501(c)(3) nonprofits that influence legislation to any “substantial degree” face the loss of their nonprofit status. However, for tax-exempt nonprofits that want to participate in lobbying, the IRS simply sets a limit on the money they can spend on political activities.

*  Nonprofit corporations must not distribute profits to members, officers, or directors. A nonprofit corporation cannot be organized to financially benefit its members, officers, or directors. However, reasonable salaries and expense reimbursements are permitted.

*  Nonprofit corporations must pay taxes on income from “unrelated activities.” Sometimes, a nonprofit organization will earn income through activities that aren’t directly related to its nonprofit purpose; for example, the directors of an organization dedicated to preserving open space may collect a consulting fee for advising other nonprofits. The IRS requires nonprofits to pay corporate income taxes on such unrelated income over $1,000, whether or not the group uses that money to fund its tax-exempt activities.

* Nonprofit corporations cannot make substantial profits from unrelated activities. If a nonprofit spends too much time on unrelated activities, or if the unrelated activities generate “substantial” income, the group’s nonprofit status may be jeopardized. Nonprofit corporations that plan to engage in activities that aren’t related to their tax-exempt purpose should consult a lawyer or tax expert with experience in nonprofit law.

*  When a nonprofit corporation dissolves, its assets must be distributed to another tax-exempt group. Since tax-exempt organizations and their assets cannot be owned, they can never be sold. If the directors of a nonprofit decide to disband the organization, they must donate its assets to another nonprofit group. This also means that once property goes into a nonprofit corporation, it cannot later be distributed to a member or director.


Tax Deductions

September 19, 2011

There are many advantages to giving to charity.  The tax benefits of giving to charity.

1. How Does the Income Tax Deduction for a Charitable Donation Work?

If you itemize deductions on your tax return, you may be able to take an income tax deduction for a gift to a qualified charitable organization. All taxpayers receive an automatic deduction from Uncle Sam, and it is only when you exceed that deduction that itemizing pays off. The standard deduction is currently $5800 for individuals and $11,600 for married couples filing jointly

To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

2. When Can a Charitable Contribution Deduction be Taken?

Your donation to a qualified charity is deductible the same year in which it is made. The contribution is considered paid when you put the check in the mail, or when it is charged to your credit card (not when you pay the credit card company). Make sure that your donation is made by December 31 the year in which you plan to claim a deduction.

3. What Charitable Organizations Are Considered Qualified?

Most charitable organizations qualify for tax-deductible donations.  Look for the 501(c)(3) designation to be absolutely sure. Some organizations, such as churches or other religious groups are not required to register as IRS tax-exempt charities in order to receive tax-deductible donations. The charity will tell you if your donation is tax deductible

Tax deductions are not allowed for donations to an individual, a foreign government, foreign charities, political parties, political campaigns, or political action committees.

4. Is There a Charitable Tax Deduction for Giving Internationally?

If the charity is registered in the U.S. as a charitable organization, you can take a deduction for your donation. If the charity is not registered, there is no tax deduction. Many nonprofits that are registered in the U.S. provide international aid.

5. Is There a Limit on How Much I Can Donate?

There are no limits on charitable contributions for most taxpayers. Most of us will be able to deduct cash contributions in full up to 50% of our adjusted gross income. There are other limitations that come into play should you make significant contributions of property or appreciated capital gains. If you fall into these categories, be sure to consult with your tax adviser to see if your deductions will be limited.

6. How Do I Handle Deductions for Non-Cash Donations to a Charity?

There are rules for non-cash donations such as real property, clothing, or office equipment.

For property owned for more than a year, the deduction is usually equal to the property’s fair market value.

Donated goods must be in “good condition or better,” according to the IRS. You must have a receipt for the goods from the charity to claim a deduction. If you donate non-cash items with a total value of more than $500, you must file IRS Form 8283 with your return.

7. Can I Get a Deduction for Donating My Car?

Making a car donation to a worthy charity seems like a good move, but there is a lot of fraud and misleading information.

To receive a deduction for the donation of a car, truck, boat, airplane or any other vehicle, the item must be worth more than $500, and you must have a written acknowledgement from the charity.

8. Can I Take a Deduction for My Volunteer Work?

No, you can’t deduct the value of your time spent on charitable work as a charitable donation, but you can deduct your out-of-pocket costs such as mileage set at 14 cents per mile. Other possible deductions for expenses include your travel to volunteer abroad or in another state.

9. What Documentation Is Required for Deductions for Charitable Contributions?

To claim a deduction for cash, check, or other monetary gift, you must have a written confirmation from the charity that contains the name of the organization, the date of the contribution and amount of the contribution. Charities are only required to provide written acknowledgement for donations over $250, but most do provide some sort of receipt no matter what size of donation you provide.

For contributions less than $250, if a receipt has not been provided, a cancelled check or a bank record will suffice. You cannot deduct casual donations that you drop into a charity’s collection box or bucket without a receipt.

If you receive some goods or services in exchange for your donation, the charity must specify the value of those goods or services. You can only deduct the amount of your donation that is above that value. The paperwork from the charitable organization should spell out what is deductible.

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Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.  Call her today at (301) 408-1082.

Attorney Karmen A. Booker has developed a Report entitled “Fundraising Tips”, which provides information regarding:

  • Developing a Fundraising Plan
  • Writing a Fundraising Letter
  • Over 27 Specific Fundraising Tips such as selling advertisement space in your newsletter and on your website, and more.

GET YOUR COPY TODAY for Only $5.00http://howtostartanonprofitorganization.wordpress.com/2010/11/26/49/

She is also the author of the “Nonprofit Handbook”, that provides strategies and tips for your Nonprofit 501(c)(3) Organization.  This Handbook is a valuable resource for all Nonprofit Organizations who desire to use effective tools that will undoubtedly yield quality services for their target markets.  GET YOUR COPY TODAYhttp://tinyurl.com/4xxx7xr


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