Thousands of Nonprofits Lose Tax-Exempt Status
Filed Under: Articles of Interest
Tags: Articles of Interest, IRS
If you are thinking about making a tax-deductible donation to a small charity, you may want to make sure it is still a charity. A few recently lost their tax-exempt status for failing to file documents with the IRS. Charities, membership groups, and trade associations without tax-exempt status are not allowed to receive tax-deductible contributions and may now have to pay taxes on any income they receive.
On June 8, 2011, the IRS posted a list of approximately 275,000 groups that did not file informational reports for three consecutive years. Tax-exempt groups other than churches and certain church-related organizations making less than $50,000 a year were required to file the form for the first time in 2007 (after Congress passed the Pension Protection Act of 2006, giving the IRS a way of tracking these organizations.)
The IRS has posted the list on www.irs.gov/autorevocationlist. Information included gives the name, employer identification number (EIN), type of organization, and last known address. The list is searchable by state. They will also post monthly updates with additional information about organizations whose filing dates have come due. Donations made prior to an organization being added to this IRS list remain tax-deductible.
Publication on this list of organizations whose tax-exempt status has been revoked is intended to serve as notice to donors and others that they should not rely on a prior listing or publication. The IRS believes that the vast majority of tax-exempt groups have filed their forms and are unaffected by the revocation listing, and many on the list are simply no longer in existence.
The tax agency said procedures have been set up to help those groups who seek to have their tax-exempt status reinstated. They must fill out an application and pay a user fee, regardless of whether they originally needed to file such an application. Information on the reinstatement process can be found on IRS.gov
EIN Order Form Now on Delawareinc.com
Filed Under: HBS Announcements
Tags: EIN, HBS Announcements, IRS
Whether it’s changing the name of an entity or re-organizing an entity, changes like this always seem to raise the question, “Do I need to get a new EIN?” Ultimately that decision will be made by the IRS, but as general rule of thumb, any time a business re-organizes it will need a new EIN (Federal Tax ID). Examples of re-organization include:
- Changing from a corporation to another entity like an LLC or Limited Partnership, or vice versa.
- Incorporating in a new state resulting in a new state charter.
- Merging corporations resulting in a new corporation.
- Changing a sole proprietor to a partnership or other business entity like a corporation, LLC, etc.
- Changing a partnership to a sole proprietor or other business entity like a corporation, LLC, etc.
- Changes to a partnership resulting in a new partnership (i.e. one partner out, a new partner in).
- Changes in business ownership that result in the original EIN applicant no longer maintaining ownership of the company.
Aside from re-organizing a business, most other changes typically do not require a new EIN. Some examples of changes that do not require a new EIN are:
- You change the name of your business.
- You change the location or add locations.
- You elect to be taxed as an S corporation or you elected on Form 8832 Entity Classification Election, to change the way the entity is taxed.
- A partnership or corporation declares bankruptcy.
These lists are not meant to cover all situations, but do cover number of common changes we see every day here at HBS. If you are still left wondering whether you need a new EIN, check out the article in the Businesses section at www.IRS.gov entitled, “Do You Need a New EIN?”
Be sure to check out Harvard Business Services new EIN order form HERE. It’s never been easier!
Tax Tips From the IRS
Filed Under: INC Knowledge
Tags: Business Tips, IRS, Taxes
Starting a business can sometimes be an overwhelming process, especially when it comes to your federal tax responsibilities, but this is something you really want to get right from the start. Below are the top tips the IRS wants you to know if you plan on opening a new business this year.
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First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
- The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
- An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN.
- Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
- Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
- Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
