The Small Business Tax Help Blog

Posts Tagged ‘reference’

Question: A 501 (c)(3) non-profit org compliance question?

Under IRS 501 (c)(3), an organization is tax-exempt as long as it meets the requirements set forth in IRC 509(a)(2).

The “One-Third Limit On Gross Investment Income and Unrelated Business Income” test set out in IRC 509(a)(2) states that “An organization will meet this test only if it normally receives not more than one-third of its total support in each taxable year from gross investment income”

If a non-profit received $29 million dollars in donations last year, and earned another $26 million on investments from an endowment fund, has it violated the terms of the “One Third Limit”?
Tro, I’m afraid I’m not very good with the definitions. I do know that the principal began with money from donations and that more money is added from current donations and interest on the fund each year.

The non-profit claims that the fund was created to accumulate funds against the day when fund raising postage costs become prohibitive.

Answer: The answer to your question partially depends on whether or not the organization is a public charity or a private foundation. A 501(c)(3) that is a private foundation is not restricted to the limits under 509(a)(2).

If, however, the organization is a public charity, a violation has not necessarily happened just because the limit is exceeded in one year. Typically, the IRS looks at things in 5 year windows. As long as the organization on average stays within limits, it is OK.

One more wrinkle: not every public charity qualifies as a 501(c)(3) under 509(a)(2). Many are 509(a)(1) and 509(a)(3) organizations and are subject to different criteria altogether.

Confusing? I do this for a living and its confusing. Hope this helps!

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Question: Small Business Tax Audit?

My business that was closed in 2009 is currently under audit. My partner is non-collectible I am considered collectible. We owe 25,000, will the IRS just come after me? I currently own no property besides a old car, my partner owns a house and newer car. Any advice or tips on how I should handle this would help?
We were an L.L.P. and it is payroll tax….
He was determined non-collectible due to his amount of income. His parents are helping him out with money and that’s why he is able to survive

Answer: Mr Reliable claimed that IRS audits cannot be handled on your own and require professional representation. Not completely true. I’ve met with a number of people who successfully defended themselves against an IRS audit. This is certainly possible, however I have to agree that more often than not self-representation backfires, and these people come to hire me after they already messed up. And I have to undo the damage.

That said, what you’re dealing with is a special case, and this type of cases is NOT a do-it-yourself project. I’m not talking about your audit – the audit you may or may not be able to handle yourself. I’m talking specifically about owing payroll tax. This is where the IRS is the most aggressive, and you really do need professional help, in my opinion. I will mention just couple points, but please do yourself a favor and hire a pro.

The issue at stake is called Trust Fund Penalty – see my link below. It is when you were supposed to take out payroll taxes from your employees’ paychecks and turn these taxes over to the IRS. When it’s not done, the IRS gets real mad, because this is not even your taxes, but your employees’ taxes. As punishment, the IRS automatically adds 100% penalty which instantly doubles what you owe, before you add interest which makes it even worse.

And while the tax itself is assessed against the company, the penalty is assessed against so-called responsible persons, and this is personally you and your partner. Unfortunately, no matter what your partner’s situation is, you’re responsible for 100% of the Trust Fund penalty. This is why you really are in a tough spot, and the IRS is very serious when dealing with this type of debt. It is possible to settle these cases, but I would not attempt it on your own.

Now, you mentioned audit, and I assume you’re talking about a standard audit where you’re asked to prove your business expenses. This is a very different game and normally is not related to payroll tax problem. Payroll tax and trust fund penalty is not an audit issue, it is collection issue.

Michael Plaks, EA, Houston TX
www.MichaelPlaks.com

Penalty for Late Filing

Question: In Nevada, is seller’s permit number the same as tax ID number?

I’m getting confused by all the different numbers and the auto-response machines at the department of taxation.

So my question is:

1. Is a seller’s permit number the same as the tax ID number in NV?
Then there are a bunch of other numbers: NV business ID, Entity number, etc.

2. If I did the initial filing (which was somehow put together with the business license appliation),
am I allowed to write the Resale certificate (http://www.tax.state.nv.us/documents/Resale_Cert_22509.pdf) that was here?: http://www.tax.state.nv.us/forms.htm

So for the “seller’s permit number” would I write my tax ID?

Answer: Reseller’s number and sales tax id, likely yes – not the other numbers you mention.

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Question: Do I have to charge sales tax in California for doing savings analysis for customers?

I own my own home business doing price quotes for other companies. I charge them a small fee for each instance and return a file to them in pdf. Do I have to charge sales tax for this service?

Answer: No. Sales tax is only due for the sale of tangible personal property and some services in connection with the sale of tangible personal property. It sounds like you’re only selling a business service, so you won’t owe any sales tax.

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Question: What would the gift tax be on this property?

Class: INDUSTRIAL
Land Appraisal: $ 99,800
Building Appraisal: $ 177,800
Total Appraisal: $ 277,600

Total Assessment: $ 111,040

This is a 4300 sq ft office building, I am going to use to start a city-wide business. Could someone please tell me the gift tax on it?

Im located in Memphis, TN (Shelby County).

My grandfather is going to give me this property. I am going to pay the taxes on it. He purchased this property for $20,000.

Could someone give me an estimate of what the taxes would be for an estate under $1,000,000 and an estate over $1,000,000.

Will the gift taxes be 48% of the value, or will the gift tax be less?

Could he just sell me the property?

Answer: It would be much better if he gave it to you in his will. If he gives it to you in his will then your cost-basis will be the then current value. If he gives it to you now then your cost-basis will be his original cost. For example, if it is worth $300,000 now and he gives it to you, and you later sell it for $400,000. You’ll pay taxes on $380,000 ($400,000 – $20,000). If you get it via his will, the taxes will be on $100,000 ($400,000 – $300,000). As far as estate (gift) taxes. There are none in 2010. In 2011 it will be 55% of the value of the estate over $1 million. You should hire a good estate lawyer to go over all the options and costs. This is a very complex area of law and might effect his ability to get medical services through Medicaid if not done correctly.

New Business Tax Questions, CPA Memphis, Memphis Tax Expert