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New IRS 1099 Rules Set to Hit Charities Hard

It seems like the hits just keep on coming.  First it was the Form 990-N rule changes that will cost a yet-to-be-determined number of nonprofits their tax exemption.  Now organizations are waking up to the news that the controversial new Health Care Law is bringing more draconian rule changes their way…namely the new requirements regarding Form 1099-MISC set to hit after next year.

So what are the new rules and why are they so bad?  We’ll explain that, but let’s first take a look at what the current rules are.

Under current law, a business is required to give a Form 1099-MISC to any independent contractor who is paid $600 or greater in a calendar year.  An independent contractor is defined as a non-corporate business entity, such as an sole proprietor or partnership.  For most businesses, this doesn’t create much of a burden.  That’s all about to change…

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IRS Adds More Uncertainty to Tax Exemption Revocations

What a mess!  Now that May 17, 2010 has come and gone, we are waiting to see just how many 501(c) organizations around the country have lost their tax exemptions.  For those of you who have been keeping up, you know that May 17 was the due date for filing Form 990.  Additionally, under federal law passed in 2006, organizations failing to file Form 990 for 3 consecutive years were set to automatically lose tax exemption.  May 17 was, for most nonprofits, the due date of the third year.  Up to 1/4 of all nonprofits were at risk.

So, how many got their filing in on time and how many did not?  We just don’t know yet.  Here is how this whole thing is supposed to work:

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One-Fourth of Nonprofits Set to Lose Tax Exemption

Doomsday is coming…May 18, 2010 to be exact.  No, it has nothing to do with the Mayan calendar ending (that’s 2012!).  May 18 is the day that nearly 1/4 of all US nonprofits find that the IRS has automatically revoked their tax exempt status.  If you are doing the math, that is nearly 400,000 nonprofits.  At The Foundation Group, we have sounded the alarm numerous times over the past several months.  It seems like people don’t start paying attention until it is nearly too late.

Consider this quote from Diane Aviv, president of the Independent Sector, a nonprofit trade group: “It’s going to be an unholy mess once these organizations realize what’s happened to them.”

We implore you to pay attention now before it is too late.

So, why is this happening, what does it mean…and how can you avoid being among the 400,000?

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Why Marketing Is So Critical To Your Fundraising

Developing a proactive, comprehensive fundraising plan to make sure your organization is fully funded is just one part of a total plan for your organization. There is another plan you need to create – one that is just as important and could make your fundraising goals easier to reach.

The plan I am referring to is a marketing plan.  It is your game plan to communicating with your donors, potential donors, media, public officials and anyone else that matters to your organization.

To effectively market your organization, you must first know a few things about yourself:

Determine what business you are in. Can you boil your mission statement down to something really short and sweet?  For example, Habitat for Humanity is in the business of building decent, affordable homes for families in need.

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Difficult People on Your Nonprofit Board

Difficult people.  Whether it be a co-worker, a neighbor, or even that very special “in-law”, we all have them in our lives.  Chances are, you will have one serving on your nonprofit’s board of directors…if not now, eventually.  Sort of like death and taxes, there is a certain inevitability to it.  Given the volume of questions we get about this subject, I suspect you already know that.  The question is, how do you deal with this situation?  In this post, we are going to explore some steps to make this tough situation manageable.

Find the source of the conflict. This can be more difficult that you might think.  The temptation is to focus on the person and label them a malcontent or even a troublemaker.  Maybe that is true, maybe not.  We all bring our baggage to the table…some of us have a carry-on, others a steamer trunk!  Certainly, if every interaction with this person creates conflict, there is a very high likelihood that he or she is a lot of the problem.  But in your rush to judgment, don’t overlook legitimate concerns and observations. 

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When The Going Gets Tough

We all have our moments of discouragement.  There are times when we are getting beaten up so badly that we would rather throw in the towel than continue to get pummeled.  This situation can occur in just about any area of our lives…personal and professional.  But what do you do when it happens in your nonprofit?  How do you know when to press on or when to give it up?

As it happens, I had this very conversation a few days ago with an acquaintance of mine who runs a small nonprofit ministry.  He and his wife started the organization about 15 years ago and what little momentum they had back in the early days has long fizzled out.  They find themselves practically alone in keeping it going.  Anymore, they are struggling to figure out why they even keep on trying.  Bill is very discouraged and, for the first time, is seriously thinking about hanging it up.  Maybe you are there, too.  How do you know what to do?  Predictably, the answer is not so simple.

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Following Up on Form 990 Schedule O

It seems that there has been some confusion regarding last week’s article on IRS Form 990, particularly Schedule O.  In this short article, I want to expand a bit on that discussion and clear up some misconceptions.

We had a caller last week take us to task for hyping Schedule O as some kind of monster.  His comments (paraphrased) were along the lines of,

“You guys have some nerve.  You are intentionally trying to create confusion to increase your business.  I looked at Schedule O and it’s no big deal.  It’s a blank form!”

Point taken..sort of.  Yes, it is true that Schedule O is a mostly blank form with a bunch on lines on it.  But no, we are not hyping anything at all.  First of all, that would be a disservice to our clients.  It would also be a very short-sighted business plan.  The truth is that, like everything related to 501(c)(3), things are more complex than they appear.

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“O” No! The IRS Has A Few Questions For You

I can already hear some of your sarcasm…

“Tell me something I don’t know!”

“You’re kidding!  The IRS?  Really?”

Point taken.  It seems like the IRS always wants to know a thing or two about you.  Whether it is your personal tax situation, your business or your nonprofit organization, the Internal Revenue Service seems to always be there.  We’ve spent a great deal of time educating you about the seriousness of the 2008 changes to IRS Form 990 and what they mean to your nonprofit.  Well, the screws are getting tighter with the recent release of additional changes for the 2009 return.  Specifically, it is the changes to the Schedule O that have the potential to shake things up pretty dramatically.

What is Schedule O? The name of the schedule, Supplemental Information to Form 990, sounds harmless enough.  It was introduced in 2008 as part of the overhaul to Form 990 that added Schedules C – R to what had previously been just Schedules A & B.  The purpose of the schedule is to provide the IRS with…wait for it…supplemental information about the activities of nonprofit organizations that is not captured elsewhere on the return.  What is new for the 2009 tax year is that Schedule O is required of all Form 990 filers.  This is where the game begins to change…

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This Year’s Form 990 is a Very Big Deal

The filing deadline for the 2009 Form 990 is May 17, 2010 for 501(c)(3) and other tax-exempt organizations running on a calendar year basis.  There is nothing particularly new about that.  What IS new is that this year’s filing obligation has the potential to cause an enormous amount of heartache to those nonprofits that are unaware of the requirements and fail to do what is necessary.  We touched on this briefly in our last article, but we want to expand on it a little bit.  We implore all of our clients and friends to read this article carefully and be informed.

ALL tax-exempt organizations must file Form 990. With the distinct exception of churches, all 501(c) nonprofits are required to file a version of Form 990.  We’ve been saying this over and over, but we still find that the message is not quite getting through.  To make it easy to understand, ALL means ALL.  No exceptions!

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