Accounting
NONPROFITS FACE IMPORTANT MAY 15 DEADLINE
The April 17 tax deadline might be a distant memory for some, but charities have another due date to contend with: May 15. That’s the deadline for most nonprofit annual returns, and missing it could be a serious problem for your charity.
Last year, the IRS reported that it had revoked the tax-exempt status of more than 275,000 charities for failure to file their annual return. And the consequences of this action are rather severe. Donors can no longer deduct contributions to these organizations on their tax returns, and the organizations might be taxed as corporations.
With some exceptions, such as for qualified church and other religious organizations, every nonprofit is required to complete a Form 990, 990-EZ, or 990-N. Private foundations are required to file Form 990-PF.
The good news, however, is that filing your charity’s return might be easier than you think. A nonprofit with annual gross receipts of less than $50,000 can file Form 990-N, which has only eight questions and is filed electronically. Larger nonprofits, however, are left with the Form 990-EZ or the longer Form 990. If your charity runs a business on the side to help raise funds, it might have to file Form 990-T, where income on those unrelated sales could be taxed.
So what can you do if your nonprofit fails to file its return by May 15? Your first step might be to contact a tax professional to determine the full extent of the delinquency. Here’s why: May 15 is the deadline for charities with a Dec. 31 accounting year-end, but your charity might have a different year-end. In that situation, the due date is the 15th day of the 5th month after the close of the fiscal year.
CHANGING JOBS CAN HAVE TAX CONSEQUENCES
Taxes may be the last thing on your mind when you’re changing jobs, but overlooking their impact could mean missed tax-saving opportunities. Issues to consider include the following:
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Your retirement plan. Distributions from retirement plans are generally taxable and may also be subject to an early withdrawal penalty. The penalty would also apply to amounts withheld for income taxes. When you leave a company, any outstanding 401(k) loan is also considered a taxable distribution if you don’t repay the loan according to the terms of your plan.
Planning Tip: Have the money in your retirement account transferred directly into another qualified plan or an IRA. A direct rollover avoids automatic income tax withholding and income taxes.
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Job-hunting expenses. You can deduct the costs of looking for a new job in your present line of work, even if you don’t get the job. Typical expenses include travel to job interviews, resume costs, and employment agency fees. You must itemize your deductions, and your total miscellaneous deductions must exceed 2 percent of your adjusted gross income.
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Moving expenses. If you meet two tests, you can deduct the costs to move your household and personal effects, including your in-transit travel expenses and storage expenses.
First, the distance from your old home to your new workplace must be at least 50 miles farther than the distance from your old home to your old workplace. Second, you must work full time in your new location for at least 39 weeks during the 12 months following your move. The time test doesn’t apply if you’re laid off from your new job or later transferred for your employer’s benefit.
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Residence sale. You can exclude from taxation up to $250,000 of gain ($500,000 for joint filers) if you own and occupy a home as your principal residence for at least two of the five years preceding its sale. If you sell your home due to a change in employment, you can still exclude part of the gain even though you don’t meet the ownership and use tests.
CHECK OUT THESE TAX BREAKS FOR SENIORS
When it comes to taxes, growing older has its advantages. Here are some of the tax breaks available as you reach a certain age.
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Higher standard deductions. You’re eligible for a higher standard deduction once you reach age 65. On your 2012 tax return, you can claim an extra $1,450 deduction if you’re single. If you and your spouse are both 65 or older, your combined extra deduction is $2,300.
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Tax credit for the elderly. You may qualify for this direct credit against taxes if you’re age 65 or older during the tax year. There are limitations if your tax-free pension benefits, such as social security, exceed certain levels. Income limitations may also apply.
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Tax breaks for Social Security benefits. Generally, you’ll pay no tax on Social Security benefits if the total of one-half of the benefits plus all other income is less than $25,000 (singles) or $32,000 (married filers). Above those levels, you’ll pay tax on up to 50 percent of your benefits. High-income seniors could be taxed on up to 85 percent of their Social Security benefits.
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Possibly escape filing a tax return. Because of the higher standard deductions and potentially tax-free social security benefits, your taxable income may not reach the filing threshold. The filing threshold depends on your filing status. For example, if you’re single and 65 or older, a 2012 return is not required if your income is less than $11,200. A married couple over age 65 doesn’t need to file if income is less than $21,800.
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Higher contributions. Once you reach age 50, you may contribute more to your retirement account – an additional $1,000 to an IRA, $2,500 to a SIMPLE, and $5,500 to a 401(k). At age 55, you can contribute $1,000 extra to a health savings account for 2012.
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Additional breaks on state taxes. Some states offer special breaks on taxes for seniors. Also check whether you qualify for deferral programs or other breaks on your property taxes.
Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail kpaccounting@verizon.net or kpinsurance@verizon.net