Month: September 2019

5 Tips for Applying for Tax-Exempt Status

If you’re thinking about starting a nonprofit and want to apply for tax-exempt status under Section 501(c)(3) of the tax code, you’ll need to use Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Here are five tips to ensure a successful application:

1. The application must be complete and must include the user fee.

2. Some organizations may be able to file Form 1023-EZ, a streamlined version, if they meet certain criteria such as projected or past annual gross receipts of $50,000 or less for a period of three years.

3. Churches and their integrated auxiliaries (organizations affiliated with a church or association of churches that receives financial support primarily from internal church sources and not public or governmental sources), as well as public charities whose annual gross receipts are normally less than $5,000 do not need to apply for 501(c)(3) status to be tax-exempt.

4. Every tax-exempt organization, including a church, should have an Employer Identification Number (EIN) regardless of whether the organization has employees. An employer identification number is an organization’s account number with the IRS and is required for the organization to apply for tax-exempt status. Once the EIN is received by the organization, it must include it on the application.

5. Generally, an organization that is required to apply for recognition of exemption must notify the IRS within 27 months from the date it was formed.

If you have any questions about applying for tax-exempt status, please call the office for assistance.

• By Leon Clinton
• September 20, 2019

Estimated Tax Penalty Waived for Eligible Filers

More than 400,000 eligible taxpayers whose withholding and estimated tax payments fell short of their total 2018 tax liability will have the estimated tax penalty automatically waived or refunded (if they already paid the penalty) on 2018 returns filed with the IRS.

Eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.

The automatic waiver applies to any individual taxpayer who paid at least 80 percent of their total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver available to them when they filed their 2018 return earlier this year. While some taxpayers were unaware of the waiver, others filed their returns too early to take advantage of it.

Earlier this year, the IRS lowered the usual 90 percent penalty threshold to 80 percent to assist taxpayers whose withholding and estimated tax payments fell short of their total 2018 tax liability. The IRS also removed the requirement that estimated tax payments be made in four equal installments, as long as all of the estimated tax payments were made by January 15, 2019. In addition, the 90 percent threshold was initially lowered to 85 percent on January 16 and further lowered to 80 percent on March 22.

Over the next few months, affected taxpayers will receive copies of CP 21 notices in the mail granting them penalty relief. Furthermore, any eligible taxpayer who already paid the penalty will receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief.

If you haven’t filed a 2018 return yet, for example, if you have an extension until October 15, 2019, you should claim the waiver on your return when you do file. The fastest and easiest way is to file your return electronically. You may also file a paper return and claim the waiver by filling out Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and attaching it to your 2018 return.

If you have any questions about the estimated tax penalty waiver or estimated taxes, don’t hesitate to call.

• By Leon Clinton
• September 17, 2019

Scam Alert: Watch out for IRS Impersonation Emails

Taxpayers should be aware that a new IRS impersonation scam email campaign is making the rounds. This latest scheme is yet another reminder that tax scams are a year-round business for thieves and taxpayers should be on guard at all times.

This latest scam uses dozens of compromised websites and web addresses that pose as IRS.gov, making it a challenge to shut down. By infecting computers with malware, these imposters may gain control of the taxpayer’s computer or secretly download software that tracks every keystroke, eventually giving them passwords to sensitive accounts, such as financial accounts.

The email subject line may vary, but recent examples use the phrase “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.” The body of the email contains links that show an IRS.gov-like website with details pretending to be about the taxpayer’s refund, electronic return or tax account.

In addition, the emails contain a “temporary password” or “one-time password” to “access” the files to submit the refund. But when taxpayers try to access these, it turns out to be a malicious file.

While much progress has been made by the IRS in the fight against stolen identity refund fraud, the battle against phishing emails and harassing phone calls remains ongoing, affecting taxpayers of all incomes.

Remember: the IRS does not send unsolicited emails. It never emails taxpayers about the status of refunds, nor does it initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

The IRS also doesn’t call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.

Questions? Help is just a phone call away.

• By Leon Clinton
• September 14, 2019