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Topic: Bad news for PIF...  (Read 10177 times)

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BigJim

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As I reported earlier, PayPal sent a 1099k to the IRS for our combined PIF/AOTY/DOTY account for FY 17:

http://www.norcalkayakanglers.com/index.php?topic=83126.0

Ana and I have been working on the taxes and finally submitted them last night...

Bottom line is that the $27,490 on the 1099K that PayPal sent to the IRS had to be declared as self employment income and resulted in a total tax bill of $9,762.98

Makes me literally sick to my stomach and breaks my heart to have had to pay this $$ to the IRS.

I created the PayPal account (and a separate checking account) to help PIF collect donations and to get $$ into the hands of members of our community in need.

All $$ raised by PIF since 2010 (well over $100,000) has gone directly to our recipients with zero overhead.

Having to fork over almost $10k of money raised/donated to the IRS is NOT what any of us involved with PIF ever wanted or imagined would happen.

We will NOT be using this account for fundraising anymore, and I would also like to stop using it for AOTY/DOTY entrance fees if the committee folks can come up with an alternative...

It is not fair to the community to have their donations not go to the recipients, and it is not fair to my family to have to shoulder the stress and pressure of this tax issue again...


Here are the details, and as always I have attached screenshots to be as transparent as possible:

-1099K income reported by PayPal to IRS: $27,490

-Fed/State Refund Before 1099K entered : $2,429

-Fed/State Tax owed after 1099K entered: $8,787

-Fed/State Tax owed after 1099k and after expenses entered: $7,154
(Since the account is PIF/AOTY/DOTY I used the $$ spent on awards, traveling to events that gave $$$ to PIF, and anything else I could reasonably think of as expenses to try and get the amount owed as low as possible)

-Fees for SE filing and Audit Protection: $179.98

-Total tax owed due to 1099K of $27,490 (Refund before plus Tax owed after plus SE filing fees and Audit Protection): $9,762.98

-Combined balance of PayPal ($381.12) and Checking ($165.81) after taxes paid: $546.93

-$1,500 owed to AOTY/DOTY but $400 of that for PISCEAN plaques already paid, so $1,100 needed…$1,100 minus $546.93 leaves us currently $553.07 short for AOTY/DOTY commitment.

I am confident that by the time of the AOTY/DOTY awards ceremony that there will be enough $$ from registration fees etc to make up the amount that we are currently short.

I apologize to everyone that this happened, and really wish I could go back in time and not have had us use this account so heavily last year...it was our busiest year ever which was great...until this happened.

Sincerely,

Jim



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Chet

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Wow shit. I don't know how to tackle this issue, someone here might know the tax law. Come help Jim.
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ThreemoneyJ

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That hurts and seems like PayPal totally screwed up on the spirit of what the account was for.
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Jim,

Anything we can do to help PIF recover from this? And cover any expenses your family may have incurred?
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JamesM

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That totally sucks... Hopefully there is an IRS enrolled agent here could help.
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LilRiverMan

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No need to apologize. Nobody has stepped up for PIF as much as you have. We greatly appreciate your efforts.  Time for a tax expert within NCKA to step up and find the best solution for the future.
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No need to apologize. Nobody has stepped up for PIF as much as you have. We greatly appreciate your efforts.  Time for a tax expert within NCKA to step up and find the best solution for the future.
THIS ^^ Jim, please let us know what we can do to help as well. As far as tax is concern, I am in no position to give advise.

Thank you!
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With all these members on ncka there must be someone who is a knowledgeable tax attorney or accountant. can someone step up or lead us in the right direction.

We will find a way Jim.
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bigtuna

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uh oh, I didn't see the original thread otherwise I would have tried to help sooner.  I'm not a tax accountant, but I've done my fair share of tracking taxes on several sources of income.  It sounds like you need to itemize your deductions (instead of taking the standard deduction) and declare 20k-30k in a charitable donation.  That amount would require receipts and paper trails sent to the IRS, but it will lower your taxable income back down to your normal wages.  But you've submitted to the IRS already?  You'll need to submit a 1040X to amend your return.  Have you tried calling H&R block or a similar tax service?


bmb

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uh oh, I didn't see the original thread otherwise I would have tried to help sooner.  I'm not a tax accountant, but I've done my fair share of tracking taxes on several sources of income.  It sounds like you need to itemize your deductions (instead of taking the standard deduction) and declare 20k-30k in a charitable donation.  That amount would require receipts and paper trails sent to the IRS, but it will lower your taxable income back down to your normal wages.  But you've submitted to the IRS already?  You'll need to submit a 1040X to amend your return.  Have you tried calling H&R block or a similar tax service?
contributions to individuals are not charitable contributions.  They are gifts.  If he was to try and submit them as charitable donations he'd be subjecting himself to an almost surefire audit.


bigtuna

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oh, right.  so perhaps the only solution is a non-profit organization


bmb

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oh, right.  so perhaps the only solution is a non-profit organization
Problem is 501(c)3s cannot keep their non profit designation and "earmark" donations to individuals.  So they can't for example do a Stephkillsit fundraiser, as those funds are earmarked for an individual and cannot be considered tax deductible if raised directly for her.  It's a tricky designation.  They probably could also not run AOTY/DOTY and have funds come in and out for that easily.  The whole paypal 20K/200 transactions thing is the trigger for the tax reporting.  Jim was subjected to unreasonable tax risk by having the funds funnel to him, and we need to work out a way to keep him from getting in trouble.  It is a tricky area in tax law (one that I am not qualified for) and needs a specialized person to review.  Used to be this would run under the radar but it is getting more difficult as PIF grows.

NorCal HOW would not be in a place to take the AOTY/DOTY funds and disburse them to outside vendors like Piscean - there would need to be another entity (likely some sort of business entity) that would need to be set up to take in the funds, do the expenses, then disburse the remaining.  But that entity would also be subject to fees and other taxes.
« Last Edit: April 17, 2018, 12:05:13 PM by bmb »


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 Establishment of a 5013C  charity organization would seem to be the only approach that would resolve the tax situation.  However, I understand that establishing one is not a simple task and meeting the required elements may not be possible in PIF's current state.  I spent a couple of years on the Board of Directors of a large non-profit but unfortunately don't have any experience in establishing one.  I do recall having to be very careful that we continually met the requirements or face the possible loss of the tax exempt status.  The IRS appears to keep a very close watch on "non-profits".  Hopefully, the recipients will not also face a tax problem.  This clearly a case of punishment for "good deeds".


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It’s a tough spot for sure. This is only an issue because we hit the #s that trigger an automatic filing with paypal (200 transactions OR $20k). We can never exceed those triggers again (with any 1 specific paypal acct) or they will file again for FY18, for example.

This leaves us with a handful of options, for how to proceed. Here’s a few of the options we’re considering:
-create a second paypal acct that we switch to if/when we get close to the #s that trigger autumatic filing (we’d only have to update the embed code for the PIF or AOTY/DOTY button)
-cash only, leave paypal out of it completely (which would probably result in less donations)
-file paperwork & pay fees to become a recognized nonprofit (but that requires people to agree on stuff and we’d have to file taxes every year)
-shut it down (it’s been a good run!)
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