New Mileage Rates

The Internal Revenue Service today issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be:

• 55 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Nonprofit Mailing Change

The U. S. Postal Service (USPS) will soon require nonprofit organizations to update their mailing lists as a condition for keeping their discount rate for service. Effective November 23, 2008, addresses on all pieces must be updated within 95 days before mailing through a USPS-approved address update method in order to qualify for the discount for nonprofit mailers. Nonprofit organizations may wish to consider the use of an enhancement service to get change-of-address updates so they may continue receiving the discounted nonprofit mail rate. Other advantages of keeping an up-to-date mailing list include an estimated cost savings of between 7% and 10% on mailings for most organizations each time they send a mailing plus help in maintaining key membership revenue.

New Form 990 - On Line Course

StayExempt.org, which provides online IRS educational resources for tax-exempt organizations, now features five new mini-courses on the redesigned Form 990. These mini-courses provide information on preparing to file the new Form 990 as well as a walk-through of the entire form and frequently used schedules. Check out other StayExempt mini-courses on topics of interest to exempt organizations as well as the web-based version of our popular workshop on tax basics for small and mid-sized organizations.

Elimination of Advance Ruling Process

The IRS has issued yet another update to its growing list of revised forms, documents, and policies. No more double applications for newly formed organizations wanting to be recognized as public charities. The old five-year advanced ruling period has been abandoned in favor of a simpler process. A new 501(c)(3) can be immediately classified as a publicly supported charity, not a private foundation. In the organization’s sixth year, it must convince the IRS that it meets the public support test by filing Schedule A of Form 990. More...

Live Workshops and Online Training

The IRS is offering live one-day workshops designed for administrators or volunteers responsible for an organization's tax compliance will be held in Chicago, IL (October 21, 22, and 23), Detroit, MI (November 18, 19, and 20) and in Memphis,TN (December 2, 3, and 4). More.... StayExempt.org, another IRS project, now features free web-based mini-courses on current topics of interest to exempt organizations. Learn about navigating IRS resources, applying for tax exempt status, the ban on political campaign intervention, foundation classification, and the charitable contribution deduction. Courses on the new Form 990 coming soon. More....

New Employment Law Resource

The U.S. Department of Labor new FirstStep Recordkeeping, Reporting and Notices Advisor helps employers determine which of the department's recordkeeping, reporting, and notice requirements (including posters) apply to them.

Streamlined Approval Process for New Exempt Organizations

The IRS issued IR-2008-102 on Sept. 8, 2008; these new temporary regulations will streamline the approval process for organizations seeking tax-exempt status as publicly supported charities. The new regulations do away with the so-called advance rulings that granted public charity status for an initial five-year period but required exempt organizations to demonstrate, after the initial period, that they in fact received a substantial part of their support from public sources to receive a final determination letter. The IRS was able to eliminate the advance rulings process because of the recent redesign of the Form 990, the tax return filed by organizations exempt from federal income tax.

990 Resources

Links to resources on the new Form 990 for tax year 2008 are available on my website, www.ahereford.org. Continuing updates will be made as resources become available.

New Form 990 Instructions

The IRS just released new Form 990 Instructions for the 2008 tax year. The new Form 990 consists of an 11-page, 11-part core form that is required to be completed by all organizations that file the Form 990, and Schedules to be completed by those organizations that satisfy the applicable requirements for each Schedule.

Group Ruling Letter for Catholic Organizations

The group ruling letter for Catholic Organizations has been issued and may be downloaded.

Substantiation and Disclosure Requirements

The Service revised Publication 1771 - "Charitable Contributions -- Substantiation and Disclosure Requirements," on the federal tax law for organizations such as charities and churches that receive tax-deductible charitable contributions and for taxpayers who make contributions.
United Church of Christ Cleared in IRS Scrutiny
Senator Barack Obama spoke at the United Church of Christ's biennial General Synod at the Hartford Civic Center in June 2007. Subsequently, the IRS launched an inquiry in response to allegations the church may have jeopardized its tax-exempt status by intervening in a political campaign. The IRS concluded its review and determined the appearance did not violate any rules.

Small Business Guidelines

The IRS has announced several services for small business that may be helpful to non-profits as well:
1) Last week, the IRS announced a campaign to educate new self-employed small business owners about their federal tax responsibilities and about filing Schedule C, Profit or Loss from Business.
2) Social Security’s new online tutorial provides an introduction to Business Services Online. BSO offers step-by-step instructions for 10 business services available online, including: 1) Filing Forms W-2 and W-2c online; 2) Access to Social Security Numbers Verification Service for wage reporting purposes; 3) Information for reviewing and correcting submissions and reports.

Political Activities Compliance Initiative

The IRS announced its Political Activities Compliance Initiative (PACI) once again will be in effect for the 2008 election season. The PACI program seeks to educate section 501(c)(3) organizations such as charities and churches about the federal law concerning political campaign activity and to enforce the law in this area.

Congressional Research report on EO Political Campaign Activities

The Congressional Research Service issued a report that discusses the laws regarding political activities of churches, recent IRS inquiries into church political activity, and legislation to repeal the tax code's prohibition.

IRS Resources

1. Economic Stimulus Payments: How Organizations Can Help
The IRS is encouraging various partners and stakeholders such as charities, churches, employers and governmental organizations to assist in efforts to reach out to those Americans who may be eligible for the 2008 economic stimulus payment but who normally have no requirement to file a tax return.
2. New Exempt Employer's Toolkit
A new page on the IRS website for Charities & Other Nonprofits centralizes federal tax resources commonly needed by tax-exempt organizations that compensate employees.

Economic Stimulus Payments Information Center

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of income and file a 2007 federal tax return. IRS will take care of the rest. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. Millions of retirees, disabled veterans and low-wage workers who usually are exempt from filing a tax return must do so this year in order to receive a stimulus payment. Find the latest updates at the IRS Information Center on the topic.

IRS Examination of Church Political Activities

The IRS has notified the United Church of Christ's national offices in Cleveland, Ohio, that the it has opened an investigation into U.S. Sen. Barack Obama's address at the UCC's 2007 General Synod as the church engaging in "political activities." Obama is a church member and was one of 60 members from various fields of culture, academics and business who spoke at the event about the impact of faith on their professional life. See more. See also April Webcast on Speaking Out and Retaining your Exempt Status

Small Exempt Organization - E-postcard

Small tax-exempt organizations whose gross receipts are normally $25,000 or less may be required to electronically submit Form 990-N, also known as the e-Postcard.
The Pension Protection Act of 2006 added this filing requirement to ensure that the IRS and potential donors have current information about your organization.
Due Date of the e-Postcard The first e-Postcards are due in 2008 for tax years ending on or after December 31, 2007. The e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, 2007, the e-Postcard is due May 15, 2008. You cannot file the e-Postcard until after your tax year ends.

Supporting Organization Exemption Revoked

The Service has revoked the tax-exempt status of a section 509(a)(3) supporting organization because 1) it failed to pass any of the three prongs of the relationship test; 2) it failed to support a public charity; and 3) it failed to pass the operational test by conducting any activity in furtherance of its exempt purpose. More information.

2008 Economic Stimulus Act

The recently passed 2008 Economic Stimulus Act provides a rebate based on income levels. To qualify for the rebate, individuals must 1. Have at least $3,000 in earned income or social security benefits. SSI benefits and patrimony income do not qualify toward meeting this limit. 2. File a 2007 tax return, even if no tax is due. For more information on this topic, see the IRS Fact Sheet or February's webcast which will discuss the preparation of the tax return for religious with taxable income, including filing for the rebate.

IRS Fact Sheets

IRS Examination and Compliance Check Processes For Exempt Organizations: The IRS has issued a Fact Sheet in which it reviews the variety of tools at its disposal to make certain that tax-exempt organizations comply with federal law designed to ensure they are entitled to any tax exemption they may claim. These include correspondence examinations, field examinations, and compliance checks.
IRS Complaint Process For Tax Exempt Organizations: The IRS has issued a Fact Sheet in which it describes the process by which complaints (also called "referrals") alleging the abuse of the tax exempt status by a organization can be made to the IRS and how they are handled.

Annual Increase in Alienation Limit - Canon Law

The amount which requires the approval of the Congregation for Institutes of Consecrated life and Societies of Apostolic Life in cases of alienation of stable patrimony or business transactions which could have an adverse effect on the patrimonial condition of an institute/society is raised to $5,475,000. This amount refers to the appraised value not the actual selling price.

E-Card Reminder - Small Nonprofits.

A new annual electronic filing requirement for certain small exempt organizations is in effect for this year. The filing system will be available in early February. Please check the IRS website then to file an e-Postcard.

Unrelated Business Income Publication 598

An exempt organization is not taxed on its income from an activity that is substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. Such income is exempt even if the activity is a trade or business.
However, if an exempt organization regularly carries on a trade or business that is not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business.
See updated IRS Publication 598 on UBIT.

Final 2008 Form 990

The IRS issued an updated version of Form 990, the return that charities and other tax-exempt organizations are required to file annually, and provided transition relief so that small exempt organizations will have time to adjust to the new form.

Employers Required to Use New Form I-9’s After Dec 26, 2007

The U.S. Citizenship and Immigration Services has issued a new Form I-9 used by employers to verify employees’ eligibility to work in the United States. The only acceptable Form I-9 has a revision date of June 5, 2007 (located in the lower left corner of the document.) Employers may download and copy this form at no charge from www.uscis.gov/files/form/i-9.pdf. A free version also may be obtained by calling 1-800-870-3676.
Employers must use the June 5, 2007, Form I-9 for all employees hired on or after November 7, 2007. Employers are not required to redo earlier versions of the form, but must use the new Form I-9 for reverification of employees.
Now that the transition period ended on December 26, 2007 employers will be subject to penalties for using outdated versions of Form I-9.