Local tax preparer, Leonard D. Rea, of Leonard D. Rea & Co. warns that many area non-profit organizations could be at risk of losing their current non-profit status if they do not file the appropriate documents with the IRS.

Rea states that in 2006, Congress changed the rules for non-profits and tax returns. Previously organizations with gross income under $25,000 didn’t have to file a return. Starting in 2007, any non-profit that does not file for three consecutive years will lose its tax-exempt status.

“The original filing deadline was May 17, 2010,” said Rea “However, the IRS recognized that many small non-profits had no idea this was happening, so they now have until October 15, 2010, to file.”

The IRS has stated that tax-exempt organizations that fail to satisfy the annual filing requirements for three consecutive years will automatically lose their tax–exempt status. This could be devastating to many small organizations that are typically managed by volunteers who could change year-to-year. (insert last name) encourages all non-profits to verify that all appropriate documents are submitted before the October date.

The IRS has posted a special page on its website at www.irs.gov containing the names and last-known addresses of these at-risk organizations, along with guidance on how to come back into compliance. The volume of organizations currently not in compliance is staggering as it is in the tens of thousands.

“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”

Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form and electronically file it by October 15. That will bring them back into compliance.

Rea advises that before going online to fill out the form, an organization should check with a reputable tax professional to make certain its annual gross receipts are $25,000 or less. (insert last name) belongs to the National Association of Tax Professionals, an organization whose members are held to high ethical and expertise standards. To find a professional tax preparer, visit www.natptax.com.

Third quarter estimated tax payments are due to be mailed on or before September 15.  If you are self employed or have a change in your filing status or income for 2010 this is your chance to eliminate or reduce underpayment penalties.  You need to estimate your annual income (after deductions and expenses) and compute the amount you expect to owe.  Seventy-five percent of the total amount due should be paid in by September 15.   If you are unsure of how to make these calculations you will want to consult with your tax advisor.

IRS and state taxing agencies expect taxes to be paid on income as it is earned, hence the quarterly filing requirement.   Quarterly estimated payments are due on April 15, June 15, Septem,ber 15, and January 15 each year.  If you have income subject to a quarterly payment requirement and wait until April 15 to pay the tax, you will be subject to an underpayment penalty.

Dateline Annapolis, MD – August , 2010

Leonard D. Rea EA CFP joined federally authorized tax practitioners including Enrolled Agents, Attorneys and CPAs from many parts of the country for a comprehensive conference on the advanced aspects of representing clients before the IRS. Enrolled Agents (EAs), Attorneys and Certified Public Accountants (CPAs) are federally authorized tax practitioners. They are regulated by the IRS and are permitted to  represent taxpayers at all levels of the IRS in addition to preparing tax returns that meet exacting standards. They represent taxpayers who are being examined by the IRS, taxpayers who are unable to pay tax liabilities, taxpayers who want to appeal IRS determinations, and taxpayers who wish to avoid or recover penalties. Enrolled Agents are licensed by the federal government and must demonstrate professional competence and meet annual professional education requirements in federal tax matters.  Attorneys and CPAs are licensed by the various states which require professional competence and continuing professional education.

WHAT: American Academy of Tax Practice Annual Conference on Advanced Taxpayer Representation and IRS Procedure

WHEN: July 21 through 23, 2010

WHERE: Annapolis, MD

WHO: Bryan & Jean Gates, EAs –  Conference Facilitators

The American Academy of Tax Practice is a professional institute devoted to tax practice education and training developing and sharpening the skills depended upon by federally authorized tax practitioners who practice before the IRS.

I recently attended a 3 hour class that dealt mostly with the basis of Partnerships and S-Corporations.  Although not thought of by most taxpayers, the basis of your assets is very important.  This could be as simple as knowing your total cost for a particular stock when you sell it and could simply be the amount you originally paid for it subtracted from the sale price to give you the taxable gain.

The class I attended went into some very complicated calculations related to Partnerships and S-Corporations but the point is the same:  If you are going to be investing in vehicles that require a calculation of your cost to determine the taxable amount when you sell them, you need to keep the records related to those things.

For your stocks and mutual funds it is the monthly and annual statements you receive.  For other investments that do not generate staements you need to keep a written record of your investments and distributions as well as your cancelled checks and bank statements.

For more information regarding this and other tax topics feel free to contact me.