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Tax Exempt Clubs

Discussion in 'Shooting Related Threads' started by 870, Feb 4, 2012.

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  1. 870

    870 Well-Known Member

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    Just a note to very small clubs.

    Lots of very small tax exempts have lost their tax exemption (whether they know it or not) because they failed to file Form 990-N starting in 2007. They might not have ever applied for exempt status with the IRS and never had to file anything previous to 2007, but have now lost exemption for failing to file for 3 straight years.

    Just want to give a heads up that you have until 12/31/2012 to fix things at a reduced fee to the IRS of $100, and it generally will be a retroactive correction.

    You should look into it.
     
  2. slowdp

    slowdp TS Member

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    870 - can you shed more light on your post. This is what my accountant has to say. Maybe you got the form number wrong.

    "To the best of my knowledge there is no 990-N form. There is a schedule "N" for form 990 only used if you sell off or distribute a part of your activity, which to the best of my knowledge, you have never done since I have prepared the 990. Ask for clairfication on this from the sender."
     
  3. Allen-MX8

    Allen-MX8 Member

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    There is most definitely a Form 990-N. Check out the link shown above for IRS.

    The Form 990-N can be used if the organization (club) has less than $50,000 in annual Gross Receipts. The link above has more information.

    I am the treasurer of a number of organizations and have been filing the Form 990-N for them now for several years.

    Allen
     
  4. hmb

    hmb Well-Known Member

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    slowdp - Time to get a new accountant? HMB
     
  5. slowdp

    slowdp TS Member

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    It seems like everyone is correct.I don't know where he came up with the definition he gave but he has been filing the correct forms for us. We cannot use the 990-N because we have more gross receipts than $50k plus some other complications that require additional forms. We are required to file a 990.
     
  6. 870

    870 Well-Known Member

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    Yes, the 990N has been around for a while now, it is a very simple filing imposed on very small exempt organizations that were not required to file the 990 or 990EZ.

    Filing the form is easy, the problem is if you did not file it, you have by now lost your exempt status. There is a window of opportunity through 12/31/2012 to get things fixed at low cost in most situations. I'm just pointing this out so you can discuss with your advisors, preferably ones that have experience with tax exempt organizations.
     
  7. Allen-MX8

    Allen-MX8 Member

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    Thanks 870, your addition to the post is not only correct but should be helpful to those clubs that have an exemption under the various sections of IRS 501 (c).

    Allen
     
  8. darr

    darr Well-Known Member

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    We have this very problem at our club.We are afraid back taxes,interest and penalties are going to wipe us out.The form our accountant says we should file is form 1023.We should of turned in this form when we changed from a 501c(7) to a 501c(3).It has been 3 years.Being in Ca. I think the state might be more of a problem than the Feds.There is nothing Ca. beurocrats hate more than "Gun Nuts".Our income is about $60000 a year.A maojority of it comes from renting a range to the Border Patrol.Does any of you have any experience with this problem.If so would you have any idea what the penalties could be for filing wrong for 3 years.We reinvest all money into the range or donate it to charities.

    Thanks
    Darr Wilson
     
  9. 870

    870 Well-Known Member

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    You say you switched from c7 to c3, but then mention you are thinking about filing a 1023? At your income level, if you didn't file it before, then you never switched to c3. That's a big step and usually requires creating a new organization, transferring assets and ending the old c7. Not something you do without advisors.

    You might still be c7, depending on what you changed when you say you switched. Have you filed the 990 forms, that is where the penalties can get huge very quickly. That is where you should start, try to determine if you can be considered c7 to date, and then determine if 990s have been filed. I have had success in years past with filing 3 years of prior year 990s and getting penalties abated, but I don't know if that would still happen.

    Don't mess with c3 until you get prior years fixed. C7 can be retroactive, but not c3.

    At $60,000 you are too large for the easy fix situation I was talking about here. This gets complicated and you need to talk to local professionals to get it corrected.

    If all else fails, you'd be liable for corporate returns, and there might not be much tax involved depending on your profits. Assuming low net income. the penalties could easily be less than the penalties on missed 990s. Again, this is complicated so talk to a CPA experienced in both c7, c3, and taxable membership organizations.

    You need to get going on this ASAP since if you were exempt, you will lose that status by the due date of the 3rd year 990.

    Just to make things worse, if you can salvage c7, you likely have an unrelated business income tax issue to face on that rental income.

    Oh yeah, the penalties for 990s are $20 per day, subject to a max of $10,000 or 5% of your gross receipts (whichever is less) each year. They can be waived for reasonable cause.
     
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