JBS Nonprofit Consulting

Thursday, October 1, 2015

Nonprofit v Tax-Exempt. What is the Difference?

Julianne Shenk

1 October 2015

“I see you run a nonprofit organization. Is it tax-exempt?”

“Yes, all nonprofits are.”

No.

You may have done the homework, applied and have been granted nonprofit status via your state agency, but there is an additional step that few people realize that they MUST do to become tax-exempt in the eyes of the IRS. It is a matter of filing a form; a simple step, but one that nonprofits overlook all too often.

First, here are a few facts:

1. Nonprofit status indicates the status of your organization under your state’s law.

2. Tax-exempt status refers to an organization’s tax-exempt status from federal income under IRS (Internal Revenue Service) Code.

According to the IRS website:

“Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales, property and income tax exemptions. Although most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as exempt from federal income tax, an organization must meet requirements set forth in the Internal Revenue Code.” [1]

To break it down further:

Nonprofits are structured around a cause or community need. Most nonprofit organizations actually the preponderance of npos,[2] are organized to serve a public need.

Tax-exempt status exempts the nonprofit organization from paying income tax on income produced from activities that are substantially/significantly related to the purposes for which the organization was founded/organized.

The IRS provides clear guidelines for nonprofits and tax-exempt organizations.

Ask questions, do your research and/or call a professional. A lot of my job is helping those looking to start nonprofits. If you need help, feel free to get in touch. If you use the code: OCTBLOG in your email, I will offer 50% off of consultation fees for the month of October 2015.

JBS Nonprofit Consulting EMAIL

[1] www.irs.gov Last updated 04 March 2015

[2] NPO/NPOs Nonprofit organization(s)

Thursday, September 10, 2015

Why Should I Volunteer?

Why Should I Volunteer?

Julianne Shenk

JBS Nonprofit Consulting

10 September 2015

Are you thinking about volunteering? Do it.

There are countless reasons to volunteer, but my initial reaction to anyone expressing a desire to volunteer…Do it! We need volunteers. Every nonprofit organization needs volunteers. Do it.

A common problem that plagues many nonprofits is a lack of or shortage of volunteers. In almost every blog I post, consult I do or conversation I have, the phrase “Volunteers are the backbone of a successful nonprofit” leaves my lips.

So why should you volunteer? Here are just a FEW reasons:

1. Volunteering strengthens the community. Whether helping in a school, community garden, or homeless shelter, you are helping strengthen the community.

2. Volunteering brings people together.

3. Volunteering gives you a sense of purpose. You are helping others, feel good about that. Volunteering gives you a reason to get out of bed and do something good for someone in need.

4. Volunteering helps you make new friends and establish new relationships. Volunteering helps strengthen those relationships.

5. Volunteering helps you network.

6. Volunteering promotes personal growth, and enhances social, personal, professional and relationship skills.

7. Volunteering allows you to gain professional experience, learn new skills, and learn in general.

8. Volunteering encourages civic/community responsibility. Volunteers that have worked hard take pride in their endeavor and instill pride in the community all the while gaining some pride in themselves and the work that they have done.

9. Volunteering is good for society.

10. Volunteers save resources. Volunteers help take off some of the financial burden of the nonprofit. The estimated value of a volunteer’s time in 2014 was $23.07 per hour.[1]

11. Volunteering is good for you. Volunteering helps combat depression, helps in staying physically healthy, and increases self-confidence.[2] Volunteers live longer and are healthier; In fact volunteering later in life has significant benefits![3]

12. Volunteering allows you to give back. Many volunteers are people that have benefited from the programs and services previously. Who better to volunteer?

13. And the most important reason…You make a difference.

You make a difference.

Volunteer.

Do it.

If you are looking for volunteer opportunities in the Austin/Cedar Park/Fort Hood area, please, shoot me an email. I would love to match you up with a worthy, in need nonprofit organization.

jbsnonprofitconsulting@gmail.com

[1] Per http://grantspace.org/tools/knowledge-base/Nonprofit-Management/Employment-Volunteering/monetary-value-of-volunteer-time

[2] Per http://www.helpguide.org

[3] http://www.nationalservice.gov/

Monday, August 3, 2015

Why Hire a Consultant?

Julianne Shenk

JBS Nonprofit Consulting
August 3, 2015

Even as a consultant, I have a tough time answering that question. I will start off with a little story…

My business has a Facebook page, Twitter feed, Pinterest page, and a website. A potential client can ask me questions via any one of these sources. I was recently asked via the website to research a question and provide a quote as to how much the cost for my time would be. In this case, a simple Google search could render the answer to their question in under 10 minutes.

Under 10 minutes of my time.

In turn, under 10 minutes of their time.

But, about $30 of my time. Thirty dollars to basically “do a little Googling”.

My theory, it was busy work that would take up too much of their time. And…I am okay with that. I can help with that.

People often wonder why bringing in a consultant (aka outsider) is good business. Here are a few reasons why I believe hiring a consultant is a good business practice:

1. Experience/Expertise. A consultant can add a scope of experience and expertise to a project that your team/company/manager does not have.

2. Education. A consultant will be up-to-date on practices/implementations/guidelines/restrictions that your company may be unaware of.

3. Past experience. A consultant does not to get to (or should not) use the title of “Consultant” without prior knowledge and mastery of skills and application with out the proper education.

4. Specialization. A consultant is “specialized” in a particular matter. This specialized knowledge lends itself to the success of the project.

5. Methodologies from the industry. While a consultant should obviously be specialized in the area, knowing how to employ the proper methodologies is essential.

6. Objectivity. An objective viewpoint on the project is essential to the success of both the business relationship and the success of the project.

7. Resources. A consultant can bring resources to the project not afforded to the company.

8. Perspective. A consultant can bring a different perspective to the project allowing for other facets of troubleshooting and problem solving to be completed.

9. Negotiation. A consultant can act neutrally in resolving differences in opinion or methodology among personnel designated to work on the project.

10. Contractual guarantees and accountability. A consultant is bound by contract regarding any limits, guidelines, privacy issues, etc. put in place by the hiring company as well as a contracted timeline to deliver the finish product/completed project.

Consultants are often viewed with a degree of skepticism.[1] “Why are we hiring someone from outside to come in and tell us what we already know?” “We can surely find the answers, complete the project, initiate the contract, etc. without outside help.” “ We have a cohesive group, why are we messing with the team?” The answer…any or all of the ten reasons above.

Sometimes consultants are seen as usurpers. A good consultant comes in and does the job he or she is contracted to do. No usurping; working with not against.

The Denver Foundation provides a clear and concise explanation for the role that a consultant should play:

“The Consultant’s primary role is to assist your organization with certain areas of your project. While the consultant may act as an educator, a catalyst for deeper change, a resource, or a facilitator, the leadership of the process remains within your organization. The project committee, staff, board members, and executive director have the power, and the greater responsibility to lead the process of becoming more inclusive. There are four general categories of work for which you may want to hire the services of a consultant or consulting team:

1. Overall Guidance

2. Information Gathering

3. Cultural Competency/Diversity Training

4. Evaluation[2]

*These are specifically in relation to nonprofit organizations, but can be applied/altered to reflect your company’s needs.

Hiring a consultant is ultimately up to the manager of the project. As a consultant, I endorse the benefits and merits of consultants. I believe in sharing knowledge, experience and expertise with a business in need of it. A proper and successful consultant will abide by all contract requests and deliver a finished product that pleases both the client and the consultant. A success for the company is a success for the consultant.

[1] Why Hire a Consultant? The Consultant: Necessary Evil or Valued Partner? 2004. Exceed Consulting. www.exceedconsulting.com

[2] The Denver Foundation Inclusiveness Project. www.nonprofitinclusiveness.org The word “inclusiveness” was replaced with the word “project” to make the passage more readable. The role explanation was written to be included in an article specifically for The Inclusiveness Project.

Sunday, July 19, 2015

GoFundMe. Tax Deductible?

Julianne Shenk

JBS Nonprofit Consulting

July 2015

In a word, No.

Nine times out of ten, No.

More often than not, No.

When I tell someone I am a nonprofit consultant, the first question I am asked is, “What do you do?” The second question is, “I gave a guy that I work with $50 for his dog’s chemotherapy through a GoFundMe account, that is tax-deductible, right?’

The answer is…no.

Full disclosure: this is not in every instance. However, most donations on

GoFundMe are basically considered to be “personal gifts”. Personal gifts are not taxed as income in the US.

Disclaimer: I am not discouraging anyone from donating to a GoFundMe campaign. I have donated to several of them myself. Just be aware that your donation is purely a giving gesture and not one that can be deducted from your taxes.[1] I have friends and acquaintances that have used GoFundMe with no issues. And, I have happily donated. And, I will happily continue to do so if I believe in the campaign, have the funds, and I am familiar with the individual or group setting up the campaign.

The exceptions are donations that are made to legally registered non-profits or charities. These donations may be considered eligible for donors to claim as a tax deduction. You will find however, that most reputable nonprofits/charities will not use a GoFundMe campaign. Again, there are always exceptions. Legally registered organizations will have a designated method for donating. Please use those options before using a GoFundMe option.

If you insist on using the GoFundMe forum for donating, note that only donations made to a GoFundMe Certified Charity campaign are guaranteed to be tax-deductible.

If you are unsure if you are donating to a Certified Charity campaign, you can visit the campaign you donated to and look for the Certified Charity icon:

[2]

If you don't see the “Certified Charity” icon on the charity site that you donated to, then it is most likely a personal cause/campaign.

If you have any doubts about a charity that you donate to, you should contact your tax professional. This advice was offered via the Turbo Tax website:

Thank you for contacting TurboTax.

I would be happy to assist you. Unfortunately you will not be able to deduct amounts donated through Go Fund Me.com. You can only deduct amounts contributed to a qualified organization. Go Fund Me is not a qualified organization. They are a business that matches people in need of help with very generous people willing to give help. If a qualified organization signs up with Go Fund Me and you donate to them through the website you might be able to take a deduction. You will need to be careful in this situation though since individuals can start a fund on Go Fund Me for their favorite organization. Since it is an individual who controls the account rather than the actual organization contributions would not be deductible.

In your case the donation is not deductible because it was not to a qualified organization and because it was for the specific benefit of an individual. Any time you can determine the exact individual who benefits from your contribution you lose the ability to take a deduction on your taxes.[3]

Recently I was forwarded an article discussing federal regulator’ s intent to crack down on crowdfunding scams. They will pursue individuals/groups who raise money through sites like GoFundMe and Kickstarter,[4] but do not follow through on fund distribution. One such case is detailed below:

“In its first case involving crowdfunding, the Federal Trade Commission announced Thursday that it has settled charges against a man who raised $122,000 through Kickstarter to produce a board game that never materialized. According to the FTC, Erik Chevalier canceled the project and said he would refund the donations but instead he used the money to pay his rent and move.”[5]

Bottom Line: Be careful when you are donating to a GoFundMe campaign. The vast majority of the time, you will be donating to a personal campaign and not an official IRS recognized charity.

I am not discouraging anyone from donating to a GoFundMe campaign. I have donated to several of them myself. Just be aware that your donation is purely a giving gesture and not one that can be deducted from your taxes.

Rule of thumb: Unless an organization is a 501(c)(3) charitable organization, recognized by the IRS, donations are not tax-deductible.

[1] You will see this paragraph again. I promise. I really want to get this point across. No discouragement, just information.

[2] Supportgofundme.com

[3] https://ttlc.intuit.com/questions/2504057-can-i-deduct-gofundme-donations

[4] Kickstarter is similar to GoFundMe. For a full explanation go to: https://www.kickstarter.com/hello?ref=footer

[5] Flaherty, Annie, “Federal Regulators are Going After Crowdfunding Scams on Kickstarter, GoFundMe,” Associated Press 11 June 2015 http://bigstory.ap.org/article/cc1b7a4b0cb84a3db4f9fda0b8f88baf/federal-regulators-go-after-crowdfunding-scam