Excellent analysis Jonathan. I just finished a Non-profit law graduate course taught by an attorney with 20+ years of experience in non-profit law and this is exactly the answer I got from a discussion with her. I think the big thing that she emphasized was when to give out a tax receipt. If someone is donating a bicycle, you can give out a receipt for the value of the donation (like you said, leaving it up to the person to ascribe value). If someone makes a donation of cash through "suggested donation", they only get a receipt for the cash donated above the VALUE of the material object being received, not the entire donation itself. Basically, the remainder. I would think one could draw the same parallel between work-trade and getting stuff in exchange. -Andrew
On Mon, Jul 19, 2010 at 11:06 AM, Jonathan Morrison < jonathan@slcbikecollective.org> wrote:
Jim Sheenan is right, if you have a question you should contact the authority. The IRS tax exempt line (IRS.gov/EO) -- you can even make it anonymous.
This is only for the US, but... Cash and/or parts and/or bikes and/or services is irrelevant. If you focus on any of those, you are missing the whole point -- which is VALUE.
If the VALUE of what someone received from your organization exceeds $600, then that person is a contractor which means they give you a W-9 (http://www.irs.gov/pub/irs-pdf/fw9.pdf) at the beginning of the tax year and you give them a 1099-MISC (http://www.irs.gov/pub/irs-pdf/f1099msc.pdf) at the end of the tax year. If the VALUE is under $600 then you are NOT required to make that tax declaration. Just like you aren't required to give a donation receipt if the value is under $300 (but it is still a good idea for recognition and the fact that the donor should declare the value -- not the non-profit.)
Remember, in the eyes of the IRS people who donate get virtually NOTHING in return. Otherwise it would be called a transaction instead of a donation.
Another mental stumbling block I have after attending an IRS workshops for non-profits was: the difference between an employee and a contractor. The IRS answer was, "a contractor brings their own tools, while an employee relies on the employer to provide tools." and consequently "contractors pay ALL of their own taxes, whereas employers are required to withhold a certain percentage of taxes for the employee." To use an example, if you hired an electrical "contractor" and they came to your house empty handed and expected YOU to have multimeters, dykes, crimpers, etc.,... you probably wouldn't think they were a contractor either. :)
So my question becomes -- if a "volunteer" comes in and works their butt off fixing our bikes with our tools under our roof, and we reward them in bikes/parts that exceed $600. By default did we just hire them as an employee? If that is the case, do we need to ask them for money so we can withhold it and use it to pay their taxes? Further more, if they don't have any money, what do we do, use our own? Realistically they can ask to withhold as little as possible and are probably going to get everything back except social security, but the employer still has to pay that amount to the IRS. So to that end are low income people that get over $600 VALUE from a non-profit entitled to a year end bonus brokered by the IRS? Or does this mean that the cap for helping those in need (who can't afford to withhold any money for taxes) is $600?
Or given that the Bureau of Labor Statistics (http://www.policevolunteers.org/resources/references/?fa=value_vol_time) declares that the value per volunteer hour in Utah for 2009 is $17.22 -- does that mean that I have to turn volunteers away after 34 hours annually just to avoid this whole mess?
While I would be curious what the IRS would say, someone else can call, my guess is that this is truly "incidental" and extremely time consuming to audit -- so like most unenforceable laws on the books, they would only use this to "pull you over for suspicion of something else."
Sincerely,
Jonathan Morrison Executive Director Salt Lake City Bicycle Collective 2312 S. West Temple Salt Lake City, UT 84115 w: 801-328-2453 c: 801-688-0183 f: 801-466-3856 www.slcbikecollective.org
The mission of the Salt Lake City Bicycle Collective is to promote cycling as an effective and sustainable form of transportation and as a cornerstone of a cleaner, healthier, and safer society. The Bicycle Collective provides refurbished bicycles and educational programs to the community, focusing on children and lower income households.
On Fri, Jul 16, 2010 at 6:00 AM, Davis, Andrew ADavis@akronohio.gov wrote:
Not much reply.
Still interested if anyone has thoughts on this topic.
Andy – Akron, OH
From: thethinktank-bounces@bikecollectives.org [mailto:thethinktank-bounces@bikecollectives.org] On Behalf Of Angel
York
Sent: Friday, July 16, 2010 4:00 AM To: The Think Tank Subject: Re: [TheThinkTank] Work Trade / shop credit/ taxes?
Andy,
Did you ever find anything out about this?
Angel
Davis, CA
On Wed, Jun 9, 2010 at 12:32 PM, Davis, Andrew ADavis@akronohio.gov
wrote:
Has anyone ever checked out the IRS regs on work trade or shop credit for volunteer time. We are working on a new bike co-op in town, and this question came up. They thought it was bartering and subject to taxes. Any help?
Andy – Akron,OH
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