A recent Thomson Reuters article informs that as the end of the year approaches, it is important for older taxpayers to pay attention to their required minimum distributions (RMDs) for the year. A RMD is the minimum amount one must withdraw from his or her retirement plans account each year.

When Required Minimum Distributions Apply:

• For traditional IRAs, taxpayers must begin taking RMDs by April 1following the year they reach 70½.
• For qualified plans such as a 401(k), taxpayers must begin taking RMDs by 1) April 1 following the year they reach 70½, or 2) when the taxpayer retires (if he or she is a non 5% owner in the business).
• For qualified plans such as a 401(k), taxpayers must begin taking RMDs by April 1following the year they reach 70½ if a taxpayer is a 5% or more owner in the business.

Failure to Withdraw

Lack of attention to your RMD can lead to stiff penalties. For example, not withdrawing your annual RMD for the necessary minimum amount could result in exposure to a tax penalty of 50% of the amount not withdrawn.

For more information on required minimum distributions, please read the full referenced article, or visit Retirement Plans on the IRS website. For assistance in anticipating your required minimum distribution, contact Brenda Jacobs at (616) 608-8530 or bjacobs@brickleydelong.com.

Learn more about our individual taxation services here.

A recent IRS announcement indicated the importance of taxpayers with undisclosed offshore accounts to come into full compliance with their federal tax obligations. Automatic reporting has made it less likely that financial accounts will go unnoticed by the IRS; so, it is even more imperative that taxpayer’s comply.

The Offshore Voluntary Disclosure Program (OVDP) and the streamlined procedures were designed to allow taxpayers to correct prior omissions and alleviate penalties of non-compliance. In addition, there are also procedures available to taxpayers who have paid their income taxes but omitted certain information on their returns.

The announcement stated that, since the OVDP began in 2009, there have been over 54,000 disclosures. And, the streamlined procedures, which began in 2012, have brought over 30,000 taxpayers to compliance.

For more information on offshore accounts compliance, and voluntary disclosure programs, please visit the referenced article, or contact Brenda Jacobs at bjacobs@brickleydelong.com or (616) 608-8530.

In the age of online connectivity and ease of social sharing, many individuals are turning to the Internet to raise money for personal endeavors. This concept, defined as crowdfunding, is done through sites like Kickstarter, Indiegogo, GoFundMe, and Causes.

How does it work?

A person brings his or her idea/project to one of these sites and creates a campaign. Through tools like social media, the person can share the idea. If others like it, they can choose to contrite a monetary amount towards it.

Types of Crowdfunding

According to Cheryl Metrejean and Britton McKay in an article published in the Journal of Accountancy, there are three types of crowdfunding:

1. Reward-based, for creative enterprises;
2. Donation-based, for personal fundraising; and
3. Equity based, for raising capital for companies.

Crowdfunding and Taxes

Many people that participate in crowdfunding do so with little thought to the tax ramifications. Crowdfunding is becoming increasingly more popular, and Congress and the IRS have not addressed this type of income, which leaves it difficult to decipher how it should be reported. Metrejean and McKay mention that while sites like Kickstarter and Indiegogo mention taxes on their websites, neither provide definitive information on reporting crowdfunding income and paying taxes.

A few important things to consider are:

1. Whether the crowdfunding activity is deemed a trade or business or a hobby;
2. Whether the activity is deemed a startup business;
3. The method of accounting used by the creator; and
4. The value of reward given to backers.

As stated earlier, tax support and guidance remains unclear for crowdfunding campaigners. For assistance related to this topic, please visit the referenced article or contact Brenda Jacobs at (231) 726-5880 or bjacobs@brickleydelong.com.

Individual & Business Tax Preparation, Closely-Held Businesses

Nonprofits often hold a variety of events to help raise funds for their organizations that fall under the charitable gaming rules. However, an organization conducting any type of gaming should understand how the activity can impact its federal tax-exempt status, as well as the tax and reporting responsibilities.

What is charitable gaming?

Charitable gaming can be defined as raising funds through “chance” type activities where the proceeds are given to the charitable cause.

Some of the more common events are:

• Bingo games
• Raffles
• Pull-tabs
• Scratch-off tickets
• Texas Hold-Em poker
• Other card games/casino nights

While the profits from some bingo games are not taxable, generally charitable gaming is subject to taxation for the nonprofit organization.

If your nonprofit is holding gaming type events or activities, take some time to check out the short training videos at http://www.michigan.gov/cg to help ensure compliance with the rules.  Another helpful tool can be found at https://www.irs.gov/pub/irs-pdf/p3079.pdf .

If you have further questions about your organization and its gaming activities, please contact Brenda Jacobs at (231) 726-5880 or bjacobs@brickleydelong.com.

Learn more about our nonprofit services here.

In a recent blog post from the AICPA, Christopher Cole, CPA, CFF, and CGMA, discusses the importance of non profit organizations to understand their finances to run an effective organization. Many non profits are run by volunteers of whom many do not fully grasp the complicated rules governing their organizations. Cole offers three important points that can be transferable to many different nonprofit organizations:

1. Understand the implications of hiring a professional fundraiser
2. Be aware of “unrelated business expenses”
3. Reporting on grants is more complicated than you might realize

At Brickley DeLong, we aim to help understand each unique non profit organization and their specific tax implications. We would be pleased with the opportunity to discuss your non profit and how these (or other) items relate to your organization.

Please read the full article at AICPA Insights or contact Brenda Jacobs at bjacobs@brickleydelong.com or (231) 726-5880.

Brickley DeLong is a West Michigan Accounting Firm, offering personalized accounting services with offices in Muskegon, Hart, and Grand Rapids, Michigan. 

In late July 2014, the IRS announced a streamlined process for small organizations seeking tax-exempt status under Section 501(c)(3). The process allows smaller organizations to file a simpler 2 ½ page application form, which is called Form 1023-EZ.

Key elements of the process and IRS Form 1023-EZ are:

1. To be eligible, the organization’s gross receipts cannot exceed $50,000 in any of the preceding three years, in the current year, and the projected upcoming two years. Plus, the organization’s total assets must not exceed $250,000.
2. The Form asks 11 questions about the organization’s specific activities, rather than a very detailed statement of proposed activities.
3. The form must be e-filed with an accompanying payment of $400.
4. Certain organizations are not eligible to file Form 1023-EZ, even if they meet the   eligibility requirements in point 1 above. Such organizations include entities that are not corporations, foreign entities, churches, schools, and hospitals.
5. There are special provisions for an eligible organization to submit Form 1023-EZ, even if the organization has already filed a form 1023.

For more information on this subject, please read this brief AICPA article or contact Brenda Jacobs at (231) 726-5880 or bjacobs@brickleydelong.com. Check out our page on non-profit organizations for more details.