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March 2010 Archives

IRS Tax Exempt Nonprofit Recordkeeping

Here are some quick facts to know about documentation for an IRS tax exempt nonprofit organization:

Make your annual returns available to the public. While you don't need to go out of your way to meet someone's request, you should make these documents (your 990 forms and your application for exemption) reasonably available to the public. Be ready to provide them if someone requests them. If someone requests them in person, you should make the documents available immediately. If the request is in writing, you have 30 days to provide a copy of the information, unless it makes the information widely available.

Donor lists can be private. Generally, you aren't required to provide anyone with your donor list, even if its in your Form 990, unless you're a private foundation or a political organization. 

Keep a copy of your exemption letter on file. This is important for soliciting grants, for any state or local tax issues and for showing potential donors.

Deducting Meal and Entertainment Expenses

It may sound like a good idea to take advantage of the allowable tax deductions for meals.

But beware!  The Federal income tax laws can be extremely stringent with regards to the deduction of meals and entertainment expenses. 

Meal expenses are generally for food, beverage and even tips. Entertainment expenses are generally for amusement, recreation or entertainment. 

Now that you have the definition, you're probably wondering whether or not your expenses are allowable tax deductions. But first, know this:

Only 50% of the ordinary and necessary business expenses for meals and entertainment will be deductible.

Deduct Business Travel: Allowable Tax Deductions

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For business travelers, deducting travel expenses can be a great way to lower your income tax amount. Although there are some great allowable tax deductions available for business travel, the traveling businessperson needs to be aware that there are certain rules under federal income tax law defining the scope of these allowable deductions. 

Deductible travel expenses are those which are ordinary and necessary expenses for traveling away from home for trade or business.

Essentially, if we're painting with large brush-strokes, you can deduct travel expenses when they are made pursuant to a work-related necessity and they are away from your usual place of business.

More Plaintiffs Join in on Yelp Lawsuit

Nine more plaintiffs have joined the Yelp lawsuit that claims that Yelp attempted to extort money in exchange for altering or removing user generated reviews of their business. The San Francisco Business Times reports that these new plaintiffs in the Yelp lawsuit include: Mermaid Cruises of San Francisco, Astro Appliance Service of San Carlos and Sofa Outlet of San Mateo, as well as businesses located in Chicago, New York City, Los Angeles, Torrance and Tujunga. This Yelp lawsuit is currently seeking class action status.

Some of the claims against Yelp in the lawsuit filed in federal court in Los Angeles include: unfair business practices, running an "extortion scheme," and having Yelp employees call businesses in order to have them pay Yelp monthly in order to remove or adjust negative reviews about their business.

Estate Tax Repeal Hurts Nonprofit Funding

If you're running a tax exempt nonprofit organization or a charity, you need to understand some of the implications of the estate tax repeal because of its potential effects on the funding of nonprofits. 

Under a logical thought process, one would assume that less taxes would mean more money and therefore, more money for people to give to charity. Right?

If only it were so. Unfortunately, tax policy is never the product (or effect) of such linear logic.   

And so it would seem to tax policy analysts that the lapse of estate tax would sound the alarm in the philanthropic sector. After all, not everyone thinks like Bill Gates, donating their estates to charity when they die. 

Data released by the Internal Revenue Service sustains the charities' fears -- that charitable bequests drop proportionally as the estate tax drops.   

Home Office Tax Deduction: 4 Quick Questions to Ask

It's tax-time and many are finding ways to reduce their income tax calculation. 

Despite the recession, many people began businesses out of their homes. There also remain many people who continue to work out of their homes.

How does this translate over to your income-tax calculation? Well, many people have heard about the home office tax deduction. As mentioned in this blog last year, it can be a great deduction. 

But there's a huge caveat. Many tax professionals are doubtful about the home office tax deduction, claiming that it can essentially be a red-flag for audit. I've heard these claims myself this past year from prominent IRS attorneys and well respected tax law professors.  Yet, there are many who claim that the fear associated with the home office tax deduction is just myth. It's consistently heralded by financial writers as a great tax deduction.

Second Yelp Lawsuit Claims Attempts to Extort

Yelp is not just the hottest review site, its also gaining notoriety in the news with recent lawsuits filed against it. ABC News reports that within weeks of the Yelp lawsuit filed by a veterinary hospital, another lawsuit has been filed by a California day spa against Yelp. We write about the Yelp lawsuit filed by the animal hospital in a previous post. Both lawsuits claim that the online review site tried to exort money in the form of advertising from them. The plaintiffs claim that Yelp did this by offering to take down possibly defamatory reviews of their small businesses only if they agreed to pay advertising fees.

The owner of D'Ames Day Spa, Ms. Christine LaPausky, claims that Yelp tried to extort money from her business in the form of monthly advertising subscriptions. According to ABC News, the lawsuit alleges: "Yelp thus capitalizes on the presumed integrity of the ratings system to extort business owners to purchase advertising." The lawsuit was filed in the U.S. District Court of California last Wednesday.

The Yelp CEO Response to the Yelp Lawsuit

As we wrote about previously in this blog, there is a Yelp lawsuit claiming that Yelp is involved in unfair business practices, running an "extortion scheme," and having Yelp employees call businesses in order to have them pay Yelp monthly in order to remove or adjust negative reviews about their business.

In response to these allegations, the Yelp CEO has posted his take on the lawsuit on the Yelp official blog. Here is his first response to the lawsuit filed by the veterinary hospital in Long Beach, California. In his first response, the Yelp CEO calls the lawsuit "to be without merit" because it is based on a "conspiracy theory."

COBRA Bites! Part II: Are You in COBRA Compliance?

Previously, we talked about which businesses must comply with COBRA. Now, we want to look at questions to ask once you know your business needs to be in COBRA compliance.

As previously discussed, the Consolidated Omnibus Budget Reconciliation Act (COBRA), from 1986, gave certain employees the rights to continue their employment based health coverage if their employment was terminated (or in certain other events).   

Here are some questions you need to ask yourself if you are a business that has a qualifying health-care plan:

COBRA Bites Part I: Basic Questions About COBRA Rules

There has been a lot of talk about "budget reconciliation" with regards to the passage of Obama's health care regime. Budget reconciliation affecting healthcare is not new and is not limited to the Democrats -- with COBRA serving as a prime example.

The Reagan administration used the reconciliation method to pass The Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1986. COBRA places compliance rules onto many businesses, requiring employers who maintain group health plans to give employees, and their dependents, the opportunity to continue coverage at affordable group rates in events where they would otherwise lose coverage.

But enough backgroud -- what do you need to know about COBRA as it affects your business?

Offering Unpaid Internships? Tread Carefully!

So, your business is tightening its belt. Hiring has slowed down, yet, you still need the extra hands on board. You've heard about working with unpaid interns.   

Could that be the solution for you?

Many colleges have programs which allow their students to work in business settings and get course credit at the same time. 

But an unpaid internship has its own host of legal issues. It's just not as easy as hiring an eager student and promising them a good referral or a chance to work with the big-boys. You need to tread carefully and make sure that you will not be in violation of the labor laws.