People are in for a wake-up call: Non-profit organizations (excluding churches) that report less than $25,000 in income in 2010 might discover in 2011 that the donations they received through 2010 were not tax exempt.
Here’s what’s happening: The IRS is requiring non-profit organizations (except for churches) whose reported income is less than $25,000 to fill out an additional form. The due-date for that form was the middle of May but nearly 214,000 non-profits had not filled out the form.
No one will realize their error and they will continue taking donations through the year. Then, when it comes time to issue donation receipts, here’s what will happen:
The organization will discover that it has lost its non-profit status and the generous donations throughout the year will not be tax deductible.
The organization itself will have to report for-profit income, which could be financially devastating to the organization. Meanwhile, the people who have given throughout the year with the full expectation of the tax-deductible benefits of their donation will suddenly discover that they paid money and are receiving no tax deduction in return.
Here is another occasion where the IRS is biting the hand that feeds it. In an attempt to collect every dollar it feels it is owed (and to leave no stone unturned to find more of those “owed” dollars), it will leave in its wake many important organizations that will no longer be able to function, including historical societies, community theater, and community outreach programs. That’s right, the IRS isn’t going after tax cheats, they’re trying to squeeze money from organizations that can barely afford to survive.
Imagine that instead of paying your taxes at the end of the year, you paid them all at the beginning: Every dollar you earned went to municipal, state, and federal governments until your taxes were paid off for the year. Then, everything you earned after that was yours to keep. It’s theoretical, of course, but it’s a good measure of the tax burden of a country’s citizens. And you can watch to see how this “Tax Freedom Day” moves in order to determine how your tax burden increases every year.
In 2010, the US Tax Freedom Day is April 9. That means, if every dollar you earned between January 1st and April 8th were paid to the government, every dollar you earned after, until the end of the year, was yours to keep. By comparison, in 1900, the US Tax Freedom Day was January 22. And in 2000, exactly 100 years later, it was May 1st. So although we like seeing that our tax burden has decreased (as indicated by the shift from May 1st to April 9th), it’s still a lot of money to pay.
So April 9th is a day of celebration. But it’s also a day of mourning. We should be concerned about the amount of taxes we pay and about where those tax dollars are being spent. And, we shouldn’t celebrate too much that our Tax Freedom Day has moved closer to the beginning of the year because some of the lighter tax burden is simply the result of short term tax breaks enacted by the current administration to help with economic recovery. And more alarmingly, according to the Tax Foundation, if Americans had to pay for what the government was actually spending this year, Tax Freedom Day would really fall on May 17.
This chart shows the Tax Freedom Day through history and note how the adjustment dramatically increases the Tax Freedom Day!
By comparison, though, Norway and Sweden’s Tax Freedom Day is July 29th. So although I don’t like paying all the taxes we do, I’m proud to be an American.
For more information on Tax Freedom Day for United States taxpayers click here.
Americans face 4 very different kinds of stresses during tax season. I call them the “April 14 stress”, “April 15 stress”, “April 16 stress”, and “April 17 stress”.
April 14 tax stress
In the weeks and months leading up to the April 15 tax deadline, you (and most other Americans) will be facing the stress of tax preparation. There’s the effort of gathering paperwork, pouring through difficult-to-understand tax forms, juggling paper and a calculator, and hoping desperately that you don’t have to pay taxes this year. The stress comes from finding the time to do taxes and then from trying to figure out each separate line in your tax return.
April 15 tax stress
No sooner is that stress over then the next stressor appears: April 15 is tax deadline day. Most Americans just barely squeak their tax returns in on time and the stress of trying to get it done and rushing through those last minute calculations feels rushed. Did you get everything? What if you didn’t do something correctly? You vow to do your taxes earlier next year (but who has the time?)
April 16 tax stress
Fortunately, not everyone feels this stress, but many people do. If you owe tax and you have to pay it, guess what: your bank account may be drained on this day to cover the check you wrote for your taxes. That’s stressful as you watch your tiny nest egg now devoured. Goodbye to that new sofabed you were hoping for.
April 17 tax stress
Have you ever played roulette and hoped desperately that the ball lands on your number? April 17 tax stress is the opposite: It’s audit stress. You hope desperate that you don’t get picked for the probing and invasive procedure known as the tax audit. And realistically, this stress doesn’t go away on April 18; it hangs over us like a cloud every single day.
If you’re facing these stresses, you’ll find some good advice for handling the April 14 and April 17 tax stress in this article at CNN Money called “A guide to avoid an IRS tax audit“. And if you want to avoid the April 16 stress, give our office a call.
I was thinking that it would be helpful to provide a calendar of important upcoming dates for taxpayers so they can mark their own calendars and plan accordingly.
But I wanted to provide you with a fuller list of dates.
I googled “2009 tax dates” and found this link showing tax filing deadlines on irs.gov, which seemed promising. Until I clicked it. Not very helpful at all to determine when one must file income tax returns.
This is typical of the IRS: There is the obvious, basic questions that people want to know. And those obvious, basic questions should have obvious, basic answers that are quick and easy to find. With just one or two clicks from the site.
But why should the IRS do anything the easy way? Why spend $1 of taxpayer’s money to create a simple set of tax rules accessible from an easy to find site when you can spend $100 of taxpayer’s money to do the same thing???
And so, when we look for “2009 dates” or “2009 deadlines” or “2009 tax dates” (etc.) we get a whole bunch of useless information.
Note to IRS: Post the filing dates on your home page… or at least a link to open a tax calendar. It’s not difficult to do. (Heck, a high school student with a list of dates could probably do it in an evening with Google Calendar).
Now, I realize that April 15 is THE DAY. It’s the day that is burned on most people’s psyche as the darkest day of the year. But there are other important filing dates and tax deadlines throughout the year that need to be adhered to.
If you want to mark your calendars with relevant tax-related dates, this calendar from MSNMoney is a lot better.
Here’s another tip that the IRS will ignore: They should allow syncing options with Blackberries and personal online calendars so that we can click a button on the IRS site and download the filing dates to our calendars… perhaps even with helpful reminders built in to remind us in the weeks leading up to a tax deadline. The technology is there, the federal government needs to implement it.
People are in for a wake-up call: Non-profit organizations (excluding churches) that report less than $25,000 in income in 2010 might discover in 2011 that the donations they received through 2010 were not tax exempt.
