Tuesday, December 7, 2010

Contract labor crackdown

Due to the revenue shortfalls, federal, state and local governments are finding revenue from auditing employers who mis-classify workers as contract labor instead of employees. President Obama has asked Congress for another $25 million to add more DOL and IRS auditors to address this issue. But states are getting even more aggressive in auditing employers.For example, Ohio ramped up their examinations in this area. Out of 88 companies that were audited in 2008-09, 80 has misclassified workers, resulting in back taxes, penalties and interest in the amount of $468,000. For 2009-10, Ohio found misclassified workers in 60 out of 64 employers that were examined. If examined, these employers spend large sums with attorneys trying to minimize their losses.

Nonprofit organizations are not exempt from the mis-classification issue. Nonprofit organizations should examine their practice and re-classify workers that should be treated as employees as soon as possible. Prudent nonprofit organizations seek legal advice before classifying any worker as contract labor.

Tuesday, September 7, 2010

Is a Form 990-T required for health care credit?

IRS announced that nonprofit organizations will be required to file Form 990-T to claim the refundable health care credit. Form 990-T will be required even if the organization does not have unrelated business income (the usual use of Form 990-T). Form 8941 will assist nonprofit organizations in calculating the credit.

Passed in March 2o10, the credit is designed to provide encourage smaller organizations to offer health insurance as a fringe benefit. The credit does not apply when an organization has 25 or more full time equivalent employees or if the average full time employee wage exceed $50,000.

More at http://www.irs.gov/newsroom/article/0,,id=227404,00.html

Wednesday, September 1, 2010

Scholarship Rules Trap Congressman

United States Representative Eddie Bernice Johnson has admitted that the Congressional Black Caucus Foundation awarded scholarships to at least 23 of her relatives at her direction. This should serve as a reminder that IRS rules require all scholarship decision makers be independent of all applicants and recipients. This standard applies to all Section 501(c)(3) organizations that award scholarships. If your organization awards scholarships, it is time to review all the requirements to assure compliance the federal tax laws governing the award of scholarships.

Tuesday, August 31, 2010

New Form 1099 Requirements

IRS issued Notice 2010-51 seeking comments on the new Form 1099 reporting requirements. T he new healthcare legislation requires all payments to be reported to IRS on Form 1099. If you feel strongly about such new regulatory burdens, the IRS wants to hear from you 9/30/2010. The Notice 2010-51 clearly applies the new Form 1099 to payments starting after 12/31/2011. So 2012 is the first year of the new requirements.

Saturday, August 28, 2010

You say hotel, court says church

In New York, a retreat center won its property tax exemption in court. The group argued that its 46-acre facility was used for "days of recollection, retreat, pilgrimages, shrines, mass, and adoration benediction."

Nonprofit organizations should review their property tax exemptions to assure that they do not lose it inadvertently. Further, non-use will automatically lose the tax exemption.

Religious discrimination in parachurches?

WorldVision recently won its right to discriminate on the basis of religion from the 9th Circuit Court of Appeals. WorldVision receives nearly $1 billion (not a typo) from government sources that it distributes food and supplies to the needy around the world. Two employees, claiming they no longer believed in traditional Christianity, sued WorldVision. They claimed that religion had no role in their job duties at WorldVision. Since they were dealing with government funds, they believed that WorldVision was secular and could not require them to be traditional Christians. WorldVision, who enjoys church status from the IRS, demonstrated that its primary motive for assisting the poor came from its religious beliefs.

Religious organizations should review their employee handbooks, articles of incorporation, bylaws and statement of faith to determine whether they can qualify as a religious organization that is exempt from the religious nondiscrimination requirements in Title VII. In other words, what evidence do you have to prove that your activities are inherently religious?

Tuesday, August 24, 2010

Founder's daughter sues because she claims she was wrongfully discharged by the Board in retaliation for reporting misdeeds to state Attorney General. The daughter of founder Larry Jones (Feed the Children) helped the Board fire her father over alleged wrongdoing. Retaliation for whistle blowing is a tough suit for everyone involved. But this type is suit is easily preventable. Every nonprofit organization should have a whistle blower policy in place to protect whistle blowers and avoid this type of mess. I will send a sample whistle blower policy to anyone who requests it at fsommerville@nonprofitattorney.com.

Wednesday, August 18, 2010

Today, DC Court of Appeals affirms that electronic or internet "church" does not meet the definition of a church for tax purposes. This affirms the IRS test that the organization must have regularly conducted worship services where the attendees are physically present at the same location. Basically, I am glad the court affirmed a position I have been taking for several years.

Friday, August 13, 2010

IRS released a newly revised Publication 1771, Charitable Contributions. This is a must read for nonprofit organizations that accept tax deductible contributions because I am still seeing organizations that fail to comply with the rules.

Thursday, August 12, 2010

Background check abuses?

EEOC claims that employers are using background checks to unlawfully discriminate against minorities. Since 38% of the prison population is black (compared to 12% of the total population) and Latinos are 2.3 times more likely to go to prison than whites, the use of as criminal background check or credit report is discriminatory.

KEY: The EEOC says employers must consider the nature of the job, the seriousness of the offense and how long ago it occurred. For example, a drunk driving conviction is very important is the employee drives a vehicle for the employer, but probably irrelevant for an office worker.

For employers, an accurate job description is critical. If the employer can connect the criminal offenses in the report to a job description, then the employer is justified in using criminal background checks and/or credit reports.