OT Question for practicing CPAs

  • Creator
    Topic
  • #190260
    mla1169
    Participant

    I have never worked a day in public so pardon my ignorance. Financial reporting in industry is my area of knowledge.

    I do bookkeeping for one of my daughters sports leagues. Came to realize they let a lot of stuff lapse AND they were telling people that they were a 501c3. Well I put a quick stop to that, got them all squared away with the state, but went to a CPA firm to have them request the 501c3 because I know the wording on the application has to be specific, yadda yadda, and I didn’t want to learn on the fly,

    This CPA is telling me that because we are in process with the IRS to obtain 501c3 status, its ok to tell potential donors that their donation is deductible. This makes me nervous, to be honest. What if god forbid the IRS denies the application, or if it takes longer than 4 months. I’d prefer NOT to tell people we are a 501c3 until they could look us up and see proof on the IRS website. I’ve asked around and been told by multiple people its ok to start taking donations.

    Do tell why would it be ok to say we’re tax exempt if we’re not………yet?

    FAR- 77
    AUD -49, 71, 84
    REG -56,75!
    BEC -75

    Massachusetts CPA (non reporting) since 3/12.

Viewing 4 replies - 1 through 4 (of 4 total)
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    Replies
  • #619573
    philb
    Member
    #619574
    Tax lady
    Participant

    I have done several Form 1023s for organization that need a 501c(3) or (4) status and it usually does take a while. I would think the donors should be told that the status is PENDING at the very least.

    AUD - 80
    BEC - 75
    FAR - 85
    REG - 82

    REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
    AUD 5/30/15 (80)
    BEC 11/28/15 (75)
    FAR 7/30/16

    Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

    #619575
    mla1169
    Participant

    Thank you tax lady.

    The specific situation is that a dad wants to make a $5k donation (love him!) and he was told he can deduct it on this years' taxes. I let him know he MAY be able to deduct it on this years taxes, if it is approved by the IRS from what I understand it is retroactive. Great.

    BUT I've heard of the IRS denying status because the organization didn't appear to benefit a community, or scope too narrow. On the chance that the IRS says no way I don't want this dad to feel he was misled or to lose a deduction if he had donated elsewhere and the CPA we hired feels I am complicating things.

    FAR- 77
    AUD -49, 71, 84
    REG -56,75!
    BEC -75

    Massachusetts CPA (non reporting) since 3/12.

    #619576
    Tax lady
    Participant

    Oh yes, that's a sticky area because that's a lot of money and not just a $10 donation. You did the right thing by letting him know it wasn't approved yet but that it would be retroactive once it's approved. I've personally never had an app denied for tax exempt status but it's always a possibility. I think you have a valid concern here and I can't believe the CPA doesn't think there should be some sort of precaution taken?! Maybe if he was the one donating the 5K he would be a little more concerned. lol

    AUD - 80
    BEC - 75
    FAR - 85
    REG - 82

    REG 8/15/14 (73); 11/13/14 (82)-expired 🙁
    AUD 5/30/15 (80)
    BEC 11/28/15 (75)
    FAR 7/30/16

    Studying with CPAexcel and Ninja notes/MCQ's/Flashcards

Viewing 4 replies - 1 through 4 (of 4 total)
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