November 1415 2012 2 GAMING EXEMPT ORGANIZATIONS TaxExempt Status What You Need to Know Impact of gaming on taxexempt status Gaming and unrelated business income Internal Controls amp Recordkeeping ID: 670119
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January 14, 2018
FEDERAL TAX AND INFORMATION REPORTING FOR TAX EXEMPT ORGANIZATIONS CONDUCTING GAMING
November 14-15, 2012Slide2
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GAMING | EXEMPT ORGANIZATIONS
Tax-Exempt Status
What You Need to Know :
Impact of gaming on tax-exempt status
Gaming and unrelated business income
Internal Controls & Recordkeeping
Workers conducting gaming
Reporting winnings & withholding
Gaming excise taxes
Read Pub. 3079Slide3
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GAMING | EXEMPT ORGANIZATIONS
Organizations Participating in Gaming
Important to know the different rules that apply:
501(c)(3) organizations operated exclusively for charitable purposes
501(c)(4) social welfare organizations
501(c)(7) social clubs
501(c)(8) & (10) fraternal organizations
501(c)(19) veterans’ organizations
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GAMING | EXEMPT ORGANIZATIONS
501(c)(3) Organizations
Largest category of tax-exempt organizations
Common misconception: If proceeds are used for charitable purposes, gaming is charitable
Actual
conduct
of activity, not the proceeds must further and exempt purpose
Gaming does NOT further an exempt purpose
If gaming is substantial activity, may jeopardize exempt status
May not have a substantial non-exempt purposeSlide5
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GAMING | EXEMPT ORGANIZATIONS
Bingo and “Pull Tabs” Example
Example:
Organization formed to give grants
to schools
Uses management company for operate Bingo/Pull tabs rather than volunteers
Bulk of profits goes to management company
Only a few small grants went to schools
Result: Jeopardizes exemption, possible revocation
Substantial non-exempt purpose
Possible Inurement and private benefitSlide6
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GAMING | EXEMPT ORGANIZATIONS
Fraternal & Veterans Organizations
Exempt function includes providing social and recreational activities for members & guests
If restricted to regular members: it furthers an exempt purpose
If open to the general public, income earned from non-members will be UBI (Pub 3079, pg 12)
If a large enough percentage of the organization’s overall income is from non-member income, the organization may jeopardize its exempt status (Pub 3079, pg 7 & 12)Slide7
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GAMING | EXEMPT ORGANIZATIONS
Unrelated Business Income
Exempt organizations (including churches) are liable for tax on income unrelated to exempt purpose: UBI
Must be:
Regularly carried on
Trade or business
Not substantially related to exempt purpose
File 990-T, Exempt Organization Business Income Tax Return if gross income from UBI
$1,000
Gaming may be UBI unless certain
exceptions applySlide8
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GAMING | EXEMPT ORGANIZATIONS
Bingo & Volunteer Exceptions
Bingo exception
Must have wagers placed, winners determined, and prizes, etc. distributed in presence of all placing wagers
Pull tabs don’t qualify: winners not determined in presence of others placing wagers
Casino Nights
May not be subject to UBI if volunteer exception applies
State regulations may apply
Pub. 598, Tax on Unrelated Business Income of Exempt OrganizationsSlide9
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GAMING | EXEMPT ORGANIZATIONS
Internal Controls & Recordkeeping
Oversight Responsibility
Supervise conduct of operation
Choosing location
Reviewing and approving leases
Officer involvement in conducting
gaming
operations
Separate and segregate workers’ duties to maximize internal controlsSlide10
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GAMING | EXEMPT ORGANIZATIONS
Bingo Operations: Internal Controls
Game manager/operator has control, prepares “Daily Sheet”
Cashier receives cash, records serial numbers of games sold
Separate controllers
prepare inventory & paid out receipts
review daily sheets
Board review for consistency of reportsSlide11
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GAMING | EXEMPT ORGANIZATIONS
Information Reporting Requirement
Form 990, Return of Organization Exempt from Income Tax – information return
Public inspection requirements
Adoption of form by state agencies
Form 990, 990-EZ, 990-N: Depends on size
and financial activity
High non-filer rate among veterans, fraternals
Coordination with state gaming regulators to
detect non-filers
Non-filers risk penalties, automatic revocation
for failure to file 3 consecutive years
Schedule G required if gross receipts from
gaming > $15,000Slide12
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GAMING | EXEMPT ORGANIZATIONS
Employment Tax Responsibilities
Payment of employment taxes required if workers are employees
Employer responsibilities for employees
Form W-2 to employee and SSA
Form 941, Employer’s Quarterly
Federal Tax Return
File Form 940, Employer’s Annual Federal Unemployment (FUTA) --- except 501(c)(3)s
Employees v. Independent Contractors
1099- MISC for independent contractors
$600 threshold for calendar yearSlide13
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GAMING | EXEMPT ORGANIZATIONS
Payments to Winners
Form W-2G, Certain Gambling Winnings
Requirement varies based on type of gaming activity and prize
Bingo: Prize
$1200
Pull-tabs: Prize
$600 and 300 times wager
Slots: Prize is
$1,200Slide14
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GAMING | EXEMPT ORGANIZATIONS
Gaming Excise Taxes
Excise taxes on amount of wager
Occupational tax on persons engaged in receiving wagers
Properly operated 501(c)(3)s would generally not be subject to tax
Properly operated fraternal/veterans’ organization may be subject to taxSlide15
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GAMING | EXEMPT ORGANIZATIONS
For More Information
Charities and Nonprofits page
For forms, publications, general information:
www.irs.gov/charities
Web-Based Training Program
For 501(c)(3) organizations:
StayExempt.irs.gov
Outreach Event Requests
tege.eo.ceo@irs.gov
General Questions
Account issues only:
1-877-829-5500 (toll free)Slide16
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GAMING | EXEMPT ORGANIZATIONS
To reach our
Charities and Nonprofits
page, go to IRS.gov and click
“Information for…”
then select
Charities & Nonprofits.Slide17
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GAMING | EXEMPT ORGANIZATIONS
Find publications, webinars, FAQs and much more on this page.Slide18
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GAMING | EXEMPT ORGANIZATIONS
Educational activities are specially designed for the EO community. Slide19
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GAMING | EXEMPT ORGANIZATIONS
IRS Video Portal
irsvideos.govSlide20
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GAMING | EXEMPT ORGANIZATIONS
2012 EO Workshops/Live Events
Find a workshop in your area. Events go on year round
.
Specialized speaker request?
Send an email to
tege.eo.ceo@irs.gov
Minimum of 100 people or 75 organizations - if travel is required
Requests must come from a nonprofit entity or government entitySlide21
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GAMING | EXEMPT ORGANIZATIONS
Register for the
EO UPDATE
!
It’s
FREE
and it keeps you up to date with what’s happening in EO.Slide22
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GAMING | EXEMPT ORGANIZATIONS
Check out EO’s new on-line exempt org search tool
.
It’s updated monthly!Slide23
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GAMING | EXEMPT ORGANIZATIONS
StayExempt.irs.gov
This is one of the best ways to learn what every exempt organization should know.Slide24
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GAMING | EXEMPT ORGANIZATIONS
StayExempt.irs.gov
StayExempt includes 21 online courses.Slide25
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GAMING | EXEMPT ORGANIZATIONS
EO’s Life Cycle website is important to all non-profit entities.Slide26
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GAMING | EXEMPT ORGANIZATIONSSlide27
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GAMING | EXEMPT ORGANIZATIONS
The A-Z Site Index is one of our most helpful pages