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tax free weekend

Tax-Free Weekend in South Carolina

If you’re anything like our LBAHS employees, you have already planned your weekend shopping trip. For those who may not know, August 2nd through August 4th is tax-free weekend in South Carolina. This is an annual sales tax holiday where both resident and non-resident shoppers are provided with the opportunity to purchase certain items free of sales and use tax.

This is a great time to go back-to-school shopping and save on school supplies, shoes, and clothing. In years past, shoppers have saved between two and three million statewide during South Carolina’s tax-free weekend. We have created a small list below of exempt and non-exempt items to give you an idea of what items may be of interest to purchase during this time period.

Exempt Items – items you will not have to pay tax on
  • Clothing
  • Footwear
  • School supplies including bookbags, binders, lunchboxes, calculators, etc.
  • Computers, printers, and computer software
Non-exempt Items – items you will have to pay tax on
  • Jewelry
  • Cosmetics
  • Furniture
  • Rental of clothing and footwear

If you plan to go shopping, be sure to check out the full list of exempt vs. non exempt items from the South Carolina Department of Revenue. The Federation of Tax Administrators has also provided a full list of sales tax holidays nationwide.

Non-Profit Tax Guide: Getting To Know The Form 990

The Form 990 is a tax document that tax-exempt nonprofit organizations are required to file each year with the IRS. The 990 discloses potential conflicts of interest, regulatory details, governance, compensation of board members and staff, and other details that relate to financial accountability. Filing the 990 correctly and in a timely matter, allows your nonprofit organization to maintain its tax exempt status. Once the 990 is filed, it is posted for the public to see. Websites such as Guidestar.com allow anyone to look at any organization’s Form 990, in order to get a better understanding of the structure and success of the nonprofit organization.

What’s the purpose of the Form 990?
  • Increased transparency and to provide a realistic view of the organization for the IRS and the public
  • Promote tax compliance by accurately reflecting the organization’s operations
  • Allow efficiency in the assessment of risk of noncompliance

The Form 990 has caused dramatic increases in the cost of compliance for nonprofits. At first, this only impacted the larger nonprofits. However, the smaller nonprofits are now feeling the increased cost of the 990.

Who is required to file a Form 990?

Tax-exempt organizations that have gross receipts totaling at least $200,000 or assets worth at least $500,000 must file the Form 990 on an annual basis.

When is the Form 990 Due?

You must file your organization’s 990 by the 15th day of the 5th month after your accounting period ends. For example, say your fiscal year ends on December 31st, then the 990 is due on May 15th the following year.

What are the penalties for not filing a Form 990?

There are many penalties for failing to file the Form 990 properly.  The list of penalties below can help you be prepared in order to avoid them.

  • The Penalty for not filing is: $20 per day, up to a maximum of $10,000 or 5% of revenue.
  • If revenue is greater than $1 million the penalty for not filing is: $100 per day with a maximum fine of $50,000
  • For failure to include information concerning liquidation, dissolution, termination, or substantial contraction: $10 per day, with maximum of $5,000.
  • Your “tax-exempt” status will be revoked if you don’t file for 3 years.
  • Once you receive an IRS notice and don’t respond: $10 per day on the responsible individual, up to a maximum of $5,000.
  • Failure to comply with public disclosure requirements: $20 per day in penalties, up to a maximum of $10,000.
  • There is no maximum penalty for failure to disclose the organization’s exemption application.
How to be prepared for the Form 990?

Being prepared is the best way to handle any tax situation.  Being proactive and having a tax plan minimizes the risk of any last minute tax surprises and allows you to be a little more stress-free when it comes time to file your Form 990 on an annual basis.  Below is a list of suggestions to help you be prepared when filing your Form 990.

  • Make sure you document as much as possible throughout the year for internal purposes.
  • Track as much information as possible from contributors, including amount, name, location, how they contributed, etc.
  • Track the revenue and expense by each event or by function.
  • Tip: Unrelated business tax income is a big issue!  If it’s not part of the core function, it is probably taxable.
  • Consult your CPA for specifics to your organization.  Every nonprofit organization is different and has different issues.

LBA Haynes Strand has handled the Form 990 for many North Carolina based nonprofit organizations, and our team is well versed in the nonprofit industry. Our nonprofit accounting team is ready to help your organization maintain its tax-exempt status and provide the accounting advice you need throughout the year to run a successful nonprofit. Contact us today!

Year End Tax Announcements and Updates

Now that fall has officially begun, it’s time to begin your tax planning for 2015 and tie up any loose ends that you may have from 2014.  The IRS recently sent out the following reminders and helpful federal income tax-saving opportunities for individuals and businesses:

October 15th Extension Reminder

About a quarter of the 13 million taxpayers who requested an automatic six-month extension for their 2014 tax returns have YET to file.  The IRS recently urged individuals whose tax-filing extension runs out on October 15 to double check their returns for often overlooked tax benefits, such as deductions for job hunting costs or moving expenses and credits for education or child care.

If you filed for an extension, you should file your return by October 15, even if you can’t pay the full amount due. By doing so, you can avoid the late-filing penalty, which is normally 5% per month, that would otherwise apply to any unpaid balance after October 15. However, interest (currently at the rate of 3% per year compounded daily) and late-payment penalties (normally 0.5% per month) will continue to accrue on any unpaid tax bills.

If you need to file an extension for your personal tax return, don’t forget to check the new box on Forms 1040, 1040A or 1040-EZ that indicates whether you had health coverage for 2014. If you plan to claim the Health Coverage Tax Credit (HCTC) for 2014, you must first file an original 2014 tax return without claiming the HCTC, even if you have no other filing requirement. Then you can file an amended return when the IRS issues further HCTC guidance.

Guidance for Filing an Amended Personal Return

Many taxpayers need to file an amended federal tax return for 2014, whether it’s to correct an error or to claim a missing credit or deduction, such as the HCTC when the final guidance is published. (See above.) Don’t panic if you need to correct your filing status, the number of dependents you claimed or your total income. The IRS allows individuals to amend a previously filed federal income tax return using Form 1040X.

But this form has specific requirements. For example, it currently can’t be filed electronically. Instead, you’ll need to file it on paper and mail it to the IRS. In addition, a separate form must be filed for each tax year that you’re amending.

In some cases, the IRS will correct math errors on your behalf. If that happens, you generally don’t need to file an amended return. Likewise, the IRS may just send you a notice for failing to attach a required form or schedule and simply request additional documentation. Such a notice generally doesn’t necessitate an amended return either.

If you expect a refund but need to amend your original return, it’s OK to cash your original refund check from the IRS. It generally takes the IRS a few months to process amended returns and issue additional refund checks. However, if you’ll owe additional income taxes, send a check as soon as possible. Doing so will limit interest and penalty charges.

To claim a refund, file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax if that date is later than the three-year rule.

Affordable Care Act Reporting For Individuals

About 800,000 taxpayers who purchased health insurance from the federally facilitated Marketplace during 2014 received an erroneous Form 1095-A, “Health Insurance Marketplace Statement.” The IRS recently reminded those taxpayers who filed a federal tax return based on their original Form 1095-A that they’re not required to file an amended return based on a corrected Form 1095-A. This is true even if you would owe additional taxes based on the new information.

However, you may voluntarily choose to file an amended return based on the corrected form if it would result in an additional refund or lower the amount of taxes you owe. You may also want to file an amended return if you filed a federal tax return based on the original form and 1) incorrectly claimed a premium tax credit or 2) failed to file Form 8962, “Premium Tax Credit,” to reconcile your advance payments of the premium tax credit.

Retroactive Extension of Bonus Depreciation and Section 179 Expense Elections

The IRS recently issued guidance on changes made by the Tax Increase Prevention Act of 2014 (TIPA) to provisions dealing with bonus depreciation options in 2014. The guidance is effective September 15, 2015.

In 2013, taxpayers were allowed to deduct 50% first-year bonus depreciation on qualifying new equipment and purchased software that was placed in service before year end. At the end of 2014, TIPA retroactively extended through 2014 the bonus depreciation provisions that expired at the end of 2013. But the extension was passed after some taxpayers had already filed their 2014 tax returns.

The recent IRS guidance provides options to amend returns to 1) claim missed bonus depreciation for assets brought into service in 2014, revoke an election, or file a change in method of accounting for the current year to claim missed bonus depreciation and 2) carry over to 2014 any disallowed Section 179 deduction for qualified real property placed in service during 2010 through 2013.

Important note: The deadline for making such an amendment is generally December 4, 2015. In some cases, the deadline may be later. Regardless, time is of the essence.

As the year winds down, it’s important to (once again) watch for legislation on these and other expired tax provisions. For 2015, bonus depreciation is currently unavailable and the current maximum Section 179 deduction is only $25,000 (compared to $500,000 for tax years beginning in 2010 through 2014). But it’s possible that Congress might extend these tax-saving opportunities again for fiscal tax year 2015.

If that happens, business owners should be prepared to act fast to lower taxable income for 2015. Remember that assets must be placed in service by no later than the end of your business’s tax year to qualify for these deductions.

Don’t miss out on any tax saving opportunities for the 2015 tax season. Contact your CPA today and schedule your no-cost consultation.