Tax law gives me anxiety.

In fact, I cathartically cut up my tax code PROMPTLY after finishing my mandatory tax law course. But it’s important to the work we do, and there have been some major updates over the last few months. If you run anything (business, nonprofit, social enterprise, etc.) there’s something below that you’ll want to pay attention to.

Final Decisions and Laws on Opportunity Zones

Early December the IRS finalized proposed regulations. There’s more advice on what to do with gains. There’s also advice on how long income can be deferred as an eligible gain, and when gains have to be included in income with a list of events that cause this to happen. Along with how to calculate income at the time it has to be reported, or Dec. 31 2026 (the max deferral period).

Below this is a list of the requirements to qualify as a qualified opportunity fund and how to become a qualified opportunity zone or qualified opportunity business. The final regulations are here:

https://www.irs.gov/pub/irs-drop/td-9889.pdf

Electronic Filing Required for Exempt Organizations

The Taxpayer First Act requires that tax-exempt organizations electronically file their returns and forms. The forms included in this requirement are:

  • Form 990, Return of Organization Exempt from Income Tax.
  • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation.
  • Form 8872, Political Organization Report of Contributions and Expenditures.
  • Form 1065, U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization).

There are a few (like the 990-T and 4720) that will be available in a paper format until they’re converted and the required e-filing of the 990-EZ will be pushed back but optional will still be available. This means up to July 31, 2020 small exempt organizations can file paper or electronic of the 990-EZ but they’ll have to be filed electronically later.

Exempt Organization Filing Address Change

Remember, the IRS recently changed the address to send in forms 1023, 1024, 1024-A and 1028. The new address is:

Regular U.S. Postal Service mail:

Internal Revenue Service

P.O. Box 12192

TE/GE Stop 31A Team 105

Covington, KY 41012-0192

Deliveries by private delivery service: Internal Revenue Service 7940 Kentucky Drive TE/GE Stop 31A Team 105 Florence, KY 41042

Applications to the old address will be sent back undeliverable.

Unrelated Business Income

Your tax-exempt organization may generate income that:

  1. Is a trade or business,
  2. Is regularly carried on, and
  3. Is not substantially related to furthering the exempt purpose of the organization.

This is something called unrelated business income, and it has to be reported because there may be a tax as a result of this income. There’s a video that walks through identifying unrelated business income, and how to report it.

https://www.stayexempt.irs.gov/home/existing-organizations/unrelated-business-income

Form W-9

If you’ve been trying to figure out how to complete the Form w-9 there’s a new video:

https://www.irsvideos.gov/Business/Resources/HowToCompleteFormW-9

Virtual Currency

Back in October, the IRS issued advice on virtual currency since it’s becoming so popular. There is a list of common questions on how to treat virtual currency for tax purposes.

https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

Employees v. Volunteers

Classifying employees v. volunteers has always been a big question with clients. Now, the IRS has a course that walks through the differences and how to report wages and gifts to volunteers. There is also a course on how to treat volunteers.

Self-Dealing and Foundations

Self-dealing is another hot topic, especially because the slope of what’s permissible by a disqualified person is so slippery. Now, there are whole webpages that help summarize the many different rules that deal with self-dealing.

https://www.irs.gov/charities-non-profits/private-foundations-self-dealing-irc-4941d1a

https://www.irs.gov/charities-non-profits/private-foundations-self-dealing-irc-4941d1b

Freelancers, Share Economy, and Gig Economy

Last, there’s a whole tax center now (code for a special webpage) that talks about the Gig Economy.

Don’t be fooled, the topics this covers is actually pretty broad. From those who work as freelancers through sites like Fiverr or Upwork to those renting rooms on Airbnb. I have clients that hire quite a few freelancers and even rent rooms, so this is something applicable to everyone.

There are self-employment taxes to pay on certain income when someone is working for themselves (whether it’s full or part-time). What’s even trickier is if a freelancer has a reoccurring gig with you. They may actually qualify as an employee, which means FIC, Medicare, and Withholding are supposed to be paid. States like California are taking a super hardline approach on what qualifies as a true freelancer, and they’re arguing most of freelancers are in fact employees. If you hire freelancers out of California, you need to look into this post-haste. Getting this wrong can be penalties, back taxes, and back benefits. You may think, “Let the freelancer handle this” but the government wants their money, and they don’t care who it comes from. Which means you could find yourself on the hook for something you didn’t anticipate.

Check out the tax center to better understand what your obligations might be. https://www.irs.gov/businesses/gig-economy-tax-center