Taxes and Fundraising with Pay It Square
What to know about the funds from your fundraiser.
Getting large numbers of donations to help a cause is a great feeling, people are talking about your cause and better yet, donating! However, this might get you concerned about your status with taxes, donations and your donors. Pay It Square has spoken with our legal and tax professionals about these sorts of things, in order to provide the best experience to you: our organizers! Please know that this advice might not apply to everyone, in every country, so if you still have questions, please consult your own legal professional!
Q: Are donations to organizers on Pay It Square tax-deductible? If so, how can they be claimed by donors?
A: Donations to organizers are not deductible. In order for a charitable donation to be deducted on a personal tax return, the donation must be made directly to the charity and the donor must have proof the donation was made. (Cancelled check). If the donation exceeds $250, the donor must have a written acknowledgement from the charity. Payments to individuals are never deductible.
Note: If you are a 501(c)3 Charity, and have a special Charity and Non-profits account with PayPal, you can still collect with Pay It Square and issue the deduction to your donors!
Q: Are the donations received by Organizers on Pay It Square considered income? How must they be represented on a tax form to claim with the IRS? Is there a (yearly) limit?
A: Donations received by an organizer is not income. It is a non-taxable / non-deductible gift. The donations are not reported on a tax form. There is the potential for gift tax issues – however the organizer must receive $13,000 or more from one individual to trigger these rules. The $13,000 limit changes from year to year – this is the current limit for 2012.
Q: If someone collects money, then to have it be sent to a Non-Profit or Foundation, what potential questions does that raise for tax officials?
A: If the organizer collects funds from various people, and then turns around and writes a single check to a qualified charity, the organizer becomes the donor and receives a charitable donation deduction on their personal tax return. The organizer/donor must receive a receipt from the charity and the organizer/donor must itemize deductions on their return to be able to take the deduction.
Q: Overall, are there any rules, regulations or tax codes that Pay It Square organizers need to be aware of after encountering large sums of money?
A: There are two things we can think of to watch for:
- Money coming in from overseas or going out overseas. This opens another discussion that cannot be summed up briefly. If you have a question about this, please seek professional legal and tax advice
- The gift tax limits mentioned in #2. If organizers are receiving large sums from individuals (instead of a bunch of little amounts), the individuals making the contribution (in excess of $13,000) may be subject to gift tax rules. They should consult with their tax advisors regarding that.
Pay It Square would like to thank Schellenberg & Evers, Pay It Square's Tax consultants, for this information. For your own information and detailed advice, please consult your legal or tax professional. Pay it Square is not held liable for the information on this page, and recommends organizers to seek their own professional legal help.