In a recent decision (United States vs. Quality Stores, W.D. Mich. Feb. 23, 2010), the tax court ruled that severance payments to laid-off employees are not subject to Social Security and Medicare taxes.

This means that if you were laid off and received severance pay with Social Security and/or Medicare taxes withheld, you can file a claim to get that money back. Depending on the amount of your severance pay, you could receive thousands of dollars!

It is important to note that this decision is subject to appeal, and it is possible that it may not be upheld in the end. But if it is eventually upheld, you’ll want to make sure that your claim has been filed so you can get your money back.

But you must act now – the statue of limitations for receiving tax refunds is 3 years from the due date of the return for the year in question. So you have until April 15, 2010 to file a claim if you were laid off in 2006.

If you file the correct paperwork before the deadline, your claim will be registered and you will be able to receive your refund beyond the expiration date of the statute of limitations. But it is important that the claim is filed correctly and with all of the required supporting documentation.

If you were laid off in 2006 or later and received severance pay, I urge you to contact a qualified tax professional to assist you to file the correct paperwork and register your claim.

Get Uncle Sam to help pay for your trip!

Here’s how:

Step 1: Keep your receipts.

• Keep your receipts for airfare, hotel, car rental, parking, taxi, and any meals you purchase during your trip.
• If you drive your car to NOTOCON, keep a written log of your starting mileage (when you leave home) and ending mileage (when you get back). Also keep your receipts for gas.

Step 2: Get a letter from your local body.

• The letter should say that you attended the National O.T.O. Convention in Seattle, Washington on August 7-9, 2009 as a representative of your local body.

Step 3: Deduct the cost of your trip on your 2009 tax return.

• You can deduct your travel expenses as a Charitable Contribution on Schedule A.
• If you drove your own car to NOTOCON you can also deduct 14 cents a mile for the trip. Or, you can deduct the cost of the gas, whichever works out better. But you can’t deduct both mileage and gas.
• Note: you cannot deduct your NOTOCON registration fee, nor the cost of items that you purchase from the vendors.
• If you add some extra vacation time before or after the conference dates, consult with a qualified tax advisor to determine how to take the deduction.

All of the above also applies if you are traveling to any other regional O.T.O. event such as Kaaba, Initiator Training, etc.

Feel free to contact me if you have any further questions.

Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.

So what’s the catch? Why not just tell everyone you are a church and start taking tax-deductible contributions?

There are two main reasons:

1. Registering as a 501(c)(3) church provides proof to your members and other potential donors that your organization is tax-exempt. Once you are registered as a 501(c)(3), your group is listed on the IRS website and in other charity directories, and donors can rely on their tax deductions being valid. Also, other benefits such as non-profit discounts, bank accounts, and grants are only available to registered churches.
2. Note the above quote says that the group must “meet the requirements of IRC section 501(c)(3).” Who decides if your group meets the requirements? The IRS! So wouldn’t it be better to know ahead of time if you meet the requirements? If it turns out later that due to some technicality you didn’t quite meet all the requirements, the IRS will track down all your donors and bill them for unpaid taxes (plus penalties and interest). And they will send your group a bill for the taxes on all those donations received (plus penalties and interest). They can go back all the way to the date your group was started. Needless to say, that could be a very costly mistake.

This is the reason that most churches do register for 501(c)(3) status, even though technically they aren’t required to. Registering does not take away any rights or add any new restrictions—as quoted above, even a church that does not register still needs to conform to the requirements of section 501(c)(3) of the tax code in order to be tax-exempt. So the smart thing to do is to register, and make sure to do it right. Enlist some professional assistance to save time, money, and headaches in the long run.

Coming Next:

• What if I am a solitary practitioner?

Previously:

• End Tax Discrimination Now!
• What benefits can I take advantage of as a member of a spiritual group?
• How do I know whether my group qualifies as a “church”?

Here are the records you should keep for each type of contribution:

• Dues – A receipt from your local body (or a letter from Grand Lodge if you sent in your national dues directly) showing the date and amount of your payment is fine.
• Donations – For small cash donations, such as jar donations at Mass, it is not necessary to have a receipt, but it’s a good idea to keep a written record. For larger donations, be sure to get a receipt.
   
  If your donation is $250 or more, you should get a letter from your local body indicating the date, amount of the donation, and a statement that the body is tax-exempt and no goods or services were provided to you in exchange for the contribution. A sample letter is available here.
• Expenses – Keep a copy of your receipts. For large purchases, have your local body write you a letter acknowledging receipt of the item. The letter will identify the item donated but won’t put a value on it — that’s what your receipt is for. A sample letter is available here.
• Mileage – Keep a log book in your car (they can be purchased at any office supply store) and record the beginning and ending mileage of each trip to and from your local body, and any other OTO event or location you drive on OTO business.
• Travel – Keep your receipts for airfare (a printout of your itinerary which includes the price paid for the ticket is fine), ground transportation, parking, lodging, and meals. Also, you should obtain a letter from your local body indicating that you attended the event (giving the location and dates of the event) as a representative of your local body.

• Non-Profit – This means that the group must not be set up to financially enrich any individuals. The funds raised by the group must be used for the purposes of the group and not for the private benefit of any person. The best way for a group to demonstrate this requirement is to incorporate as a non-profit corporation in the state it is located. If the group doesn’t want to go through the time and expense of incorporating, it is easy to set up non-profit Articles of Association which accomplish pretty much the same thing, and can still be used to establish bank accounts, leases, etc. in the name of the group. (Contact me if you would like assistance doing this for your group.)
• Religious – The group must be organized for genuine spiritual purposes (”religious” in IRS terminology). Consistent with the U.S. Constitution, there is no doctrinal test – a group cannot be rejected based on what type of belief or religion it represents. Instead, the IRS is looking for the group to conform to the characteristics of a religion, such as:
  • a written creed, statement of faith, or summary of beliefs
  • some kind of “scripture” or spiritual literature
  • a minister, leader, hierarchy, or government
  • an established congregation or membership
  • regularly scheduled religious services
  • an established place of worship
  • some form of worship
  • a distinct religious history
  …among other things. Not all of these tests must necessarily be met, but overall there must be enough evidence that the group has a definite religious character. The best way to meet this requirement is for the group to apply for 501(c)(3) tax-exempt status from the IRS. However, this can be a laborious and expensive process, and must be done correctly.
• Provide Documentation – The last requirement is that the group must provide its donors with documentation to back up their donation. For donations of less than $250, this can be a simple receipt showing the name of the donor, name of the group, date, and amount of the donation. For donations of $250 or more, or for donations if items, the group should provide a letter to the donor on their letterhead containing the same information as the receipt, and indicating that no goods or services were provided in exchange for the donation.

Note that it is the responsibility of the donor to be sure that their group qualifies as a genuine charitable organization in order for the deduction to be valid on their tax return. A group, however, can provide reassurance to its donors that it does qualify if it meets the above requirements.

Coming Next:

• Does my group have to register with the IRS as a 501(c)(3) “church”?
• What if I am a solitary practitioner?

Previously:

• End Tax Discrimination Now!
• What benefits can I take advantage of as a member of a spiritual group?

• Donations of Money Dues, donations, and any other money you contribute to help support the group count as charitable contributions. Note that this does not include things for which you get something tangible in return. For example, if you buy a book it’s not a donation because you got something in return. But “intangible religious benefits” are OK, so if your donation was for a ritual, it’s deductible.
• Donations of Items If you donate something like a censer or a computer to your group, you can deduct its value.
• Expenses for the Group If you incur expenses for your group, like buy candles for a ritual and don’t get reimbursed, you can deduct these as well.
• Mileage You can deduct 14 cents per mile you drive as part of your volunteer service to your group. For example, if you officiate in a ritual or help with cleanup you can deduct the miles you drive to and from the event.

Note: these are general guidelines, and as every person’s situation is different, you should check with a qualified tax professional to determine if you are eligible for these deductions. Your group must also meet certain requirements, which will be the subject of my next article.

Coming Next:

• How do I know if my group qualifies for tax deductible contributions?
• Does my group have to register with the IRS as a “church”?
• What if I am a solitary practitioner?

Previously:

• End Tax Discrimination Now!

The following types of contributions to O.T.O. are tax-deductible:

• Grand Lodge Dues
• Local Body Dues
• Donations to your local body or to Grand Lodge directly. This includes cash donations such as jar contributions at Mass and admissions to events, and also donations of items (at fair market value).
• Unreimbursed Expenses – if you buy candles or roses for your local body out of your own pocket and are not reimbursed, you can deduct these expenses as charitable contributions.
• Mileage – you can deduct 14 cents a mile, plus tolls and parking, when you use your car to provide services for O.T.O. purposes. This includes driving to and from your local body if you are an officer or otherwise helping out.
• Travel – you can also deduct the cost of airfare, lodging, meals, and local transportation if you travel for O.T.O. purposes at your own expense. This includes NOTOCON, Kaaba, Initiator Training, etc. if you are a member of a local body, therefore representing your local body at a national or regional convention.

The following types of payments to O.T.O. are generally not tax-deductible:

• Initiation Fees
• Bar Tips, Feast Fees
• Newsletter/Journal Subscriptions
• Purchases of Books, T-Shirts, etc.

As a general rule, it is not deductible if you get something tangible in return. Initiation fees generally cover actual expenses incurred in providing the initiation, exclusively for your benefit, and would therefore not be deductible. If you pay for food, drink, products, etc. then you are receiving something tangible in return and the cost is not deductible.

There are some grey areas such as fundraising dinners, raffles, auctions, etc. for which it would be prudent to consult with a qualified tax advisor before listing them as a deduction.

Feel free to comment here or contact me privately with any further questions or to ask about particular situations.

What do all these groups have in common? Christianity, of course. In spite of the Constitution’s prohibition against “law respecting the establishment of religion” the U.S. government provides billions of dollars in subsidies and tax relief to Christian churches every year.

Their best-kept secret is that you don’t have to be Christian to take advantage of the same benefits they do!

Buried in the tax code are the words:

There is no single definition of the word “church” for tax purposes… church includes mosques, temples, synagogues, and other forms of religious organization.

And although they will only begrudgingly admit it, this includes covens, circles, groves, orders, lodges, and other pagan and magical groups. So the first thing to keep in mind is that anywhere the IRS uses the term “church”, your group may also be included.

Coming Next:

• What benefits can I take advantage of as a member of a spiritual group?
• How do I know whether my group qualifies as a “church”?
• Does my group have to register with the IRS as a “church”?
• What if I am a solitary practitioner?

Stay tuned to this blog for these articles coming soon!