Donations Taxed (1 Viewer)

DChiJEllis

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I donated to the server fees this month, but got hit with $1.95 tax where I haven't before. I didn't think donations were taxable. And if they they are, we need to note this in the donation page.
 

xydrine

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I donated to the server fees this month, but got hit with $1.95 tax where I haven't before. I didn't think donations were taxable. And if they they are, we need to note this in the donation page.
Well unfortunately RDF is not a 501c3 or actual charitable organization so I still have to pay taxes on all incoming donations/Premium Memberships so I will make sure a proper notice is displayed to those who do donate/purchase a Premium Membership going forward.
 

samq45

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Well unfortunately RDF is not a 501c3 or actual charitable organization so I still have to pay taxes on all incoming donations/Premium Memberships so I will make sure a proper notice is displayed to those who do donate/purchase a Premium Membership going forward.
Is this some sort of a sales tax?

If you have donations as income and then have the related expenses for server fees, rent etc, there should only be income tax on the net difference.

If you are charging an extra amount that is not sales tax, that is just more revenue to pay income tax on, unless I am understanding this incorrectly.
-- Double Post Merged: --
After thinking about this a little more, the donations should be considered a gift as the amounts are not set, you can use the form without making a gift and people donate different amounts.

This is just like Just like GoFund Me. As long as the donation is less than the annual exemption, which it must be for each member. There is no tax forms or anything else due and the donation would not be subject to sales or income tax.
 
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sdrawkcaB

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Edit: I removed my original post here as I am not a CPA nor a professional in tax law. Another member pointed out to me privately that I'm not correct with my earlier statements, thus they've been removed so as to not add to any confusion.
 
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thanks

for all the fish
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I would consult with an accountant before brushing off options. I know some 501(3)c's that are small and do not have any bonds....
 

MurrayB

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This can get real complicated. I support other websites and forums without a sales tax tax burden. Perhaps it has to do with PayPal documentation involving RDF/XYD.

It bears looking into perhaps there are forum members that are conversant with tax laws.
 

DChiJEllis

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My last two donations were not taxed; so something changed in the way that it's processed between last year and this year. I'm not saying that it's wrong, but you should advised members that a tax has to be applied, if it's appropriate to collect one.
 

samq45

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Depending on the structure of the Company/LLC (which I have no idea about) there are a few ways to take member contributions without paying tax on them. For example a Grocery Store Co-op Membership (not the food you purchase) can be structured to not pay tax on it. In some cases the initiation fee for a country club can be set up in a similar way.

For the member upgrade fees and other membership type fees where you are receiving an upgraded service, (not donations for the server) those would certainly be taxable in a normal company/Schedule C setup.

It might be more pain than it is worth however to avoid the taxes with the recordkeeping requirements, and probably easier in most cases to just pay the tax on the net proceeds after the expenses are accounted for. Could also be cheaper to do it this way than to have a not for profit with the required additional 990 filings, etc. Not for profits are somewhat expensive to operate due to the rules.
 

gmcv893

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I can discuss details if someone wants to PM me as I profess to be a number cruncher. As stated above it depends on how you file your articles of incorporation (501C vs. LLC, etc). That being said 501Cs can be complicated (tax form is like 25 pages...). So it depends on the intent of the entity, and also the location of incorporation.
 

xydrine

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My last two donations were not taxed; so something changed in the way that it's processed between last year and this year. I'm not saying that it's wrong, but you should advised members that a tax has to be applied, if it's appropriate to collect one.
No but I've still had to pay tax per PayPal's instructions for non-501 organizations on ALL "donations" and Premium Memberships for ALL transactions I've ever received. If you guys think it's not fair for you guys to have to pay the tax on "donations" and Premium Memberships then we will adjust the cost of these transactions to account for taxes, but the bottom line is I *HAVE* to pay taxes on these transactions to the US Government every year, regardless of what you guys *think* should be the case. Unless we are registered as a charity organization with the government, which is NOT possible because we are NOT a charity and shouldn't be considered one, then these transactions *HAVE* to be paid taxes on, by ME, again, to the US Government.
-- Double Post Merged: --
No but I've still had to pay tax per PayPal's instructions for non-501 organizations on ALL "donations" and Premium Memberships for ALL transactions I've ever received. If you guys think it's not fair for you guys to have to pay the tax on "donations" and Premium Memberships then we will adjust the cost of these transactions to account for taxes, but the bottom line is I *HAVE* to pay taxes on these transactions to the US Government every year, regardless of what you guys *think* should be the case. Unless we are registered as a charity organization with the government, which is NOT possible because we are NOT a charity and shouldn't be considered one, then these transactions *HAVE* to be paid taxes on, by ME, again, to the US Government.
As a side note, this is absolutely not a way to get more money out of you guys. Again, donations are entirely up to you - hell, premium memberships are as well, but again, taxes are unfortunately just a reality for ANY transactions that are made to organizations like RDF, regardless of what we think of them or not.
 
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MurrayB

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I make monthly donations to support another site. Coincidentally, I changed from a credit card to PayPal earlier today. I just removed PayPal and went back to a credit card.
 

xydrine

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I make monthly donations to support another site. Coincidentally, I changed from a credit card to PayPal earlier today. I just removed PayPal and went back to a credit card.
I'm absolutely not a fan of PayPal but the reason we use it here is because PayPal is so widely used. I do have access to a merchant account with Braintree Payments and can process card payments directly, and that's possibly something we should explore going forward to work around PayPal/tax-related issues with that, but after what happened with Stripe/Chargebee I'm so hesitant in that. If we did that, I think payments would have to be processed directly and no card information would ever be stored on their servers or ours. It's something to think about.
 

DChiJEllis

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I didn’t say it wasn’t fair. I just said we should be transparent. Do whatever you think you need to do.
 

xydrine

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I didn’t say it wasn’t fair. I just said we should be transparent. Do whatever you think you need to do.
I know, I wasn't saying you did - I was just stating that for anyone who was thinking it (people think the darndest things ;)). But I agree, transparency is ideal.
 

MurrayB

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Perhaps a complete re-look at the PayPal "paperwork" to see if there was some "over caution" which resulted in the current situation.
 

xydrine

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Perhaps a complete re-look at the PayPal "paperwork" to see if there was some "over caution" which resulted in the current situation.
Current situation, what do you mean?

There really is no current situation, it's how it always has been. Payments need to be taxed. :shifty:
 

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