Leah Cole, Leawood graduate student, presents tax-form research to non-profit organizations Friday afternoon at the United Way Building in Lawrence. Cole and classmates spent many hours over the past month researching the changes made to the new tax forms designed to increase transparency of information.
Monday, October 26, 2009
Eleven graduate students left the relative safety of their white-walled home in Summerfield Hall Friday to venture out into the Lawrence community for some volunteer work.
The accounting graduate students met with several non-profit organizations or, as they like to call them, “tax-exempt entities,” not to paint buildings or answer phones, but to do what they do best — talk about taxes.
Changing the System
The changes for filing for next tax season will affect student groups because the Internal Revenue Service lowered its filing requirements, meaning all non-profits – including student groups – are required to file a version of the Form 990 next year, regardless of the size of the organization.
Form 990 exists in three forms: Form 990-N, Form 990-EZ and Form 990.
Most student groups on campus must file the shortest form, Form 990-N, within four and a half months after the organization closes its books at the end of the tax year, said Racquel Alexander, assistant professor of accounting. If they don’t, she said, the International Revenue Service will take away their tax-exempt status and require that the organization pay penalties for failing to file.
Though student organizations have been required to file this form in the past, Alexander said, it’s important that their tax preparers know the changes in the forms to best comply with IRS requirements. The new forms can be found at irs.gov.
The IRS will phase in the new standards in the next three years to give organizations time to adjust.
“It was a chance to bring what we have learned in our classes and help out the Lawrence community,” said Leah Cole, Leawood graduate student.
Cole was one of the 33 students in Raquel Alexander’s “Tax Research” class to present to various non-profits last week. Eleven students presented in Lawrence, but other groups presented in Salina, Junction City and Topeka to a combined total of 50 non-profits in northeast and central Kansas.
Alexander split the class into four groups, each with the task of researching and developing a presentation to help non-profits understand the complex new forms they will complete next tax season.
“What a great way to use our knowledge to help organizations that already do such worthwhile things,” Alexander, assistant professor in accounting, said.
Though non-profits aren’t generally required to pay taxes, they are required to file what is known as a Form 990 with the Internal Revenue Service every year. That hasn’t changed since 1979, but come next March, the old form will have a whole new set of requirements and thresholds that could make filing more confusing than ever.
Alexander said the changes came with good reason. With 1.5 million non-profits in America earning a combined revenue of $1.4 trillion each year, it’s easy for fraud and abuse to corrupt a system that’s older than most students at the University. The new filing requirements increase transparency in an attempt to end the practice of using non-profits as tax shelters.
The other reason, she said, lies in the first page of the form, which requires organizations to provide a detailed explanation of the organization’s mission statement and progress.
“It provides an opportunity for organizations to brag about their accomplishments and help spread their mission,” she said.
Rather than teach the students the information from a podium, Alexander had them research the issue themselves.
Cole said she and her classmates spent about 30 hours in the past month becoming experts on the new forms to help non-profits in the region.
Anna Bliss, a graduate student from Portage, Mich., also presented Friday. Bliss said she had never worked with non-profit tax issues before this project.
“It was overwhelming to think that we were doing all this research on our own to get the information, rather than having a teacher sit down and tell us what to do,” she said.
But Bliss and Cole said the research helped them retain the information and would be useful when they needed to help their own clients someday. According to all in attendance Friday, their hard work paid off in the form of a successful, informative presentation.
Barb Bishop, executive director for Arc of Douglas County, an organization that provides advocacy and support to people with developmental disabilities and their families, said she came to the presentation to learn what she needs to give her accountant next year.
“Just because we’re tax-exempt doesn’t mean we’re exempt from following the rules,” she said.
Bishop also said she wanted to make sure she handled her donations properly.
“If they wanted to give the money to the government, they wouldn’t have given it to me,” she said. “It would be pretty poor stewardship if we gave more money than we needed to the government because we messed up the 990 form.”
After the presentation, Bishop, a self-proclaimed tax-illiterate, said she felt like a deer in the headlights. But she said she knew once she let the information sink in, she would be able to get the right details to her accountant because of what she learned from the students.
“I’m really impressed by the students’ efforts to be a part of this community,” she said.
Alexander said she has had her “Tax Research” students participate in a different service-learning project each semester since 2005, when her students helped the victims of Hurricane Katrina. Other projects involved aiding residents of Greensburg and providing tax education for performing arts organizations.
— Edited by Abbey Strusz
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