Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hi and welcome to Just Answer!If you have a separate business entity and you did not file for 501(c)(3) status for your entity - you may not claim tax exempt status - and all your income should be treated as taxable. Thus filing form 990 was not correct and that is why you receive a notice from the IRS.
You did not mention if your husband registered a separate business entity. If not - filing form 1120 would not be correct either. That form is for corporations. If you do not have a corporation - do not use this form.If your husband just owns the website - that doesn't create a separate taxing entity - and he should be considered as a self-employed person.Without 501(c)(3) status - all income will be included into gross business income for tax purposes - even you are receiving donations - that will be your gross business income.
The business income and expenses will be reported on the schedule C - http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
The net income (after deductions)will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required (13.3% in 2012).
Self-employment taxes from schedule SE will go to the form 1040 line 56 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
Also - she will deduct half of self-employment taxes on the line 27.Generally - that all you needs. Please review all possible deductions - that might help to reduce income tax liability.
I'm having problems getting my reply to you. It is seperate business entity with it's own EIN number. Registered as a non profit corporation.
It should say hit enter to reply. I was trying to send my reply by hitting the reply button and it wasn't working
I will switch to Q&A mode - so it would be easier to communicate.Please refresh your screen.Sorry for technical issues.
Then - you are correct - if you registered a separate entity as a corporation - you need to use the form 1120. You still will treat all income as gross business income and deduct all qualified business expenses.You may only use 501(c)(3) status and file form 990 - if apply for that status and it was granted by the IRS.
Where are you now?
Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales, property and income tax exemptions. Although most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit organization at the state level does not automatically grant the organization exemption from federal income tax. To qualify as exempt from federal income tax, an organization must meet requirements set forth in the Internal Revenue Code.
Hi, Thank you for your explanation and link to the website. That is exactly what I was looking for. I had searched the IRS website and could not come up with that - from the horse's mouth so to speak.
I have another question on a totally unrelated issue. Should I start another thread so you can bill me again or can you answer it for me here?