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Ask Shan-Nel Simmons Your Own Question
Shan-Nel Simmons
Shan-Nel Simmons, Enrolled Agent
Category: Tax
Satisfied Customers: 22
Experience:  Tax Professional and Owner at Nel's Tax Help,LLC
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This is a tough one. For 10 years I have been helping my

Customer Question

This is a tough one. For 10 years I have been helping my friend in Kenya with her orphanage. I know her very well and know her orphanage is legit. I sponsored three kids to go to school. My church society also sponsors a girl and then a woman (unsolicited) wanted to donate $10,000. I deposited it in the separate account I have and my bank called and said I should get a TAX id #., which I did. Now I think I have to file something, but this is just a a few people helping my friend. I don't want to have a 501 c3 or anything like that. I just don't know what to do. ALL the money goes to help the kids in Kenya at one orphanage. No one gets paid anything and I donate my own money to send mail, etc. I called IRS and they suggested a 990EZ but that is for Return of Organizations exempt from Income Tax. I don't think I quality for this. Maybe I should just withdraw the money from that Shepherd's Home fund account and close the Tax ID? number. The more I read, the more confused I am. Thanks for helping. Pam Broiles, Wells, NY
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: I do not solicite donations or hold fundraisers and all money sent to Kenya has a big paper trail.
Submitted: 1 month ago.
Category: Tax
Expert:  Shan-Nel Simmons replied 1 month ago.

First, that is very nice of you to help the orphans in Kenya.

So, your friend, not you, is helping with the orphanage. You are merely gifting your friend money. But you could be subject to gift taxes. For the annual limit you can send to anyone as a gift for 2016 and 2017 is $14,000 per year. So if you only sent $10,000 a year, you are fine. It is a gift and it's under the limit.

Now, you cannot deduct this $10,000 if it is truly a gift. Since the organization is in Kenya, if it is a charity and you would want to treat it as a charitable donation, one would have to research if the US has a treaty established with Kenya.

So as long as it's a gift and you did not exceed $14,000 for the entire year, you will not have to worry about reporting it as income but cannot claim it as a deduction.

I do think the IRS misunderstood you and probably thought you were running the organization. It seems like you are merely a person gifting the orphanage.

But again, be careful about possible gift taxes.

Expert:  Shan-Nel Simmons replied 1 month ago.

Glad to help. Please leave a five star rating.

Customer: replied 1 month ago.
Hi Shan-Nel, Thank you for your response. I originally had the Shepherds Children's Fund under my SS number and then when the kind lady donated $10,000 (apparently, she sold three senior citizen homes in Long Island)....my bank called and said I should get a Taxpayer ID number and then changed the titling of account. Although the" business "line of the form when I opened the account says "volunteer group". I have copies of her licensing as an orphanage from Kenya and she is the ONLY one I send the money too. It's used for food, improvements and about five of us sponsor a student to go to a boarding school. This $10,000 was used for installing a Posho Mill so she can make some money grinding flour. Last year I used my own money to help install electricity in the compound, so they don't have to use kerosene lamps. I never intended this to be some kind of big non profit organization though.
Any way, I was researching more yesterday and saw that I can make a request to have the EIN deemed "out of service" so to speak with an explanation . Maybe I will do that and just keep the separate account under my own SS number?
This was just an extraordinary thing and generally I have about $200/$300 dollars in that account. Friends may give me $50.00 here or there when the kids are home from school or if I have mentioned a special need. Sorry for rambling on. So do you think this may be the way to go.? Thanks for getting back. Pam Broiles
Expert:  Shan-Nel Simmons replied 1 month ago.

I found this advice from this website about giving money only to foreign charitable activity: https://www.501c3.org/charitable-activities-in-a-foreign-country/

Charitable giving. This activity usually involves a US charity financially supporting the efforts of a foreign charitable organization. This topic may seem more straight-forward on the surface, but it is actually treated with greater scrutiny by the IRS than are direct activities. For example, a US charity gives money to a poverty relief program based in New Delhi, India. In principle, this is OK, so long as the foreign country or agency is not on any OFAC list (see above). The problem is the lack of direct, fiduciary responsibility for the expenditure of funds by the US organization. In our example, the US charity must ensure that the program being supported qualifies as one that would be recognized as 501(c)(3) if it were in the US. In addition, the US charity must require a detailed accounting of the expenditure of funds in order to monitor compliance with 501(c)(3) related expenditures. Should the domestic organization find out that money is not being spent in a way that would be acceptable by the IRS, the donations to that foreign organization must cease immediately.

Also, the IRS will not allow a domestic charity to be simply a “money conduit” to a foreign organization. US law does not allow such direct-affiliate organizations. In other words, a US charity cannot exist for the sole purpose of financially supporting a specific foreign charity. A US charity must be organized for specific charitable purposes that it alone is responsible for, one of which may be the support of foreign charitable work. It is best when that support is not tied to any specific foreign charity on an exclusive basis. For a new organization it is OK to name the foreign charities to be supported initially, but it would be a big mistake to make the support of those named charities the sole purpose. The IRS would probably deny the application for 501(c)(3) status. Revenue rulings 63-252 and 66-79 deal with some of these issues directly.

My advice to you at this time is seek legal aid or an attorney as your issue goes beyond what can be done here.

Glad to have you this far. Please leave a five star rating. Enjoy the rest of your day!