Beware: The IRS is Paying More Attention to Fundraising (even the small stuff)
Many who are involved with fundraising through a volunteer or booster club may be unaware of the related tax implications. These clubs have come under intense scrutiny recently from the Internal Revenue Service and the courts, so it is important to know the rules.
Common assumptions about the laws for fundraising and volunteer clubs, like the ones below, can lead to trouble later on.
- “We do not have to be an exempt organization. We can just operate while our children are involved and then call it quits when they are done.” This is true as long as those contributing to the group do not expect to get a tax deductible receipt.
- “We are too small for anyone to care about. We just go about our business.”
No organization is too small for the IRS to scrutinize or audit.
Dues are another tricky area. Some groups, unaware that dues will not qualify as a charitable contribution to the parties paying them, may promote a tax deduction as a benefit to join.
It's also important to avoid crediting amounts raised by a participant or other contributions toward that participant’s dues. Consult with your CPA about group dues policies and procedures (if the group has not done so) to ensure they comply with state and federal tax requirements.
As your year-round trusted adviser, your CPA can help you navigate many of the rules and explain what you need to do to protect your liability as well as the group’s tax-exempt status.