JJ Luna

Re: Nonprofits

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Happy 2008, JJL and all! My question is for Steven, who got a TIN for a nonexistent nonprofit publishing company. Did you apply for the TIN as a 501(a) religious organization or 501(c) other nonprofit corporation? If the latter, when the IRS sent you the document that verified the TIN you applied for, did you notice a dates for filing periodic information returns/reports like quarterly and annual reports for the nonprofit (usually a 990 of some type)? Donations, including the vehicle, valued at more than a certain amount may count as reportable property/assets for the nonprofit, even if not taxable. (And, if you're not certain types of religious nonprofits, you need to file for a tax exemption.) If you don't file those periodic information reports and identify your nonprofit publisher's assets to the government, you may get audited. Then what? If you claimed to be a religious nonprofit, you may be exempt from filing requirements but you may still be caught. And why didn't you just get a TIN for an single member LLC for which you aren't required to file any returns in the name of the LLC? (You file any income for the LLC on your 1040 Schedule C and pay self-employment taxes on another Schedule, just as if you were a sole proprietorship, without naming the LLC!) If you weren't required to show any documentation to the state where you registered the vehicle to prove the existence of the nonprofit, you probably wouldn't have had to provide proof of the LLC's existence and ownership. Now, however, you've put your nonexistent nonprofit corporation (or ministry...I'm confused as to which it is) in the state's databases and, therefore, on its radar. (And, by having the plates run, it's also now in police records.) The state tax authorities (which tend to be more aggressive for small amounts of tax liability than the Feds), too, may notify your "organization" of state information return filing requirements it hasn't met (states have different laws and rules for nonprofits, even religious ones in some cases) and decide to audit your nonprofit if you fail to comply. Most states have a reciprocal reporting agreement with the Feds so they may notify the IRS that you're failing to meet reporting requirements and/or that your TIN may have been used for fraudulent purposes. (Or, someone else could report suspected tax fraud to the IRS based on your fake nonprofit TIN.) Then what? You have to admit the "ministry" or "publisher" is bogus and that you've obtained a tax ID and registered property using it fraudulently? It's far more expensive to defend yourself against the IRS and other government agencies for a fraud charge than just form a legitimate nonprofit (which is far more expensive to set up and administer in most states than an LLC!). And, no matter how you explain this to any tax auditor or government agent, it sounds shady and could cause you serious trouble. Sure, you may not be caught--ever. But, you may be playing with fire so be careful, especially if you and your wife decide to take a tax deduction for the "donation" to the nonexistent nonprofit. I'd be rethinking whether I could afford the consequences of being caught doing this or if I should just bite the bullet and spend the money it costs to set up a NMLLC. (I did mine, on my on own, using a ghost address, my mother as my nominee to sign papers and my Dad,who lives in NM, as my registered agent.) If you're clever enough to come up with this scheme, which is illegal, you can certainly download and complete forms on the NMLLC site and establish your LLC and pay for registered agent services to meet state requirements. (Take a legal odd job or two in order to get the funds together to pay for the LLC, which doesn't require a TIN to use to register/title a vehicle or title real property.) As I've said before, DON'T play fast and loose with the law in order to obtain privacy! That's not the purpose of JJL's books and you risk being caught! When you are, FORGET about privacy! And, whatever you do, DON'T mess with the IRS and other government authorities to obtain privacy because you'll really lose it when you're found out!
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