What is cancellation of debt income? We all understand that if I give someone ten dollars, that's income -- they received cold hard cash. It is a little harder to understand, but if you borrow money, you still receive cash, but it is not income. Why not? Because you...
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What do I do if I receive a Notice of Deficiency from the IRS?
Question. What do I do if I receive a Notice of Deficiency from the IRS? Answer. You will get this letter if you owe additional tax or other amounts for the tax year(s) listed in the letter. The letter explains how to dispute the adjustments if you do not agree. If...
How do I appeal an IRS Audit?
Question: How do I appeal and IRS Audit? Answer: First, after you audit, the IRS sends an examination report with proposed adjustments to the taxpayer; these will also include additional penalties and interest. Assuming you don't sign off and return a copy of the...
What is a Small Tax Case?
Question. What is a Small Tax Case? Answer. “Small tax cases” are handled under simpler, less formal procedures than regular cases. However, the Tax Court’s decision in a small tax case cannot be appealed to a Court of Appeals by the IRS or by the taxpayer(s). If you...
What are “directly connected” expenses?
Question: What are “directly connected” expenses? Answer: Deductions incurred solely because of the unrelated business are known as directly connected expenses. These are expenses that wouldn’t be incurred if the unrelated business didn’t exist. For example, the...
When is Unrelated Business Income Taxable?
If your nonprofit engages in inactivity unrelated to its exempt purpose, you may have Unrelated Business Income that is taxable. Unrelated Business Income is the income from a trade or business regularly conducted by an exempt organization and not substantially...
Reinstatement of Tax-Exempt Status after Automatic Revocation
Question. My organization's tax-exempt status was revoked by the IRS. What can I do? Answer: If an organization has had its tax-exempt status automatically revoked and wishes to have that status reinstated, it must file an application for exemption and pay the...
Avoiding the Taxation of Corporate Sponsorship Donations
Question: How can our organization avoid the Taxation of Corporate Sponsorship Donations? Answer: One effective way for a nonprofit to generate revenue is to pursue a corporate sponsorship wherein the sponsor makes cash or in kind donations in exchange for public...
Was your Offer in Compromise rejected? Appeal.
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the...
How can I get a copy of my tax transcript from the IRS?
Question: How can I get a copy of my tax transcript from the IRS? Answer: The bankruptcy court requires tax returns or tax transcripts with your bankruptcy petition. Either one is acceptable. If you don't have a copy of your tax return you can request a tax...
A Primer on Private Foundations
Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a)). In...