Find solution
Can non-profit organizations pay income tax?

Do I have to pay taxes on services done to non-profit organizations?

  • I will be starting a sole proprietorship soon as a freelance web designer/developer as well as computer repair. I have a bunch of leads with non-profit organizations once I start out. Do I have to pay income and self-employment taxes on money received by non-profit organizations? Someone told me since they are tax exempt that the IRS won't charge me tax on all the profit from these sources. I am in the state of Florida.

  • Answer:

    As usual when "someone" gives you tax advise, it isn't even close to correct. You'll still owe tax on the work unless you donate it. If they pay you, what they pay you is taxable income, no different from a for-profit organization. They will very likely have a tax exemption certificate which will mean you won't charge them sales tax, that's the only difference. If you donate your services to a 501(c) organization, you can deduct your out of pocket expenses if you itemize, but not anything for your time.

mrcsrcvr at Yahoo! Answers Visit the source

Was this solution helpful to you?

Other answers

They may be tax exempt, but you are not. You will still be liable for income from whatever source, even from payments you earned for work done for a non-profit organization.

Damocles

The non-profit organization doesn't pay taxes on money it receives that is part of its function. You, on the other hand, are always expected to pay federal income taxes on money you earn. Ask that someone who told you otherwise to show you some proof. I doubt that he or she will be able to do that and anything you are given that claims the income is tax free to you is not to be trusted. The US courts have repeatedly bashed tax protester's arguments and sent many a protester to jail. Florida doesn't have an income tax so you only have to pay federal income taxes and self-employment taxes. SE taxes are like Social Security, but because you are both the employer and employee, you pay both halves of the tax. The stated rate is 15.3% on income up to $106,800 this year, but after deducting the tax from itself, the actual rate is closer to 14.1%. One rare exception is for employees of foreign governments who are citizens of that country. I hope this helps. Gary

garyg7

"Someone" is ignorant. The fact that a customer is a non-profit organization does not make YOU a non-profit organization.

Woof

You are very wise to seek intel beyond what "they" are telling you. Go to IRS.GOV and download a free Pub 17 for refer to and reading for tax intel. If you are in a web design business then whoever or whatever your client is(are) has no bearing on anything pertaining to you. You list your gross receipts and apply your expenses on your Sch C to get a net figure. Whether your client is a zoo or tax exempt church is totally errelevent.

acmeraven

Any time that the statement starts with "someone told me" you can bet that it is wrong. The non-profit may well be tax exempt but you are not. Anything they pay you is treated just the same as any other funds you receive for services. I just gotta meet this "someone" person someday.

Mathew

Caveat said it correctly. Your buddy is an Ignorant S.O.B. You should fire him and just ask the Yahoo community. In any case, a not-for-profit doesn't pay tax itself, but all their employees do. Think about a not-for-profits CEOs. the CEO of Boy Scouts of America and the Red Cross earn $1,000,000+ a year. Both are not for profits, but do you think the CEOs get a tax break? K.I.S.S: You will owe tax!

Dawson

the non profit may be tax exempt but you are not no, you report any and all income you have from your own business on sch C and yes, you pay self employment tax, approx. 15.3% of your sch c 'net' on Sch SE, included in your 1040

tro

THEY are tax exempt. YOU are not.

Related Q & A:

Just Added Q & A:

Find solution

For every problem there is a solution! Proved by Solucija.

  • Got an issue and looking for advice?

  • Ask Solucija to search every corner of the Web for help.

  • Get workable solutions and helpful tips in a moment.

Just ask Solucija about an issue you face and immediately get a list of ready solutions, answers and tips from other Internet users. We always provide the most suitable and complete answer to your question at the top, along with a few good alternatives below.