(00:00:00) How to make some money from free time I can't imagine a more interesting topic and we have two experts today to talk to us about the subject of how volunteers can can get some tax deductions and also how artists and other people who might have a difficult time keeping records can also benefit from some tax deductions. The experts are Helena soudan berga tax consultant with Cooper's library and public accounting firm in Minneapolis. In fact is we were just talking Helena the number one accounting firm in the world right now and also with us seal Victor attack specialist for performing artists and other nonprofit organizations. I shouldn't say performing artists and other nonprofit organizations some performing artists make money after all welcome to both of you on midday today and I'd like to begin Helena by asking you who are the people who can benefit from the kind of information we're talking about today tax deductions for volunteers (00:00:57) anybody that files a tax return and Gets over this quote 0 bracket amount if they have enough deductions, they can benefit by deductions for volunteer services (00:01:10) Now by volunteer services. I'm thinking of all of the men and women who volunteer for Hospital work various social work with social agencies work for church groups. How do you define the various categories that people can and cannot take deductions for (00:01:27) anything that sets a tax-exempt group. It could be the Minneapolis opera or anything where they get their money from donations or things like this and you volunteer your services. You don't get paid for what you do those would be deductible. (00:01:45) Now these deductions mileage special clothing required those sorts of things (00:01:51) right mileage is deductible at 7 cents a mile. You should keep a track of the miles at that you drive for those volunteer. And also in addition to the seven cents a mile you get parking if you have to come downtown to a meeting of a non-profit group and you have to park out there that parking is deductible also, so you keep a track of that (00:02:14) but no expenses for example Insurance costs for the car. (00:02:17) No, no no insurance suits it strictly at 7 cents a mile. Now. There is an alternative you can keep a track of the actual expenses, but it gets to be a very horrendous job of keeping the records for that. (00:02:28) I was going to say this issue of record-keeping see all ask you about that in a moment as regard to as regards the Performing artists, but Elena, what about people who are volunteers? What is the best record keeping system you can recommend (00:02:42) a little logger notebook that they carry with them and mark down the miles from home to where they're going whether it be to a hospital or are to whatever nonprofit just keep it in the glove compartment. (00:02:56) Now, there are a variety of other categories according to descriptions. I heard of what is possible for tax deductions things such as any materials used for an organization. We mentioned clothing for (00:03:08) example, right if you have to have a special uniform see say you're a Hospital volunteer and you have to get a special cover all or something the cost of cleaning that plus the cost of purchasing that is deductible and you should keep the receipts on anything that you (00:03:23) get. Is it your experience hella know that a lot of people don't know about these deductions and as a result aren't taking advantage of them. (00:03:29) That's that's very true. Yeah, a lot of people volunteer their services and you know, they just think well, this is something I'm doing but they never know that they've really got a very good built-in tax deduction here. (00:03:41) Can you in any way average what volunteer might be able to expect for example, I'll ask it this way. What is the largest amount of money that you are aware of that a volunteer has been able to deduct we don't have to give names. I don't (00:03:55) know I guess, you know, I volunteer for a lot of things myself and The several hundred dollars a year when you start adding up mileage and little supplies if you have to have postage for mailing certain things. And as long as you keep a track of all that stuff and you've got a record of it it get can add up to several hundred dollars a year or more depends on maybe all your time is volunteer time. Now, we're gonna (00:04:17) sorry now, we may all be very conscientious and keeping our records and the little logs in the glove compartment and so on and so forth. What is the attitude of the Internal Revenue Service towards these volunteer deductions? What is your experience in Audits? And and other questions at the IRS asks 'can volunteers expected to be questioned quite (00:04:35) regularly. If you put in your tax return a nice schedule of you know, here's the miles. I've driven what organization it's for listing of items. If you've got some out of pocket expenses telephone calls and materials and supplies and things and you put in into your tax return a schedule that list these things. They may question at they may not if they do question it and you've got All your receipts and like I say this mileage thing which is a contemporaneous record. You're keeping it on a daily or a weekly basis daily. Preferably. Every time you go out to do volunteer work jot down the miles, you know, they accept that because it is contemporaneous evidence and and you've written it down at the time that you're doing a (00:05:17) service now, you are a certified public accountant Helena, so I'm sure you're completely objective in answering this next question do volunteers seeking deductions tax deductions need outside professional (00:05:28) help if they can do their own tax return they can keep these records not necessarily she struggled with the (00:05:38) answer for objectivity one over. Yeah, that's good. We'll return in a moment to talk more with Helena. So tandberg about some specifics of tax deductions for volunteers, perhaps get a couple of case histories from your to about people who have performed various volunteer tasks and taking tax deductions and want to talk now for a moment with Co Victor who is a tax specialist. Performing artists and nonprofit organizations, see how I recall a hearing a few years ago that the death knell was founded for lots of nonprofit organizations and for some per individual performing artists because of poor record-keeping and lack of attention to detail and financial matters. What's your view of how artists and nonprofit organizations are doing these days as they've been sort of a Renaissance in that area (00:06:24) evacuated on profit organizations are doing very very, well. They have to for the simple reason that they're they're receiving quite a bit of funding especially within the last few years. And in order to get the funds they have to have good records and as far as the artists themselves, They have they especially these young struggling artists. They really have to learn record keeping because so much is deductible and allowed to be deductible on their jobs that if they don't keep Good Records we can use an estimated amount for them. But I always warn them that if they're called in by the IRS, it might be thrown out for the simple reason that we don't have good record-keeping for them. (00:07:18) I've I've known of a few Community organizations some neighborhood groups, for example, full some men's or women's Glee clubs or some neighborhood entertainment groups of various kinds of they have formed and they have discovered that maybe they'd like to stay in existence for just longer than a few weeks or perhaps one year and as a result they may file to become a tax exempt or nonprofit private Corporation or organization of some sort. What is the single greatest problem? Do you think that these organizations run into in their (00:07:47) van? The accounting of the funds and so and most of them though, excuse me, but most of them usually they elect someone as treasure that's really gun. Ho you know and wants to do a terrific job and they make a point of finding out and nine times out of ten you find that there are people that have been in business or are in business and they know what is expected of them. In addition. There's the the form I don't know the publication right now for nonprofit tax reporting, but they have to report, you know once a year (00:08:24) and I'm sure many forget that to perhaps. What is the dollar limit do you think at which point a nonprofit organization should perhaps turn over the books to a professional or somebody with some training and keeping (00:08:35) books? I don't think that there is such a thing as a dollar limit. It depends upon. The requirements of the organization itself. For instance. I do work with Minnesota Opera and I go in once a month and more or less go through the books and post to the general ledger and give them a statement. But at the end of the year, we bring in a professional firm. Hmm because it is required by the National Endowment and the other organizations that we have a bona fide certified accounting record. (00:09:13) All right. Now, let's say that a nonprofit organization has established itself is keeping records, but something goes wrong the donations don't come in it flops. It closes down stops business, but then tries to resurrect itself. Once again later on. Do you find that situation a number of times where a nonprofit organization will try to essentially reorganize and then build it. So (00:09:36) no. I haven't. I really haven't I haven't come in contact with it. And I don't usually when they go fall by the wayside, the smaller ones they fall by the wayside. I mean they if they do try to reconstruct and resurrect what has gone on in the past very few people know about it. It's held by just a few what are some of the benefits (00:10:03) than for a group of people in a community or a neighborhood who might want to become a nonprofit organization. What does it allow them to do? (00:10:10) It allows them to raise funds to give Benefits and to raise funds that are that they can use to further whatever the purpose is of their organization. But of course, you know they have to do they have to first of all pass the criteria for a nonprofit organization. You just can't say I'm a nonprofit organization and this holds true with the post office and the (00:10:39) IRS. So there's quite a variety. (00:10:41) Yes. And in fact, I have found a case in point where the IRS is. Okay, you're a nonprofit organization, but the post office has (00:10:49) no so you find quite frequently than that. The nonprofit organizations will run afoul of some federal agency want to return now to Helena so danberg certified public accountant and talk a bit more about some of the deductions for individuals. We return to seal Victor in just a moment to get some additional tips on how artists can keep their records in some of the particular problems with artists who have Lovely wild fluctuations in cash flow, but he'll and I wanted to put to you a question that has been suggested to us from a listener can people deduct the cost of childcare while they're doing volunteer work. In other words. Can you deduct the cost of a babysitter as well as mileage when you work for a nonprofit (00:11:31) agency? That's an absolutely big No-No there are cases and cases on that. The childcare itself is not the expense of the childcare. He's not giving anything to that non exempt organization and they're very many cases on that and they've all come down. Absolutely. No and it's a funny thing, you know, because you couldn't go do the volunteer work unless you got a babysitter but that's its case law says you can't do it. All (00:12:01) right. Now what about volunteers who find themselves moving into a capacity that is perhaps almost Beyond volunteer work and involves fundraising in some instances where there is entertainment involved where they have to Wake up attentional donors out to a meal or where they have a party in their home or a gathering in their home of some sort. How do tax deductions applies apply to Volunteers in those (00:12:23) instances the meal type of situation or a fundraising event in your home where see your you become the fundraiser for the group or the president or something like this. It's just like business deductions. You have to keep a track of who you've invited. There were some funds actually raised at this fundraising event type of thing. Keep a list of the names of the people attending and then your expenses and that is a deductible item because you are giving its out-of-pocket costs for you and you're raising funds for that organization. (00:12:59) I think I almost know the answer to this next question, but I'll go ahead anyway, what if a person has been a volunteer for say five years and it's just now hearing your description of tax deductions for volunteers are their deductions allowed for activity retroactive deductions. (00:13:13) You can Back in a minute your tax returns for three years. If you've kept the record so that you can prove what you've spent. But if there are no records there are doing records. I'd be hard-pressed to go an amended return because it could get examined and and get thrown out. If you don't have the records to back it up and (00:13:28) then in that case you'd have to make up the (00:13:29) difference have to pay it back. Anyway, (00:13:31) these are questions that would seem to get very detailed and I imagine at this point a person in those circumstances a volunteer who finds themselves in a fundraising situation of fundraising role or volunteers who have questions about past activity probably do need professional advice on this matter and you're just pulling out now and IRS publication, maybe that applies (00:13:52) this does this is it says income tax deductions for contributions its publication number 5 to 6, and it's available from the Internal Revenue Service. It has not only just the volunteer type of deductions, but it has a listing of all kinds of other contributions that are deductible and it might be a good idea for a person to pick it up and read through it and You what's available there? (00:14:15) It looks as though it's about a or an eight-page publication. And that's publication number 5 to 6 is Helena pointed out income tax deduction for contributions. This is the 1978 Edition and I imagine that it is revised probably every year almost every year and that's an IRS publication. I suppose he'll that the same publication is important for people who you consult with. I wanted to return to you as he'll Victor for just a moment to talk about artists individuals who perhaps want to remain independent of any structure whatsoever, but who may run into financial difficulty because of lack of record-keeping is that something you find every now and again, (00:14:54) well, especially when they start out, you know, they're such dreamers and they're so creative that they don't stop to think of the administrative phase and all of a sudden they've run out of money and the the important thing for them to realize is that if they would learn the easy To keep accurate record of their expenses as and if they would only bear in mind that the minimum that they would save as at least 25 cents on every dollar as a rule that seems not yes. If not more if they would just keep track of every penny whether it's by check or by cash. I prefer that they they have credit cards and they have that they and they pay by check and I really I just love teaching them and you'd be surprised how meticulous they become in their record keeping a few of them. Don't they still bring me what we call the shoebox, you know with all the receipts just piled in there, but most of them are very meticulous because when they stop to think that everything That is an expense for their profession as deductible, you know, especially even makeup or clothes and things of that nature. (00:16:14) What about an artist who sells an art object that has a high price tag on it so that there is an unusually large lump of income in one period of time I would imagine that the tax rate is is no different but perhaps later on in the year when the artist is low on money that it can be a real hardship for paying these taxes. How do art is how can artists even out their (00:16:38) cash flow? Well, they have to estimate their what their earnings are going to be for the year and what their total income will be and Uncle Sam insist on his slice four times a year estimated taxes or by the same token. If there isn't going to be a large change they can use the basis of their previous years tax bite by the IRS and State of Minnesota and use that as a criteria for their estimated (00:17:08) payments. Now, what about the issue of social security or withholding plans are there plans were withholding taxes for (00:17:14) artists not as such for Social Security but they do pay a lump sum at the end of the year on their net profit not the gross profit, but on the net profit (00:17:26) and you mentioned that there are a variety of deductions available to artists perhaps the same category available to volunteers clothing. Oh too many (00:17:34) more there. It's amazing because especially performing artists has coaching music stereos that they can depreciate in certain cases TVs that they can depreciate its jet with there's at least a good hundred (00:17:53) items. But again records are critical I suppose this value, especially when it comes to this issue of depreciation, and I wonder if you could explain how that works because many artists of course have very high. Items in terms of equipment (00:18:06) but let's say they bought a stereo that is very important for them to so they could sing and record their own music and play it back and they can the the criteria usually is about a 10-year that a livable that the stereo will live about 10 years. And then that that they can depreciate it over a 10-year period (00:18:34) we want to get just a bit more information on the bookkeeping arrangements for our individual artists in just a moment. But we have another question that a listener is curious about not so much a question perhaps Helena is a is a common and as The Listener points out not just any nonprofit organization not work for just any nonprofit organization is deductible. What's the explanation for (00:18:58) that? They mention a country club here. I guess when I think of nonprofit organizations and always comes to mind its thing. Like an all volunteer work at hospitals are at a art institute or the orchestra plays or something The Listener mentioned a country club. I guess I've never thought of a country club as a nonprofit organization and I guess I wouldn't volunteer my services there. But yes, that's true. It would have to be for charitable or educational purposes that type of nonprofit (00:19:25) organization. Alright, and in some cases there are organizations who are incorporated as a non-profit private Corporation, right? But who do not qualify as charitable organizations, right? And that is a very important function (00:19:38) right? Because I know we were talking when we started out that it'd be like for Hospital. Yeah things like this and that stuck in my mind calendar wouldn't it be according to the list put out by the IRS? There's a big publication that lists hundreds of thousands of nonprofit organizations that fall in the category of charitable and educational. So everything if (00:20:01) people do have a question about whether or not a particular organization they are Hearing for is eligible for tax deductions. They can call the IRS (00:20:08) or the public library in the Direct business directory department. They are very happy to look it up for you. (00:20:14) All right, see how I want to return to you with this question about a bookkeeping system for individual artists. What do you recommend along those lines? (00:20:21) Well, I recommend that the bill do a billing or keep track their sales just the total sales. And then I also recommend that they use a spreadsheet. You can buy these columnar pads at run. Even I guess 20 columns don't they Helena and were they and as I said, I prefer that they pay by check and they could just put the titles on top of each column of the of the things that are deductible for their business and they list the date and the name to whom they wrote the check the check number and then just spread the check right across then and they can do this monthly when they get their bank statement of takes no time at all. And the meantime they should have a phone. Older or let's say four folders one for each quarter that they throw their receipts in in the order in which they pay them (00:21:12) so they can use the shoebox. Technically. Yes, right that's (00:21:16) still have a recap. So at the end of the year, all you have to do is total up the columns and handed either to your accountant or do your own work. And by the way, I feel that volunteers can do their own taxes. They can always go down to the IRS is just marvelous about helping people that come into their office and so is a state of Minnesota and they could just go right down there and they'll help them fill in their their (00:21:41) form. No, I suppose. This is a particularly important time of year perhaps for volunteers and artists were coming up on the close of 1978 here Christmas season, and let's let's draw the conclusion to this discussion by first asking Helena, what are some things that people should be doing right now if they haven't caught up in their record keeping and as they look towards filing there. Their tax returns. (00:22:06) Well some things of course, you can't go back and and get the records on like mileage you can if you know where you've gone and you know the dates if you've kept a calendar of places you've gone and you know, how many miles it is there and back you can just repeat that. I mean, you know, that's you don't have to go back and say well I wrote it down every day because you know what the mileage is, (00:22:27) but your organization and your volunteer for may have a record check (00:22:31) sure they probably have dates that you helped out over there (00:22:35) what other things can you estimate like that (00:22:37) mileage? Well, there is an awful lot. You can estimate you really have to keep track of it at track of it job where you can go back through your checkbook. Maybe there were things that you wrote and it comes to mind this went for whatever group it was for and just go back and check and see you know things in the check register ring a bell or something. Hopefully, they've got receipts if they haven't got receipts canceled checks are still the second best thing. You're better than nothing (00:23:06) NCO. What about individual artist anything special at this time of year that they should be paying attention to now as we draw to an (00:23:12) end, I have to go back. They should go back and try to resurrect the entire year for themselves up as to every expense that they have paid out for their business and also in quite a few of them work out of their homes, and it's very important for them to find out what percentage of their home they can take as a deduction in addition to the percentage of their car. Yeah, does there's there's a phenomenal list of things that they can take? (00:23:43) That's what I'm afraid of and as I explained to both of you at the beginning of this discussion, even before we went on the air. I'm a complete novice on Tax Matters and I get the feeling from this discussion that there are so many questions that volunteers and artists and nonprofit organizations should have answered so many questions to be answered that there must be a single Source. I presume it's the IRS or the state income tax office, but haven't you found that often as not you have to know the question to ask before you can get the right information or the halfway the (00:24:11) IRS? They don't tell you anything volunteer. All right, so wonderful, though. They really are in there. They're very cooperative. And if you're called in on audit, if you have good records, you have no (00:24:24) problems. So where should people go if they do need to get some of those questions asked that they don't even answers to questions. They don't even know we have publication 526 I suppose theoretically they should contact (00:24:36) her they have another public. Asian for a small business that they can get from the IRS. I do not have the number but if anyone's in business for themselves, the IRS has a marvelous package of forms that they have put out within the last year. I don't know if Helena seen it but it it has everything in it including the tell you how to handle and hiring of new employees and what you have to do for for the correct record keeping for the IRS and it comes in a folder and its really it's a wonderful wonderful record and they can get that by just calling the IRS number. Do you have their phone number Helena? (00:25:15) I have an IRS number right here. That's 1 to n 1 1422. That's the Internal Revenue Service Office in st. Paul today 114 (00:25:25) 22 and they will send this folder out to them and free of charge that you can call for the contribution from you call them for almost anything and they send it out free of (00:25:36) charge and we haven't even Touched on the issue really of state taxes and that's a different category. (00:25:42) Not really if it once you've done your federal taxes your state taxes take over. All (00:25:47) right, but if you're they have any questions about that the telephone number for state tax information. We didn't warn the state of the IRS would be giving about I can see the phone's jumping now 296 3781. That's the telephone number for state of Minnesota tax information to 9 6 3781. Well many questions still to be answered. All we can do is wish people the best of luck in getting the most out of their tax forms for this year and for following years our thanks to Helen Asotin berga, certified public accountant in Minneapolis and seal Victor a tax specialist for helping artists and other nonprofit and other and nonprofit organizations and our thanks to both of you for joining us today on midday.