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Author: KLTolly One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121312  
Subject: How do I handle a forced "donation"? Date: 8/23/2009 5:52 PM
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My husband volunteers to coordinate an annual program for a not-for-profit organization. (To quote a commercial, this is "a name you would know", and the program has existed for over 4 decades). There are several students hired on a weekly basis as counselors. After submitting a list of the expenses to be paid - facility, vendors, counselors, the organization provided checks for all but the counselors, claiming thatthe expenses were higher this year than anticipated. Hubby was told that if he wanted them paid, he could pay them himself, then submit for reimbursement. The organization collected the program payments directly in advance of the program. Soft touch that he is, he did not want the counselors stiffed after a week of 24/7 services, so he paid them, which I am sure the foundation was counting on. He has been provided the form to request reimbursement; unfortunately, it is a grant application that cannot be completed by an individual, as they do not award grants to indivduals, only to organizations. They now feel that we should consider this a "donation" to them, and move on.

He has volunteered for this organization (and this program) for over 20 years; this is the first time that he has been out-of-pocket for anything other than some postage and minimal expenses. We have always made annual contributions to the organization, just not in the neighborhood of $5,000 in one shot.

I looked at the IRS website, and it does not appear that we can deduct this on Schedule A, as all of the checks were made payable to individuals, even though the program was referenced on the memo line.

The real irony (to me) is that the program has historically run at a deficit; this year was the closest to breakeven ever! What they've done amounts to extortion, in my mind.

TIA for any suggestions.

Tina
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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106819 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/23/2009 6:01 PM
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With the benefit of hindsight, he could have donated the money to the organization with the agreement that they would use it to pay the counselors. Since he didn't do that, he's probably screwed. However, he has learned an expensive lesson about the organization. If it were me, I'd have a serious talk with the director of the organization about what happened, probably ending with my promise to let others know what happened and my departure from any further association with them. But that's just me and I get nasty when I'm crossed.

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Author: stjoe56 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106820 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/23/2009 6:02 PM
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Next time, make the check payable to the charity and have the charity reimburse them.

I would also seriously consider cutting back on my volunteer time there.

SJ

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Author: KLTolly One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106821 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/23/2009 6:31 PM
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But that's just me and I get nasty when I'm crossed.

LOL! I have already considered contacting the IRS proactively, as I suspect this might have some impact on their NFP status, or at least (possibly) open them to some uncomfortable questions.

At the moment, I have hubby compiling a list of the boards and other programs, as I am wondering if he might not be the only one to have this experience with them...

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Author: wrjohnston91283 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106824 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/23/2009 9:21 PM
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LOL! I have already considered contacting the IRS proactively, as I suspect this might have some impact on their NFP status, or at least (possibly) open them to some uncomfortable questions.

I'd at LEAST contact the IRS, and cc the organization so they know about it. Depending on how far you want this to go, you might want to contact the local news stations / papers. I'd imagine that they'd be more than willing to pay up once the negative press starts flowing.

Please let us know how this turns out, I'm intrigued by this.

WRJ

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106828 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/23/2009 10:04 PM
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My husband volunteers to coordinate an annual program for a not-for-profit organization. (To quote a commercial, this is "a name you would know", and the program has existed for over 4 decades). There are several students hired on a weekly basis as counselors. After submitting a list of the expenses to be paid - facility, vendors, counselors, the organization provided checks for all but the counselors, claiming thatthe expenses were higher this year than anticipated. Hubby was told that if he wanted them paid, he could pay them himself, then submit for reimbursement. The organization collected the program payments directly in advance of the program. Soft touch that he is, he did not want the counselors stiffed after a week of 24/7 services, so he paid them, which I am sure the foundation was counting on. He has been provided the form to request reimbursement; unfortunately, it is a grant application that cannot be completed by an individual, as they do not award grants to indivduals, only to organizations. They now feel that we should consider this a "donation" to them, and move on.

Continuing the No Good Deed Goes Unpunished theme, he may have bigger problems.

It may just be your choice of words, but it sounds to me like the counselors were employees of the organization, and I'm betting that no FICA/Medicare taxes were withheld, nor will W-2's be issued. Hubbie could be on the hook for the amount that should have been withheld. Funding only net payroll is a huge no-no.

I'm frankly torn about what his best course of action would be. It ranges from sue the bastards to lay low and hope he nevers hears anything about it again.

Phil
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Author: bookie71 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106833 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 12:20 AM
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See if he can get a letter from the org. thanking him for contributing the counselor fees in the amount of $XXX. I don't see it being any different than paying for supplies or out of pocket expenses. As these folks aren't relatives, I believe he is only missing a "receipt". I see this a lot in dog rescue groups paying vet bills etc.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106834 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 1:08 AM
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See if he can get a letter from the org. thanking him for contributing the counselor fees in the amount of $XXX. I don't see it being any different than paying for supplies or out of pocket expenses. As these folks aren't relatives, I believe he is only missing a "receipt". I see this a lot in dog rescue groups paying vet bills etc.

There's a big difference between paying a provider of professional services a fee as an independent contractor and paying someone who is or should be an employee.

In addition to the other suggestions, you might want to contact the state regulator in charge of charities in your state and the organization's home state (if different).

Ira

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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106839 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 7:10 AM
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Question for Phil and Ira: Since the guy gave money to the counselors in good faith to make up for what the organization stiffed them, could he argue that it was simply a gift to them because he felt bad that the organization didn't pay them? It would be within the legal tax free gift limits and that argument would get him off the hook so far as payroll taxes are concerned. Apparently he's not an officer in the organization so he had no obligation so far as their pay was concerned.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106840 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 7:35 AM
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Since the guy gave money to the counselors in good faith to make up for what the organization stiffed them, could he argue that it was simply a gift to them because he felt bad that the organization didn't pay them? It would be within the legal tax free gift limits and that argument would get him off the hook so far as payroll taxes are concerned. Apparently he's not an officer in the organization so he had no obligation so far as their pay was concerned.

Depending on all the facts, most of which we don't know, there are all sorts of arguments that could be made.

Phil
Rule Your Retirement Home Fool

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Author: bacon Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106842 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 8:02 AM
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If it were me, I'd have a serious talk with the director of the organization about what happened, probably ending with my promise to let others know what happened and my departure from any further association with them. But that's just me and I get nasty when I'm crossed.

This would have been my family's money that was, umm, appropriated, too. I get nasty when someone attacks my family, too.

Eric Hines

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Author: bacon Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106843 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 8:08 AM
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It may just be your choice of words, but it sounds to me like the counselors were employees of the organization, and I'm betting that no FICA/Medicare taxes were withheld, nor will W-2's be issued. Hubbie could be on the hook for the amount that should have been withheld.

can't hubby write this off as a gift, or are gifts only allowed among direct relatives?

Eric Hines

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Author: JeanDavid Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106845 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 9:29 AM
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For $5000, he might seriously a law suit against them. When I was a teenager, I had to threaten to sue my church because they would not pay for some materials I purchased for them even though they agreed to pay before I purchased them. In future, get cash in advance for anything you do for a charitable organization.

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106846 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 9:35 AM
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Since the guy gave money to the counselors in good faith to make up for what the organization stiffed them, could he argue that it was simply a gift to them because he felt bad that the organization didn't pay them? It would be within the legal tax free gift limits and that argument would get him off the hook so far as payroll taxes are concerned. Apparently he's not an officer in the organization so he had no obligation so far as their pay was concerned.
=====================================
I think that's a very good argument. It doesn't seem like compensation if they worked for the organization, but weren't paid by it. And he had no obligation, other than his conscience to do the right thing for them.

BUT - gifts to those individuals would not be a charitable contribution, either.

Bill

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106848 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 6:36 PM
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Next time, make the check payable to the charity and have the charity reimburse them.

The problem with this is the "charity" would like take the money and not pay them.

I would not work with this "charity" again.

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106850 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 6:49 PM
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The problem with this is the "charity" would like take the money and not pay them.

You can make a donation that has strings attached (like that it must go to pay for X item)

And at least in CA if they don't use it for that purpose they have to return the money OR if an alternative purpose is defined the charity may use it for that alternative purpose.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106851 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 7:27 PM
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You can make a donation that has strings attached (like that it must go to pay for X item)

And at least in CA if they don't use it for that purpose they have to return the money OR if an alternative purpose is defined the charity may use it for that alternative purpose.


You can make directed donations and if the charity fails to follow the instructions legal action can be taken. This charity has already proved that they are less than honorable. I would not trust them to do the legal and right actions.

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106852 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/24/2009 8:02 PM
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I would not trust them to do the legal and right actions.

I wouldn't entirely trust them either.
But there are 2 things working in your favor at that point.
1> Possibility of negative publicity.
2> Possibility of getting sued.

There's also a chance someone in the organization can get the checks cut since there is designated funds (and if you get buy-in from whoever you are handing the check to, possibly they'll go to bat in-house for you as well - before you start threatening with going to the local paper's consumer advocate, etc. Most people want to do what they promise to do - and if they promise to use the money to pay the kids, they're probably going to try to make that happen.)

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Author: bookie71 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106854 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/25/2009 1:26 AM
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They wouldn't be his employees but the charities.

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Author: oldfart1248 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106872 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/26/2009 4:36 PM
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I've been an enrolled agent for over thirty years and two thoughts occur to me.

1. Although this is unusual, a petty good case could be made that Reg § 1.170A-1(g) regarding out-of-pocket expenses of volunteers would make this a charitable donation. If someone wants to argue that paying these counselors poisons the well, I would counter that the payments were on BEHALF of the charitable organization as there was at least an implied contract to pay them and the contribution was made in discharge of a legally enforcable obligation that the charity just bailed on. There are lots of other problems with taking this position, and I am sure a bunch of people will let me know, but I think it has at least a one-in-three, so I could argue it.

2. Since he was told before he paid the counselors that he would be reimbursed should he pay them, and later after he had paid them, he was refused reimbursement, I think there was a contract violated, which created a non-business bad debt (deductible as a short-term capital loss). Remember, local law governs the existence of a contract. Also, legal action to recover a debt is not necessary for deducting; only that a reasonable person viewing the facts would conclude that there was a debt, that the debt was legally enforcable, and that there was good reason (insolvency?) to not waste the time and money in a fruitless effort at collection.

I nominate the director of this organization for one Kieth Oberman's "Worst Person in the World" awards.

Jamie

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Author: KLTolly One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106875 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/26/2009 8:04 PM
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By way of update, there is now apparently an overpayment to the campus that hosted the program; we have asked that the check be made payable to the organization, but sent to us. This is not an unusual request, as there are usually last minute head counts at various meal functions. Hubby has always been the point of contact for paperwork, checks, insurance forms, etc.

It was implied to hubby that his reimbursement might be forthcoming after they have an accounting of all the funds. My twisted little mind is focused on the fact that an accounting is not an actual receipt, so I may be able to wordsmith something to them along those lines.

Thank you all for your input. As I stated before, he's been involved with these people for close to forever, but officers and directors do change. Apparently the officers this year have diverted from standing procedures.

It seems that we do have several interesting avenues of recourse; I am trying to not be sour on the organization or their branches. It's really a great organization, but you know what they say about a few bad apples....

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Author: bacon Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 106881 of 121312
Subject: Re: How do I handle a forced "donation" Date: 8/28/2009 7:02 AM
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...but officers and directors do change. Apparently the officers this year have diverted from standing procedures.

... It's really a great organization, but you know what they say about a few bad apples....


Frankly, when the leadership goes bad, it's no longer a matter of a few bad apples--the organization has gone bad. There are other charitable organizations that do this sort of work; I'd walk away from this particular one, and not look back.

Eric Hines

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