Latest Lists

What is the affect on your personal taxes when fund raising without a 501(c)(3)?

My wife and I organized an event this year in memory of my son who recently passed away. This is an event that we plan on doing annually and each year will be for a different cause. For our first year our goal was to raise money for a family that was going through chemo treatment to help cover some of their travel and living expenses and also try to use some of the money to establish a 501(c)(3). We want the tax exempt status because we know we will try to do even more fund raisers and would like for people to have their donations be a write off for them. We ended up raising close to $9,000 through donations from individuals and businesses and gave the family $8200. I am in the process or researching how to establish the tax exempt nonprofit and will use the remaining $800 to cover some of the costs but I know I won’t have this established by the end of the year due to the lack of funds to cover all of the costs. We have a few other events in mind for next year to continue to raise money for various causes and hopefully come up with the rest of the money to establish our 501(c)(3). In the meantime though, since there is no business entity involved I am curious how this will impact my personal taxes, if at all? Will I need to list this money as personal income this year and pay taxes on it? Or do I not need to worry about it being counted as income?

Public Comments

1. Sorry about your son passing away. Your thought to set up a 501(c) 3 is a good one as it allows to keep the funds separate from you and your family and it may assist you in raising funds in the future. You are going to need funds to apply for the non profit status and the application ( form 1023) is lengthy and there is an application fee to include with the application so the funds you still have may be used for this purpose among the expenses you are going to have. These funds need not to be listed with your personal income and you need not pay any tax on them. You did not earn them, you raise funds for a cause and you have extra funds you are going to use for another fund raising event or to form a non profit organization which is the entity you need to continue to raise funds and make the donations a tax deduction for your donors. Right now the funds you have collected cannot be a tax deduction since they were given to an individual so the non-profit entity is the entity you need to form. Keep the cost of operating this non-profit org. low as donors like to see money going to the cause. Your state may also have some requirements and you need to check them too. All the best!