Our 501(c)(3) organization is going to be dissolved. We are in a small town and have tried to raise funds to stay afloat and keep the doors open to needy families, but the economy and lack of funding has made this impossible. The organization owes back payroll taxes. Are the board members liable for the debt?
The IRS takes a dim view of organizations that fail to turn over their withholding taxes, not only because the organization has failed to meet its own financial obligation, but also because it has diverted (some might say stolen) funds from the employees, part of whose pay has been withheld as their personal contribution to Social Security and Medicare. Although the corporate form normally insulates directors from personal liability for organizational debts, the federal tax law provides that a person “responsible” for failing to pay over the required funds may be personally liable for the obligation. The IRS can look long and hard to find a responsible person with the funds to make the payment. Insurance usually excludes coverage for a tax claim so it is important to try to work out a deal for payment with the IRS.
Some states are also vigorous in pursuing unpaid withholding taxes.
It is tempting to fail to make withholding payments when there is a cash flow problem and needy families to help. But it entails personal financial risks that are not pleasant to contemplate.
Planned giving sounds complicated, with its CRUTs and CRATs, CLUTs and CLATS, and CGAs. It can be incredibly complicated, but it needn’t be. Keeping it simple may be the best way to start a planned giving program for a charity that hasn’t already put one in place.
This webinar offered a review of major planned giving instruments and a discussion of ones that make the most sense to emphasize in starting a planned giving program. It discussed the advantages of integrating planned giving into an existing development program, targeting the best prospects, getting buy-in from the board that is likely to generate results, and setting a structure to make it all happen.
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