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.
State Charitable Solicitation Statutes: Everything You Wanted to Know But Were Afraid to Ask
Charities that seek contributions nationally must typically register in 39 states and the District of Columbia before starting to solicit. Furthermore, for-profit fundraisers are also required to register and file their contracts and other documentation with many states. Since many states are increasing their enforcement efforts to ensure that charities and fundraisers are complying with initial and annual registration requirements, it's important that charities and fundraisers abide by these statutes.
Program materials include an extensive review of the statutes and their provisions, plus a copy of the Uniform Registration Statement for multi-state filings. Purchasers will receive an e-mail receipt that includes a link that will take them to the product download. The download is a pdf file. Learn More
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