I'm the lead for a fairly large project. This is the biggest project I've led, and naturally I keep discovering new things I don't know.
We're going to be launching our fundraising campaign in a few days, and just a couple of days ago, I asked myself "myself, how am I going to account for the incoming money on my taxes?"
I'm not trying to make any money with this project—I expect to be out a few hundred at least. But there will be enough money flowing through my hands that I can't pretend to the IRS that it never happened. And I don't want to pay taxes on it. So I'm wondering how others who have led big projects have accounted for them.
I know to keep receipts and all that. It seems like the obvious thing to do is file a Schedule C for the project and show it making a trivial profit to avoid raising eyebrows. Getting NFP status is out of the question due to administrative overhead. Am I missing something?
This project is actually for a regional event, not Burning Man, but I figure there are more people who have dealt with this problem in the context of Burning Man, so I'm asking the question here.
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I have no specific accounting advice, other than expect the project to cripple you financially (along with the other core members of your team). Possibly for several months after. Many of the big installations from 2011 are still in the red and trying to pay off deep debt, and some of them from established teams with incredible fundraising success before the event.
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adamrice wrote:and just a couple of days ago, I asked myself "myself, how am I going to account for the incoming money on my taxes?"
Disclaimer-Not a tax guy, never done a big project, but have done my share (probably 20) of Schedule C's and lived in Texas.
I'd treat it as a SchC business.
In a business, the goal is to make a profit but if you don't, there's nothing wrong with breaking even or showing a loss, so don't feel that you have to "profit" to avoid scrutiny by the IRS. Also, keep in mind that profit will be taxed AND subject to ~15% FICA.
I'd go to the county clerk, register a Fictitious Name (minimal cost), and then do your project.
Set up a separate paypal account and run as much income and outlay through it as possible.
Open a separate bank account if you feel you must, but as long as you keep good records, money going in and out of your personal account shouldn't be a problem.
I've made mistakes on Schedule C's in the past and the only thing the IRS wanted clarification on were specific items- I was never flagged for audit.
I'd just be sure not go wild with expenses....like deducting a trip to Stonehenge to evaluate the possibility of a similar project at Enchanted Forest.
EDIT: If (as Trilo suggests), there is a possibility that you will end up personally shouldering a major loss, I'd talk to a tax guy to see what extent you will be able to deduct it.
As I was typing my response, I was thinking "Large project = $10,000-$20,000". If more than that, I'd definitely talk to a tax guy.
Thanks. $10K is right about what we're hoping to raise and I'm (perhaps unreasonably) optimistic we'll reach that. Our local community stepped up and raised about double that for the CORE project. I've already registered a DBA.
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