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How to expense fundraiser proceeds?

 
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Old 3 Weeks Ago Aug 26, 2019 12:01:05 PM -   #1 (permalink)
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Default How to expense fundraiser proceeds?

So a couple years ago we signed up with an ONLINE STORE web site to easily create online stores that our customers could use for T-Shirt sales, eliminating the need for sign-up lists, order gathering, etc. by our customer, and have it handled all online and we get paid directly for each order.

We had several orders that the customer asked us to add on a fundraiser amount which would be collected by us and refunded to them after the order was complete. So I created a new expense category called "FUNDRAISER PROCEEDS" and recorded those payments as an expense to our business. All went well until year end taxes and my accountant said I couldn't do that, but that it would be counted as OUR INCOME. After some deliberation at the tax firm they suggested we call it ADVERTISING since we are using the stores to also promote our own business. So that's what we've done.

We switched this year to OrderMyGear which is a slick online store site and they have the fundraising option built in, even giving a portal for the customer to track sales and see their fundraiser amounts grow as the orders come in. I asked them about expensing the fundraiser proceeds and they had no suggestion.

Are you doing fundraisers (online or otherwise) where you "over-collect" the sale amount and refund the difference? What expense category are you using to expense that refund? Do you pay income tax on that income?
 
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Old 3 Weeks Ago Aug 26, 2019 3:30:17 PM -   #2 (permalink)
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Default Re: How to expense fundraiser proceeds?

It is advertising. That is how we handle it.
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Old 3 Weeks Ago Aug 27, 2019 9:07:49 AM -   #3 (permalink)
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Default Re: How to expense fundraiser proceeds?

We 1099 them and take the deduction that way.
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Old 3 Weeks Ago Aug 27, 2019 11:02:41 AM -   #4 (permalink)
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Default Re: How to expense fundraiser proceeds?

Could you treat it as a commission paid out to the organizer of the fundraiser?
 
Old 3 Weeks Ago Aug 27, 2019 11:30:04 AM -   #5 (permalink)
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Default Re: How to expense fundraiser proceeds?

You run the risk of them claiming they are an employee.
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Old 3 Weeks Ago Aug 27, 2019 2:36:30 PM -   #6 (permalink)
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Default Re: How to expense fundraiser proceeds?

Quote:
Originally Posted by binki
You run the risk of them claiming they are an employee.
We certainly don't want that!
 
Old 3 Weeks Ago Aug 28, 2019 5:45:48 AM -   #7 (permalink)
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Default Re: How to expense fundraiser proceeds?

If you want to issue a 1099, do it to the organization. I believe anything under $600 you don't need to.

"As a general rule, you must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards or other income payments. You don't need to issue 1099s for payments made for personal purposes."

https://www.entrepreneur.com/slideshow/299440

https://www.irs.gov/businesses/small...rmation-return
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Old 3 Weeks Ago Aug 28, 2019 9:07:53 AM -   #8 (permalink)
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Default Re: How to expense fundraiser proceeds?

I like 1099'ing better because lumping a lot of stuff into 'Advertising' could flag an audit when the total amount is disproportional to the industry average.

I do it for whatever amount I pay, even if less than $600. And it's always to an organization.

I've not had to issue one to an individual, but I would have no qualms doing so. The IRS has a number of factors to determine who is an employee and who is not (set work schedule, continuing relationship, etc.). But whether you issue a 1099 or not is not one of them.
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Old 3 Weeks Ago Aug 28, 2019 9:54:25 AM -   #9 (permalink)
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Default Re: How to expense fundraiser proceeds?

I was addressing paying an individual and issuing a 1099 as a commission. I wouldn't call it that.
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Old 3 Weeks Ago Aug 29, 2019 12:07:20 PM -   #10 (permalink)
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Default Re: How to expense fundraiser proceeds?

Quote:
Originally Posted by splathead
We 1099 them and take the deduction that way.
So several of you said you issue 1099's. Again I ask what expense category you are using when you issue that check?

We issue 1099's for unincorporated contractors that do work for us, but we're expensing that as "repairs" or some other such thing. We've never issued a 1099 for any other purpose.
 
Old 2 Weeks Ago Aug 30, 2019 7:54:16 AM -   #11 (permalink)
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Default Re: How to expense fundraiser proceeds?

Quote:
Originally Posted by abetterimage
Again I ask what expense category you are using when you issue that check?
Call it for what it is; Commission Payable
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