News For Nonprofits

Employee Gadgets As Fringe Benefits

Newer technologies — like cell phones, personal digital assistants (PDAs) and laptop computers — allow new ways to provide employees tax-free benefits. Working condition fringe benefits are property or services that allow the employee to perform his or her job away from home.

As in the past, if the employee could deduct the cost of the property or services as a business expense if she or he had her/his own business, it isn’t considered compensation to the employee and isn’t taxable. The employee must keep documentation to support the business purpose. Assuming there’s no “personal use” of the equipment or services, little reporting is required.

But if there is personal use, it must be accounted for. On a regular basis — monthly is suggested — the employee must report any personal use, or allocate a percentage of time the equipment is used on nonbusiness activities. The reporting should be detailed by the total number of minutes or other quantifiable measure. At tax time, the fair value of this personal benefit — what it’s worth in the marketplace — is added to the employee’s annual W-2 as compensation.

Employee vs. Independent Contractor

The IRS is looking more closely at the people you treat as contractors rather than employees — cases where you don’t withhold payroll taxes from payment for work done. In Uncle Sam’s eyes, the key issue is your relationship. Do you direct and control the individual’s work through instruction or training? Does this individual work only for you, and is the relationship permanent? Is he or she paid for services based on a measure of time? Do you provide the worker with the type of benefits you extend to employees, such as vacation or insurance? The more “yes” answers you have to these questions, the more likely the IRS will consider this person your employee.

Protecting Your Domain

If an illegitimate Web site is set up with your domain name or a similar one, you could face substantial damage to your organization’s reputation. You need to be aware of your .ORG domain name’s value and make sure your registration is current.

Steps you can take to avoid a public relations nightmare start with knowing when your registration expires. There are more than 200 registrars available, and time limits vary. Put your expiration date on a checklist. Also make sure your contact information is current.

FIN 48 Delayed As Requested

The effective date of a new accounting rule, Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), has been extended.

Nonpublic companies, including nonprofit organizations, will now need to apply FIN 48 for fiscal years starting after Dec. 15, 2007. Dec. 15, 2006, originally had been proposed as the transition date.

Entities that already have adopted the provisions of FIN 48 are ineligible for the deferral.

The reason for the delay, FASB said, is to supply organizations with the extra time needed to understand and apply the provisions of the new accounting interpretation. FIN 48 had been criticized for failing to provide examples of how it would apply to not-for-profit organizations and other nonpublic entities.

FIN 48 would require nonprofits to record a liability for any uncertain tax position that arises when calculating unrelated business income tax, and require private foundations to record a liability for the excise taxes on their investment income. An influential advisory group, the Private Company Financial Reporting Committee (PCFRC), had recommended the postponement. •