New IRS rulings or old rules are not problems for youth groups

In the past, a unit (BSA, GSA, etc.) would go do a project and earn money. The money would be credited to the individuals who worked. New ruling implies that is not OK, but that is not the real facts.

Money

Money (Photo credit: Tax Credits)

 

The money has always been the units. If the youth who earned the money left the unit, the money stayed with the unit

 

because the check was written to the unit. The incentive to get kids out to work was the idea that they could reduce their cost of a future event by working today. (Besides it got around underage employment laws……).

 

The money has always been the unit’s money. It may be credited to different members of the unit in different ways, but it was never earned by the members. (That would make the IRS mad.)

 

The issue then settles down to how the money is attributed to the individual youth not to rattle the IRS. This may take a little more finesse. However several options can work.

 

1.   Make sure the money is never given to the individual.

 

2.   The unit should write checks out of the account to the activity or the event. (Makes bookkeeping easier because you have one check rather than 30).

 

3.   Round up your bookkeeping. Instead of tracking exact amounts say each youth will get a credit, or a percentage. Don’t keep track of the money for each kid in dollars and cents.

 

4.   Make sure the unit keeps some part of the money for the unit. If a 10 youth work four hours for the unit and the unit receives a $100 check for the work, have the unit credit one credit each to the scouts and keep $60 for the unit.

 

5.   Make sure everyone understand the money is for the unit and if a youth leaves the money stays.

 

Besides, there needs to be some way to help those that can’t. If you have an older youth who is already working a job to pay for his activities and can’t make the event or a poor one who will never be able to go, some part of the money should be contributed to that person. Most youth organizations are not pure capitalism.

 

If you want to have the kid’s ear money, then the person or business hiring, you must write a check to each kid who works. There is no incentive to do this because each kid must be 16 (in most states), must receive a 1099 at the yearend (in some cases) and who wants to collect W-2’s from all those kids.

 

Like everything, this issue was never a problem until some units or organizations took it to zenith degrees earning thousands of dollars for an individual. The companies hiring the units loved it because they got an advertising or donation in exchange for some work with a lot less paperwork.

 

However, a youth organization is not an employment office or a temporary employment service. The organizations are there to promote their missions and program to the youth.

 

Remember that and this issue takes on less of an onerous feeling.

 

By the way, the article is titled wrong. The policy has always been in place; it is just now being talked about.

 

See New policy prohibits individual Scout fundraising accounts

 

Disclaimer: Use of any information from this site or any other web site referred to is for general information only and does not represent personal tax advice either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance.

 

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By Recreation Law    Rec-law@recreation-law.com         James H. Moss         #Authorrank

 

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