Private Foundation & Form 8940

[Catherine]

Private foundation needs help with its 990-PF, but also says they were told they need to file Form 8940 "to allow us to become 'active' as a foundation" and there is nothing I can find in the Form 8940 instructions that has anything to do with being "active." They got their 501c3 determination letter in November 2022, and did file a 990-PF for 2022 (no activity, so late in the year). 

I've done PF's before and this one isn't hard (only two donations totaling less than $5k, a couple of office expenses, and a prepackaged web site; all expenses are maybe $1k). The stumbling point is this insistence that they "need" this form filed to "activate" the foundation.

Every other bit of advice they got from whoever was talking to them about taxes seems to be highly suspect, and I'm thinking this is again the case with this form. But I'm somewhat out of my league here in PF startups. The one other PF I dealt with had their own issues (meant to set up a charity & did the paperwork wrong; had to file PF for two years while that mess was being fixed) but there was nothing about some form for "activation."

Instructions for the 8940 have nothing that sound like it applies. Other readings online ditto. However, I could well be missing something. Anyone here have any clues, pointers, reference sites?

TIA.

[DANRVAN]

1 hour ago, Catherine said:

"to allow us to become 'active'

I can't think of any reason unless they plan to pay scholarships.

[Lion EA]

https://www.irs.gov/charities-non-profits/form-8940-for-miscellaneous-determination-requests

Are they dissolving the PF; or do they need an advance approval for a new activity, such as voter registration? Why does your client think they need to file Form 8940? I agree with you that that form says nothing about "activation." Maybe their "advisor" said de-activation, and your client heard activation.

[Catherine]

3 hours ago, Lion EA said:

https://www.irs.gov/charities-non-profits/form-8940-for-miscellaneous-determination-requests

Are they dissolving the PF; or do they need an advance approval for a new activity, such as voter registration? Why does your client think they need to file Form 8940? I agree with you that that form says nothing about "activation." Maybe their "advisor" said de-activation, and your client heard activation.

They are under the impression that they cannot accept larger donations until they are "activated." As far as I know, that was the Nov 2022 determination letter! I had been wondering if the guy was told "de-activation" and heard it wrong. But since this is not an area of expertise, I also figured there was a chance I was the one misunderstanding it all, too. 

It's a new entity, and has not yet even begun to serve it's purpose (because he's been holding off for this $%^&* form issue); it's not being disbanded, that's for sure!

[Lion EA]

Because he has to complete the form and pay on pay.gov anyway, tell him to do that himself now. Give him the instructions.

[DANRVAN]

On 5/6/2024 at 6:25 AM, Catherine said:

The one other PF I dealt with had their own issues (meant to set up a charity & did the paperwork wrong; had to file PF for two years while that mess was being fixed)

A moot point now, but instead of filing PF for two years they could have filed form 8940 to receive retro recognition as a Public Charity.

 

On 5/6/2024 at 11:53 AM, Catherine said:

It's a new entity, and has not yet even begun to serve it's purpose

Sounds like they need some sound advice on the difference between a Public Charity and a PF. 

For a PF they need to be aware of the minimum distribution requirement, self-dealing rules, serving a charitable purpose  among other concerns.

On 5/6/2024 at 6:25 AM, Catherine said:

, and did file a 990-PF for 2022

Maybe a reason why they are changing tax preparers?  By their choice or were they fired?

[DANRVAN]

14 hours ago, Lion EA said:

Because he has to complete the form

Sounds to me like they only think there is a form to complete.

[Lion EA]

I should've put that phrase in quotes! I meant to say that if he insists upon filing that form, it has to be filed and paid on pay.gov anyway, so he may as well do it himself, because none of us see a reason for him to file it. It would be nice if he tells you which criteria he meets for filing. Or, if he gives you a cite from his "tax-savvy" advisors.

[Catherine]

On 5/7/2024 at 3:06 PM, DANRVAN said:

 

Maybe a reason why they are changing tax preparers?  By their choice or were they fired?

Self-prepared using some online site for 2022.

I've already told him he needs to find someone else for next year. I've put the return on extension and have asked for a phone conversation. I may ask him to go elsewhere for 2023, too, as I am getting increasingly uncomfortable with this whole mess. Considering for all of 2023 they took in less than $5K (and yes, spent it on PF purposes), that's saying something!

[mcb39]

I have been having the same issues with a non-profit.  Someone dropped the ball in 2022 and I am not qualified to fix it.  I filed it in 23, but they came back with "that was the wrong form".  This was just a small Horseshoe club.  I sent them on their way.  I don't have the time or the desire to figure this out.