Application for NFP status not yet approved when we collected money for our event; 1099 issued to me. Any way to avoid paying tax at my marginal rate?

Forum|Forum|1 year ago
February 27, 2025
1 reply
0 views

501c3 status was finally granted in November; we applied a year ago February. We started collecting fees for our event but had to do it under my name, as sole proprietor. The money went directly into the nonprofit account. The 1099 was issued to me. Is there any way to avoid paying tax at my marginal rate? And no, itemizing will not exceed the standard deduction.

Best answer by JamesG1

Turbotax says I don't need to report this income.

Are you referring to reporting the IRS form 1099-K income under This amount in box 1a is too high or includes some personal transactions? Or something else?

If you reported the total amount of the IRS form 1099-K under This amount in box 1a is too high or includes some personal transactions?, all of the IRS form 1099-K income would be reported on Schedule 1 as the amount reported to you....that was included in error or form personal items sold at a loss.

If this is the case, make sure that you retain records of these transactions should a tax authority have a question at a later time about either your personal income tax return or the not-for-profit entity.

Vanessa A

If you started collecting the money AFTER you submitted your application, this would not be taxable income to you instead it would be included on your 990 for your non profit.

However, since you did receive the 1099, you will need to enter it on your return and then back the income out.

"When the IRS approves a timely filed exemption application, exempt status is recognized back to the date the organization was created. Thus, while an application is pending, the organization can treat itself as exempt from federal income tax under section 501(c)(3)." Contributions to organization with IRS application pending

To enter the 1099 Misc as non-self-employment income take the following steps:

Income
1099-MIsc under Other Common Income
Enter the information from the 1099-MIsc
Continue through and say the work does NOT involve work that is like your main job
Select the years you received it
Say no, to did this involve an intent to earn money

Then you will take the following steps to remove the income:

Income
Less Common Income
Miscellaneous Income
Other Reportable Income
Answer Yes to Any Other Taxable Income
Enter the description such as 1099-Misc received for Non Profit prior to final status
Enter the amount on the 1099-Misc as a negative number.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

mcfoshay1Author

Actually, the form I received is a 1099-K. Turbotax says I don't need to report this income. Will this cause trouble? I can file all the necessary forms with the issuing agency to clarify that we are now NFP, but they say they can't reissue the 1099-K.

JamesG1Answer

Turbotax says I don't need to report this income.

Are you referring to reporting the IRS form 1099-K income under This amount in box 1a is too high or includes some personal transactions? Or something else?