The latest in the “There are no ‘quick questions'” files. A client calls to ask if he needs to provide a 1099 to his campaign manager. He ran a political campaign and paid her “out of his personal funds.” Now, on the surface it looks like the answer to that question would be “no” because individuals are not required to issue 1099s. Businesses, however, are and this political campaign had an EIN and its own bank account. The candidate’s “personal funds” were actually contributions he made to his campaign. So now the answer is “yes.” Easy, right? Well, if the personal funds had been paid back they could have been considered loans and we’re back to “no.” And a good #taxpro will also work to keep you in compliance in general so more due diligence was required. Four or more hours down the rabbit hole later I found the following potential filing requirements:
- IRS Form 8871 (required for tax exempt status if the gross income for the campaign reached over $25K)
- IRS Form 8872 (required if you are running for a federal office OR if you are not reporting your state/local campaign income and expenses to your state authorities)
- Form 1120-POL (may be required for certain types of non-exempt campaign income that exceeds $100)
- Form 990-N, 990-EZ, or 990 (tax return for tax exempt organizations all with different filing thresholds and requirements and which are just slightly different if your tax exempt organization is a political organization)
Lucky for me and my client, his campaign was fairly small and many of the forms that might have needed to be filed didn’t need to be filed (just the 1099 and the 8871). I did give him and his campaign treasurer a heads up on the applicable thresholds and filing requirements and told them that if things “started to get big or gain a lot of momentum” to be sure to contact me so we can stay up to date with all of the requirements and necessary bookkeeping.
Your campaign may be small and you may think it’s not a big deal, but the tax consequences can be hefty for non-compliance. Better safe than sorry! Consult your #taxpro and stay safe.