As you will recall I promised an article in this issue concerning the IRS regulation concerning raffles. A large number of our Divisions throughout this country raise a great deal of their charitable donations through raffles.
I know from personal experience that for many years nothing was filed with the IRS concerning raffles because we all assumed that the IRS threshold amount from winnings was below the figure that the majority of us were paying out. However, things have changed. The current basics for gambling reporting, “raffles”, and withholdings for the Internal Revenue Service is as follows.
1. Regular Withholdings:
Made on prizes of $5,000 or more:
a.) Rate is 28%
b.) Winner must provide VALID PROOF of (1) name, (2) address and
(3) taxpayer identification number. Form W-9 should be prepared.
2. Backup Withholdings:
Made on prizes of $600 or more:
a.) Rate is 31%
b.) Made when winner does NOT provide VALID PROOF of (1) name,
(2) address and (3) taxpayer identification number. Form W-9 should
3. Form W-2G should be completed by the organization upon payment of the prize:
a.) Copies “b”, “c” and “2” of this form should be given to the prize winner.
b.) The other three copies must be given to person responsible for making
Federal income tax withholding payments; e.g. the organization’s
4. Taxes Withheld must be deposited by either:
a.) Electronic Federal Tax Payment System (EFTPS) (funds will be taken
directly from bank account by IRS), or
b.) Using Form 8109 and depositing a check in any Federal Reserve Bank
or authorized financial institute.
c.) Timing of the deposits depends upon the amounts and coincides with
the rules for depositing payroll withholdings. See IRS Circular E.
5. Annual filing of Form 945 is required. This return reports the amount of Federal income tax withheld, backup withholdings and related deposits for the year. This return is due by January 31 of each year.
Basically what all of the above means is that if you have an individual winner who receives anywhere between $600 to $5000 and if that particular winner provides a valid Social Security number, then that AOH Division need not withhold any monies. However a Form W-2G must be issued to the winner with a copy going to the IRS and a copy retained by the Division. That form must be submitted to the IRS by March 31 of the following year via a Form 1096 “Annual Summary and Transmittal of U.S. Information Returns”. The winners must report their winnings on their income tax return for the year in which they were paid.
However, as I have recommended in the past it is always good to seek out members in your Division with training or some familiarity with this process. If you can find no talent in your Division with this background, seek out help from other Divisions who have members with this knowledge.
Since we are on the subject of income tax returns, I also want to remind financial secretaries who are responsible for filing the 990’s for their Divisions every year the following:
1. Group exemption number 0832 should be put on the returns as follows:
- Form 990 …. Box H(c)
- Form 990-EZ …. Box F
2. Tax exempt status should be shown on returns as 501 (c) (8):
- Form 990 …. Line I
- Form 990-EZ …. Line J
A 501 (c) (8) entity is a “Fraternal Organization.
Some of the above will sound like a foreign language to many of you. This is why it is urged that you seek help from Brothers who have this expertise.
Hope to see all of you all in Cincinnati for our National Convention. Remember, the member delegates of Divisions who have not paid the Per Capita tax for this year will not be allowed to vote. So double check with these Division Presidents and Secretaries to make sure this has been done.
God bless and have a great summer.