Help request in setting up a bank account for a fundraiser

My friend's daughter was diagnosed with schleroderma when she was 10-years-old. Now she is "almost 13" and the doctors are recommending some laser treatment at MD Anderson. Insurance has thus far denied coverage, but even if the hospital is able to get them to cover the treatment, the copays are very expensive in this case and the treatments will go for months in a town far from home... that all adds up to big costs.

A number of her friends and I are wanting to set up a bank account and make a web site with a way for people to donate money for the girl's treatments. Today, I got a "doing business as" name and opened a bank account under that name. The girl's parents' names are also on the account. And, I obtained an EIN from the IRS website.

Can anyone tell me what category the IRS considers this money for the girl's family? Do they have to pay taxes on it? My name is on the account, too, since I set it up, but I will not ever withdraw money or write checks from it. Do I have to report anything to the irs?

I spent an hour on the phone with the IRS trying to ask them for help, was transferred five times with 15 minute waits following each transfer to no avail. In the end, I was told to refer to a very lengthy online document to discern for myself what kind of income this is for the family. I told him that I would not have confidence that what I decided was correct since I am not a CPA, but he insisted that the IRS had no one who could or would help me figure it out. Grr.... I guess they just want me to waste some money that should be spent on medical treatments by hiring a CPA to set this up for us.

Can anyone help me figure this out? Can we use the scleroderma foundation in any way to keep the parents from having to pay taxes on the donations. If they have to pay taxes, basically 1/3 of every dollar donated is going to Uncle Sam. That flat doesn't seem right.

Thank you for any and all help and suggestions!

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You need to talk to your tax accountant. He or she will know what to do. I agree that there is going to be alot of red-tape, especially when there are so many peoples name on the acct. What useful purpose did that serve? There will be lots of squabbling when each and everyone gets into that acct. to draw money out.
What a mess that will be.. sorry to scare you.

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Oh, no, there will be no problems. My name had to be on the account, but I have no desire to have any control over how the money is spent and the other two names are a married couple who share all their other bank accounts already. But, yeah, three different (unmarried) people making money decisions would be a mess!

I use H&R block, but they are going to charge me for advice on this, I think. I'd rather donate money toward medical expenses than pay for a tax accountant. It just makes me so mad that our country's tax system forces us to hire help, that it's so complicated that even the irs can't explain it to us. That's really bad. Who was it that said something to the effect that the more complicated a government, the more educated the populace had to be to maintain control over that government. Somehow I think we messed up that balance long ago!

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Is there a way to set things up as a non-profit organization? I apologize for not knowing exactly how to do this, but it seems like that would be the way to go.

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Well I think that's what we did. When the bank set up our EIN, I think she did that as a non-profit organization. I need to verify that. But I think for the IRS to recognize us as tax-free, we have to file for a non-profit corporation... a VERY complicated and long process. I know of one group that has been in the process of making one over the last year. We need the money much faster than that. I think the problem lies in the government trying to protect all of us against fraud, so there is some good reason for there being a "process." It just flies in the face of common sense at the surface, that is for sure.

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Hi I run a non-profit organization and the money we receive we do NOT have to pay taxes on. But it was a lengthy process to get that classification. I'm also not a CPA but from what I was told, if you don't want to pay federal taxes on the money you must be a 501(c)(3) organization. If you filed the paperwork for a business (this would be through the Department of The Secretary of State) i assume you would have designated it a non-profit. In order to make this new "business" tax exempt you have to go through a series of steps that can take a long time... after the EIN you need a DUNs number and then another record number and then bylaws for the business and a few really tedious forms.

I know it seems like an arduous task but I can certainly understand why it is set up that way, they need to be able to make sure it's all legit before giving it tax exemption.

I'm not at all surprised that you were not given any answers from the IRS. They don't seem to know squat. ( i was given the run-around every time i tried to call and ask a question, they are not really in the business of trying to help us get the tax exempt designation anyhow.) Either way though, they should have given you their website for the forms that you would need to fill out and the steps that you would need to take.

I would say MOST small business and organizations (yes including small personal charities) hire an accountant to get them the 501(c)(3) designation. We are some of those crazies that chose to do it by ourselves. We did end up saving about $500 + but it took months to complete. Granted we were not working on it every day but we did have to wait at least 30 days after getting our EIN to get our DUNS number...etc.

It can be done, but it is an annoying process if you choose to do it by yourselves.

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