Ac­count­ing 101 on op­er­at­ing char­i­ties

Jamaica Gleaner - - SATURDAY TALK -

THE EDI­TOR, Sir: WELL-ES­TAB­LISHED COM­PA­NIES with char­i­ties are bet­ter able to ne­go­ti­ate the oner­ous in­come tax form (Form IT12) than small char­i­ta­ble or­gan­i­sa­tions that are not ac­cus­tomed to proper ac­count­ing man­age­ment.

The in­come tax form for reg­is­tered char­i­ta­ble or­gan­i­sa­tion con­sists of 11 pages. The form (IT02) for a trad­ing lim­ited li­a­bil­ity com­pany, by com­par­i­son, com­pris­ing three pages. An­other cu­ri­ous ob­ser­va­tion is that by the third sched­ule of The Char­i­ties Act of 2013, regis­tra­tion as a char­ity is a perquisite for relief un­der the In­come Tax Act, among other re­liefs, while Sec­tion F Line 2 of the IT12 form calls for the com­pu­ta­tion of in­come tax.

So oner­ous is the IT12 form that the tax pre­parer must re­port fund­ing de­tails for in­ter­na­tional fund­ing agen­cies by name and coun­try, ma­jor for­eign donors by name, lo­cal fund­ing agen­cies by tax regis­tra­tion num­ber (TRN), lo­cal com­pa­nies and in­di­vid­u­als over $999,999.99 by TRN, gov­ern­ment sub­ven­tion by TRN and depart­ment, in ad­di­tion to in­vest­ment in­come by type, and rental in­come by prop­erty. The char­ity is also re­quired to doc­u­ment fees paid, such as man­age­ment fees, pro­fes­sional fees, ac­count­ing fees, au­dit fees and le­gal fees by TRN and name of ser­vice provider.

Un­less the char­ity cap­tures the in­for­ma­tion in its rou­tine ac­count­ing sys­tem, such a char­ity could find it­self in a pickle when it is mak­ing a tax re­turn on form IT12. Char­i­ties are well-guided to down­load the IT12 form and study the ques­tions asked and prac­tise to record data ac­cord­ing to the sched­ules out­lined.

Com­pa­nies that de­velop a foun­da­tion as an ad­junct to reg­u­lar op­er­a­tions may be able to spare the re­source of the ac­count­ing depart­ment to cap­ture the re­quired data. In­di­vid­u­als and so­cial in­sti­tu­tions like churches and com­mu­nity-based or­gan­i­sa­tions must de­pend on vol­un­teers who some­times are not skilled in data-pro­cess­ing tech­niques to pro­vide the in­for­ma­tion.

When, there­fore, the num­bers have to be au­dited, as re­quired by the ad­min­is­tra­tor of The Char­ity Act (Depart­ment of Co­op­er­a­tives & Friendly So­ci­ety (DCFS)) and the In­come Tax Depart­ment, as re­quired by Form IT12, au­di­tors of­ten­times have to per­form ac­count­ing tasks and spend hours sift­ing through in­com­plete data to pro­vide a fair view of the en­tity’s ac­tiv­i­ties.

This raises the ques­tion: Is Form IT12 meant to dis­cour­age tax eva­sion, or is it to frus­trate the small com­mu­nity-based or­gan­i­sa­tions? Per­haps there should be ex­emp­tion from the re­quire­ment to file IT12. The DCFS, the or­gan­i­sa­tion in charge of the act, can mon­i­tor this ex­emp­tion by in­struct­ing char­i­ties that ex­ceed the es­tab­lished thresh­old to file a re­turn on IT12. Be­fore you form a char­ity, seek ad­vice on the ac­count­ing re­quire­ments. NEVILLE ROBIN­SON ven­fromja@ya­

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