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Montana Freemason                                              January 2018                                 Volume 94   Number 1
                         The Business of the Fraternity, Part lV
                         The Business of the Fraternity, Part lV
                                                      Taxes
                                                      Taxes
                                 Bruce Lahti, Grand Treasurer
                                 Bruce Lahti, Grand Treasurer


       We’re  a  non-profi t  organization  so  why  are  we   Generally, the Lodge payment to the Secretary and
     talking about taxes?  Unfortunately, even a non-profi t  other employees is low enough that the employee elects
     organization  needs  to  worry  about  taxes.   There  are  not to have Federal or state income tax withholding.
     three  basic  types  of  taxes  a  non-profi t  organization  However, if the employee does elect to have Federal
     needs to be concerned about: 1) income taxes, 2) real  or state income taxes withheld, they must be withheld
     estate taxes, and 3) payroll taxes.                   irrespective  of  whether  or  not  the  Lodge  wishes  to
                                                           do so.  The withholding amounts for Federal income
       Payroll  taxes  are  the  easiest,  so  we’ll  start  the  tax withholding can be found in IRS Publication 15,
     discussion there.  If you employ anyone in the course  also  known  as  Circular  E.    Publication  15  provides
     of  operating  the  lodge,  it’s  likely  you  will  need  withholding tables that can be used to calculate income
     to  deal  with  payroll  taxes.    Payroll  taxes  include  tax withholding.  Additionally, the State of Montana
     Federal  and  state  withholding,  Social  Security  and  has similar withholding tables.
     Medicare.  Payroll taxes also include Federal and state
     unemployment taxes.  You may feel that what you pay     Payroll  withholding  requires  payment  of  payroll
     is so small that the Lodge doesn’t need to worry about  taxes on a monthly or quarterly basis.  Some payroll
     payroll taxes.  Or you may feel that the Secretary or  taxes may meet more frequent deposits.
     Lodge maintenance person is “casual labor” and you
     don’t need to worry about withholding taxes.  Not true!  Quarterly reporting of payroll taxes is required for
                                                           Federal  and  state  income  tax  withholding,  Social
      The  IRS  position  is  that  there  is  no  such  thing  as  Security  and  Medicare  tax  withholding  and  state
     casual  labor  under  Federal  labor  laws.    Therefore,  unemployment  taxes.    Generally  speaking,  Federal
     anyone  the  Lodge  employs  would  be  considered  an  unemployment  taxes  only  need  to  be  fi led  annually,
     employee.  Informally, the IRS has said that someone  although quarterly payment may be required.
     who you pay less than $50 per quarter for work totally
     unrelated  to  the  business  may  be  considered  casual   Year-end reporting to the IRS and employee is also
     labor.  This means that someone you pay $40 to come  required.  The employee is required to receive a Form
     in and replace the burnt out light bulbs in the Lodge  W-2 showing wages earned and taxes withheld.  The
     once a year could probably be considered casual labor,  Form W-2’s must be reported to the IRS together with
     and  you  could  probably  avoid  payroll  taxes  on  that  Form W-3.
     person.    If  it’s  an  extra  $40,  you  pay  the  Secretary
     who’s already on the Lodge payroll, that $40 would be   So,  what  if  you  do  really  have  independent
     subject to payroll taxes.                             contractors (no employees) providing some services to
                                                           the Lodge?  The IRS has rules about reporting income
      Certainly, the Lodge Secretary, if he’s paid, would  paid  to  independent  contractors.    Anyone  receiving
     be  considered  an  employee  of  the  Lodge.    If  the  compensation in excess of $600 annually should receive
     Lodge  maintains  a  building  and  hires  someone  to  a Form 1099-MISC reporting the total amounts paid
     be the custodian, even on a periodic basis, he would  to that individual in a year.  There are also reporting
     be considered an employee of the Lodge.  The same  requirements for rent paid to an unrelated entity such
     would go for someone paid to wash dishes after each  as  a  bank,  offi  ce,  restaurant  or  retail  store  a  Lodge
     meeting or Lodge dinner.  So what does this mean?     may  rent  from.    There  are  exceptions  to  the  Form
                                                           1099 reporting rules for amounts paid to corporations.
      Probably the most signifi cant tax withholding would  Forms 1099 must be aggregated and reported to the
     be Social Security and Medicare.  The combined rate  IRS annually.
     is 15.3% with half (7.65%) being withheld from the
     employee and half paid by the Lodge.  Next would be     In retrospect, payroll taxes may not be the easiest.
     Federal and state unemployment, which would be the
     sole responsibility of the Lodge to pay.  Both of those   Most Lodges, as non-profi t organizations, are exempt
     taxes  require  a  Lodge  expense  for  which  a  budget  from real estate taxes.  However, there are exceptions
     should be established.                                to that rule as well.  If your Lodge owns a building and

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