The Tax Compliance Office serves as a point of contact for
tax matters for the University. This office is responsible for Unrelated
Business Income Tax (UBIT), the review and issuing of 1099-NEC and 1099-MISC
forms, issuance of the University’s W-9 and general tax questions. Tax
Compliance also assists in the determination of taxable fringe benefits for
employees and their reporting.
The University operates as an income tax-exempt entity. However, when revenues are generated from
sources that fall outside of the University’s exempt purpose, these amounts are
called unrelated business income and are reported on the University's Unrelated
Business Income Tax Return (Form 990-T), for the applicable fiscal year.
A three-part test determines whether an activity is
UBI. If the activity is (1) a trade or
business, (2) not substantially related to the University’s tax-exempt purpose
and (3) regularly carried on by the University, it is UBI. All three requirements must be met, so if any
of these factors are absent, the revenue stream is not taxable as UBI.
- Trade or Business
- An activity is a trade or business if it is carried on for the production of income, sells goods or performs services.
- Not Substantially Related to tax-exempt Purpose
- A substantial relationship exists if it has a causal and important relationship to the achievement of the University's exempt purpose. If these requirements are met, the activity is not UBI.
An activity is not mission-related just because it raises funds that can be spent on mission activities. The IRS has ruled that the nature of the activity is what must be considered to be substantially related to the mission - not how the money will eventually be spent.
- Regularly Carried On
- Considerations include both the frequency and continuity with which the activities are conducted, and the manner in which the activities are pursued. Short-term activities, which are sporadic or intermittent, are not activities regularly carried on by the University. However, seasonal activities may be regularly carried on even if they only occur for a short period each year. Therefore, the activity doesn't need to be ongoing throughout the year to be labeled as regularly carried on.
For additional information and potential exclusions, see the
slide presentation below or contact the office of Tax Compliance for any
inquiries:
Forms
1099-NEC and 1099-MISC
1099-NEC
Form 1099-NEC is sent to individuals
who receive at least $600 for services performed by someone who is not an
employee and for payments to attorneys. The non-employee compensation must
be reported on Form 1099-NEC and be furnished to the recipient by January 31.
1099-MISC
A Form 1099-MISC is sent
to individuals who receive at least $10 in royalties and/or to individuals (non-
employees) who received at least $600 in rents, prizes and awards, medical
services and other income payments, such as final employee wages paid to a
beneficiary. Form 1099-MISC must be furnished to
the recipient by January 31.
For 1099 inquiries, contact the office of Tax Compliance:
479-575-4717.
Fringe
Benefits
A fringe benefit is a form of pay
for the performance of services. Per IRS
regulations, any payment to an employee is considered taxable unless otherwise
excluded.
Taxable Fringe Benefits
If a fringe benefit is considered
taxable, it is reported to the payroll office for taxing. Some examples include:
Employee Awards (Employee of the Quarter, etc.)
General Guidelines:
Gifts and awards received by
employees are taxable and must be reported as additional earnings if their
value exceeds the following thresholds:
- Cash
or gift certificates of any value
- The
IRS considers gift certificates and gift cards to be a cash equivalent
even if the property or service acquired with the gift certificate would
normally be excludable.
- Gifts
or awards of tangible personal property with a value greater than
$100
- Gifts
and awards of tangible personal property to employees are
“de minimis” when they are awarded infrequently and are not greater
than $100.
- Gifts
or awards of tangible personal property greater than $400 for a length of
service or retirement award
- These
awards may not be made within the employee’s first five years of service
or more frequently than every five years.
Moving Expenses
The Tax Cuts and Jobs Act
repealed the employee deduction and income exclusion for moving expenses.
Therefore, reimbursement of qualifying moving expenses reimbursed in 2018 and
forward are recognized as taxable income for the employee. No longer
can qualified relocation expenses be reimbursed tax-free. This applies to
both moving expenses that are reimbursed to an employee and moving expenses
paid directly to a moving company on the employee's behalf.
Memberships
Memberships to private clubs
(country clubs, airline clubs, etc.) are deemed to taxable fringe benefits by
the IRS, even if used primarily for business purposes.
For additional questions regarding Taxable Fringe Benefits,
contact the office of Tax Compliance: 479-575-4717
IRS Form
W-9
All University W-9 inquiries must
be requested from the office of Tax Compliance.
W-9’s are not to be used for multiple requests unless expressly stated
by the office Tax Compliance.
Additional
Resources
IRS
Section 274 Substantiation Form
Prize
Form
For any other tax related questions, contact the
office of Tax Compliance: 479-575-4717