I used my venmo for a not for profit organization and wrote a check to the account after paying for supplies. How/do I file this?

[jmdich]

I am fundraising/treasury chair for a not for profit organization through my veterinary school. I collect money from other students on venmo when we do pre-orders on items. After the sale is over I transfer the money to my personal account and pay the total owed for the merchandise order. After that is payed, I write a check for the difference to the organization. How would I represent this on my taxes? My last two events had higher sales than usual and I am worried the amount will look suspicious to the IRS. I do have receipts from all transactions.

[rjs · Accepted solution]

Your post is very vague and unclear about who is paying whom for what, what the activity of the nonprofit organization is, what merchandise is being purchased or sold, and by whom. But as a basic principle, you need to keep the funds and accounts for the organization completely separate from your own personal funds and accounts. If a student is paying the organization for something, that payment has to go directly from the student to the organization. If the organization is buying or selling something, those transactions have to be to or from the organization's account. Nothing should be going through your personal account.

Since you have already mingled the organization's funds with your own funds, you need to hire an accountant to straighten things out. We really can't help you with it here in this forum. The problems go way beyond what to put on your tax return. Mixing the funds of a nonprofit organization with your own funds will indeed look suspicious to the IRS, whether the amounts are large or small. You may also have violated some laws about how the funds of a nonprofit organization are handled, so you might need legal help as well.

[jmdich]

It is a club for a veterinary school. We sell tshirts to raise money for labs that give students experience. The students who order shirts send money to the venmo or write checks directly to our club account. I did not have much of a choice to mix funds. We do not have a direct account that we can send money to (the university makes things complicated with access). I have all receipts from the t-shirt company and any shipping that I had to do for the order and I write checks to the organization after money is taken out. I also keep a record of all orders and all venmo transactions. This is typically how it is done for any clubs like ours, I just do not want to ignore it on my taxes. It is less than $3,000 but I just need to figure out how to report it.

[Opus 17 · Accepted solution]

You have several issues to deal with.

As a tax matter, you are using a personal cash account for someone else's business.  The money will not be taxable to you, but you will need to keep meticulous records to show the IRS if you are audited.  I believe Venmo will be required to issue a 1099-K to you if there are more than $20,000 of transactions per year.  You would leave it off your tax return, file by mail with a written explanation instead of e-filing, and be prepared to show the IRS your extensive and meticulous proof that you paid out everything that was paid in and none of the money went to you personally.  It would be far better for the organization to have an account in its own name, but that may not be practical.

There are several other issues you are exposed to as a matter of tax compliance and good governing principles for your organization.

1. You should not be the only person reviewing these transactions.  Have another officer from the organization review the Venmo transactions and verify that the amounts paid to you by Venmo equal the amounts you paid out (whether you paid for supplies or whether you paid the organization and the organization paid for the items.)  Since you are managing the Venmo account and you are also the Treasurer. you could very easily be falsely accused of embezzlement by someone with an axe to grind.  Have someone else review and sign off on all payment that come to and from your accounts. 

2. Related to that, it would be best practice for you to collect the Venmo payments and write ONE personal check to the organization for all the Venmo payments, then use the organization's checking account to pay your vendors (t-shirts, party supplies, and whatever.)  Don't make those payments from your personal account if you can avoid it.  Keep your personal financial ties as simple and transparent as possible.

3. Even if some payments made to your Venmo account would normally represent tax-deductible contributions to a non-profit, they are NEVER tax-deductible if made to a specific individual (meaning you).  You must not issue receipts that say the payment is tax-deductible, or else you personally and the organization can get in trouble.  Only contributions made directly to the organization are tax-deductible, and only then if your organization follows all the other applicable rules.  If fact, you probably shouldn't issue any tax donation receipts unless you thoroughly understand all those rules.

4. It sounds like you aren't really a separate exempt organization, you are operating under the umbrella of the school.  If you were a separate exempt organization, the organization would have its own tax number and be able to open a bank account or Venmo account.  That doesn't really change anything I wrote above, except that you really can't issue tax-deductible donation receipts if you aren't an authorized representative of the actual EO.  If the club is a separate EO with a separate IRS registration and tax number, then you really should be able to open accounts in the EO's name. The school can't really stop you if you have your own separate EO registration. 

[jmdich]

The outgoing treasurer (I will be leaving one position and becoming the treasure in the next months) is working with me and has reviewed all of my transactions. We do have an account but I am working to set up other ways of payment that avoid this in the future.

[Carl]

I collect money from other students on venmo when we do pre-orders on items. After the sale is over I transfer the money to my personal account and pay the total owed for the merchandise order.

Depending on the amount, this can quite easily raise flags at the IRS for potential money laundering. You should *NEVER* under any circumstances run the funds of an NPO or corporate organization through a personal account, and especially not the personal account of anyone who has access and/or control of those NPO or Corporate funds. No exceptions. Having receipts and proof will probably help clear you of any wrongdoing should such an accusation surface. But the hassle that can be created with such an accusation can be massive, as well as costly on the legal front for the individual(s) accused and/or suspected of potentially illegal activity.

[Opus 17 · Accepted solution]

---

@jmdich wrote:

The outgoing treasurer (I will be leaving one position and becoming the treasure in the next months) is working with me and has reviewed all of my transactions. We do have an account but I am working to set up other ways of payment that avoid this in the future.

---

When I was church treasurer, I sometimes had to reimburse myself.  I always had those checks signed by the other person with signature authority on the bank account, who checked the receipts and made sure that what I had purchased for the organization was within policy.  Someone else should always review payments you make to yourself.  It's cheap insurance against false accusations.  You will want to maintain that practice even after the old treasurer leaves (bring in the chairperson, secretary, etc.)

[jmdich]

I agree. I have figured out how to not use my personal account in the future. However, I did not have access to club funds and will not until I become treasurer next year. Our treasurer was confused last time. I will now be setting the club account up (it will still have to be with someone's personal venmo account, but at least it will go directly to the club account). I have kept tedious records and I am trying to prevent the hassle for myself and other future members. It felt a bit odd for me from the start, and I much rather not involve my account. I will likely speak with an accountant when doing my taxes to make sure I do not miss anything.