Question on Grants: Taxes, Keeping, Making a Living, Etiquette, and Legal Ramifications
November 8, 2004 1:12 PM Subscribe
I decided to try my hand at making a grant application, sent the 8 pages or so letter and forgot all about it. Then yesterday, I got a call indicating that I may actually have a chance of getting some if not all of the amount I requested ($40+ grand for video/photo equipment/NLE gear, stipend). Although I'm seriously excited, I have a few questions to ask you, fellow MeFites:
1. Will I owe taxes for this money?
2. What questions might their lawyer/trustee ask me if they ever call?
3. Do I get to keep the equipment after? (I know its stupid but this is my first time)
4. Can people actually earn a living doing this "grant" gig?
5. Is there some etiquette involved when receiving the moolah? (i.e. hugging the donor, kissing her feet, thank you letters)
6. Am I absolutely, legally bound to follow through with this project?
6. Any advice is welcome.
Thanks for your time and patience.
1. Will I owe taxes for this money?
2. What questions might their lawyer/trustee ask me if they ever call?
3. Do I get to keep the equipment after? (I know its stupid but this is my first time)
4. Can people actually earn a living doing this "grant" gig?
5. Is there some etiquette involved when receiving the moolah? (i.e. hugging the donor, kissing her feet, thank you letters)
6. Am I absolutely, legally bound to follow through with this project?
6. Any advice is welcome.
Thanks for your time and patience.
No, I think he means: is he bound to complete the project if he accepts the money? What would happen to him if he accepted the money, spent it, but then failed to complete the project.
My guess is this would depend on the specifics of the grant. Read the small print!
posted by grumblebee at 1:40 PM on November 8, 2004
My guess is this would depend on the specifics of the grant. Read the small print!
posted by grumblebee at 1:40 PM on November 8, 2004
Real answers will depend on who you got the grant from. IANAL/accountant, etc.
0. If you get the money - re-read all apps you made, all forms you filled in, etc. Figure out what you signed up to do.
1. You might not owe taxes for the equipment, as you need it for work (I see it as an income that ten gets deducted, bringing you back to square one). You'll owe taxes for the stipend, I would think. You may also have to contribute to social security, Medicare, FICA? I've been paid out of grants obtained by other people - it was a regular wage for me, with regular deductions. I would also set up a separate account for the grant itself, and keep good accounts, and keep all receipts.
2. What did you do with the money? Did you spend it as you claimed (e.g. did you help the poor starving children you claimed you were going to)?
3. One possibility is, equipment may be inventoried by the grant-making body for *their* tax purposes. Therefore it belongs to them. This might only apply to large/more expensive pieces however. Further, they might not want it back physically - but they will want to know where it is in case the IRS asks them. I still have computers and cameras from previous grants, btw.
4. Yes - if you like writing grants, and re-inventing yourself on a regular basis, and not knowing what you may be doing/earning a couple of years from now. It's more fun when you're younger, I think. However, if you get good at writing grants - knowing the form, drafting good proposals - and can get a track record of successes - you could freelance *as a grant writer* to other non-profits that require but do not have those skills. Grant writing is a whole industry on its own.
5. They might just do a direct deposit. In event of a face-to-face handover, go, and act pleased!
6. Legally, I don't know. You may be acknowledging some kind of contract when you accept the money. At minimum, you'll probably have to produce a report saying what you did (that e.g. they could maybe print in their report to donors).
7. Feel free to contact me if you have any questions. I would sya go for it though - unless you have a better gig on or impending, in which case you can always refuse the grant, or ask for it to be postponed.
So: If you get the money I would contact the folks concerned and ask them all these questions. Say you're a first-timer. It's probably against your interests just to attempt to 'maximise' your 'gains' from this, as success in obtaining future grants is greatly increased by having a kosher track record with previous grants (and good feedback from previous grantors).
posted by carter at 1:41 PM on November 8, 2004
0. If you get the money - re-read all apps you made, all forms you filled in, etc. Figure out what you signed up to do.
1. You might not owe taxes for the equipment, as you need it for work (I see it as an income that ten gets deducted, bringing you back to square one). You'll owe taxes for the stipend, I would think. You may also have to contribute to social security, Medicare, FICA? I've been paid out of grants obtained by other people - it was a regular wage for me, with regular deductions. I would also set up a separate account for the grant itself, and keep good accounts, and keep all receipts.
2. What did you do with the money? Did you spend it as you claimed (e.g. did you help the poor starving children you claimed you were going to)?
3. One possibility is, equipment may be inventoried by the grant-making body for *their* tax purposes. Therefore it belongs to them. This might only apply to large/more expensive pieces however. Further, they might not want it back physically - but they will want to know where it is in case the IRS asks them. I still have computers and cameras from previous grants, btw.
4. Yes - if you like writing grants, and re-inventing yourself on a regular basis, and not knowing what you may be doing/earning a couple of years from now. It's more fun when you're younger, I think. However, if you get good at writing grants - knowing the form, drafting good proposals - and can get a track record of successes - you could freelance *as a grant writer* to other non-profits that require but do not have those skills. Grant writing is a whole industry on its own.
5. They might just do a direct deposit. In event of a face-to-face handover, go, and act pleased!
6. Legally, I don't know. You may be acknowledging some kind of contract when you accept the money. At minimum, you'll probably have to produce a report saying what you did (that e.g. they could maybe print in their report to donors).
7. Feel free to contact me if you have any questions. I would sya go for it though - unless you have a better gig on or impending, in which case you can always refuse the grant, or ask for it to be postponed.
So: If you get the money I would contact the folks concerned and ask them all these questions. Say you're a first-timer. It's probably against your interests just to attempt to 'maximise' your 'gains' from this, as success in obtaining future grants is greatly increased by having a kosher track record with previous grants (and good feedback from previous grantors).
posted by carter at 1:41 PM on November 8, 2004
IANAL(Yet)
As to #6:
Make sure you read whatever you signed when you applied for the grant and whatever you sign before you get the money. It is possible that the money will be made as a "gift", in which case you porbably don't owe them anything. If, however, they say something like "You accept this $40,000 in exchange for making a video" then it's probably a contract and yes they can sue you if you don't do it.
posted by falconred at 2:57 PM on November 8, 2004
As to #6:
Make sure you read whatever you signed when you applied for the grant and whatever you sign before you get the money. It is possible that the money will be made as a "gift", in which case you porbably don't owe them anything. If, however, they say something like "You accept this $40,000 in exchange for making a video" then it's probably a contract and yes they can sue you if you don't do it.
posted by falconred at 2:57 PM on November 8, 2004
As for 1: The grantor may be a non-profit, but you are not; you're essentially acting as a freelancer receiving money under a contract. You'll need to file a Schedule C and treat the grant-related activity as a business for tax purposes. The income will be as a 1099 and most likely reported to the IRS in advance, so you'll have to tread carefully.
If the bulk of the grant is truly used for equipment purchases, those will be deductible against your income directly for the amount they are to be used for the purposes of the "business" (IRS terminology: "activity"), which may be 100%. You can either use a Section 179 deduction and deduct the full cost (up to certain limits), or depreciate the items to handle as deductions against future income in this activity, if you think that's reasonable or (more pertinently) you find you don't need the full deduction to pay the least tax. Full deduction may mean you actually owe no extra taxes whatsoever, but be sure to do the numbers now, not at the end of the year, because if you do owe taxes you're expected to make quarterly payments which can vary in complex ways. TurboTax and competitors can certainly walk you through most of this.
Note, by the way, that if your deductible expenses exceed the income from the grant, you can carry a Schedule C business loss through to the 1040 and reduce your overall tax. You can't do this every year (IRS rules redefine it as a "hobby"), but lots of people get away with similar, offsetting income in other areas. This is what's called a "tax shelter", in fact. Welcome to the world of the big shots!
posted by dhartung at 6:59 PM on November 8, 2004
If the bulk of the grant is truly used for equipment purchases, those will be deductible against your income directly for the amount they are to be used for the purposes of the "business" (IRS terminology: "activity"), which may be 100%. You can either use a Section 179 deduction and deduct the full cost (up to certain limits), or depreciate the items to handle as deductions against future income in this activity, if you think that's reasonable or (more pertinently) you find you don't need the full deduction to pay the least tax. Full deduction may mean you actually owe no extra taxes whatsoever, but be sure to do the numbers now, not at the end of the year, because if you do owe taxes you're expected to make quarterly payments which can vary in complex ways. TurboTax and competitors can certainly walk you through most of this.
Note, by the way, that if your deductible expenses exceed the income from the grant, you can carry a Schedule C business loss through to the 1040 and reduce your overall tax. You can't do this every year (IRS rules redefine it as a "hobby"), but lots of people get away with similar, offsetting income in other areas. This is what's called a "tax shelter", in fact. Welcome to the world of the big shots!
posted by dhartung at 6:59 PM on November 8, 2004
#1 is complicated. If the foundation writes you a check for the whole amount and issues you a 1099, it might be simplest to do as dhartung suggests, above.
However, it may be that the grantmaker won't cut checks to individuals, in which case you have to set up a corporation and pay yourself a stipend. Added complications, yes, but the upside is that the corporation can buy the equipment off the top and you'll only owe taxes on the stipend.
Another option is to find a friendly non-profit organization which will agree to act as your "agent" and disburse the funds for you. Frankly, it's best to have an accountant vet this because it's damned complicated.
As for #6--you have to try to complete the project, and be ready to write a report on why you couldn't, if you couldn't. Different grantmakers have different requirements for reports. Almost every grantmaker requires at least a one-page report, though.
posted by Sidhedevil at 8:13 PM on November 8, 2004
However, it may be that the grantmaker won't cut checks to individuals, in which case you have to set up a corporation and pay yourself a stipend. Added complications, yes, but the upside is that the corporation can buy the equipment off the top and you'll only owe taxes on the stipend.
Another option is to find a friendly non-profit organization which will agree to act as your "agent" and disburse the funds for you. Frankly, it's best to have an accountant vet this because it's damned complicated.
As for #6--you have to try to complete the project, and be ready to write a report on why you couldn't, if you couldn't. Different grantmakers have different requirements for reports. Almost every grantmaker requires at least a one-page report, though.
posted by Sidhedevil at 8:13 PM on November 8, 2004
Oooh. Please. As you're reading this, could you email me your application? I'd love to submit one...but it's good to see one that's been accepted.
Yeah, I know you'll lose your anonymous status...but please? My email is in my info. Thanks.
posted by filmgeek at 8:37 PM on November 8, 2004
Yeah, I know you'll lose your anonymous status...but please? My email is in my info. Thanks.
posted by filmgeek at 8:37 PM on November 8, 2004
Off topic, I know, but e-mail me if you need any help with video or NLE gear. There is a learning curve, and I'd be glad to help.
posted by Vidiot at 9:21 PM on November 8, 2004
posted by Vidiot at 9:21 PM on November 8, 2004
Find out when the grant paid. I run a non-profit and we've received several grants this year. Only one was an up-front cash grant; the others require specific performance to be completed before funds are dispersed. The latter type of grant can take months to process before you're reimbursed.
posted by F Mackenzie at 11:04 PM on November 8, 2004
posted by F Mackenzie at 11:04 PM on November 8, 2004
This thread is closed to new comments.
4. There are many organizations/businesses that do the grant 'gig' for other groups and organizations. So yes, people actually earn a living writing grants.
5. A thank you letter, most definitely. Is the grant awarded to an organization or a business? A mention in their newsletter, or the applause section of the local newspaper would also be nice.
6. I believe you can still decline the money even if it is awarded to you: I presume this is what you mean.
posted by rhapsodie at 1:21 PM on November 8, 2004