Accordingto the Department of Treasury (2014), estimated tax is defined as atax evaluation process on income that is not subject to withholding.For an NGO, the Internal Revenue Code makes exemptions due to thenon-profit nature of the organizations. In section 501c and 4947(a)(1), most of the activities and financial collections made by NGOsare exempted in order to enable the organizations make better use oftheir finances (IRS, 2014). According to the case study, anot-for-profit organization decides to increase its finances byengaging in a for-profit activity in form of a restaurant, The GoldenKettle. The donations from Golden Kettle customers amount to $ 4,800.Sales made throughout the year amount to $156,100.
Accordingto the cash flow table presented from the company, the company hasalready factored in $10,000 in the cash disbursement section.However, a breakdown of the tax expenses demonstrate that $1,900 wasused from the $10,000 to cater for tax return preparation, legalfees, and architect fees. Although the company is qualified forexemptions, the District Director makes it certain that the dealingsof The Golden Kettle are completely different from the operations ofan NGO, hence liable for tax returns. One of the considerations inthe following financial tax computation is the gross profitsgenerated from this year’s operations.
Theending inventory is $14,000 and $12,100, based on the inventoryinformation. Additionally, there is an insurance of $150 monthly forall inventory levels. This figure is taxable. However, the tangiblepersonal property has been insured $2,700 on a three-year term. Theinsurance fees apply on an annual basis hence, the amount will be$900.
Additionalcosts emerge from customer claims, fines and loans. However, finesare not deductible since their sources emerge from corporatemisappropriation of funds, poor policies and other preventableexpenses. The expenses help in reviewing the first figure of totalexpenses calculated from the disbursement table. The figure, $44,430does not represent the final taxable amount. Other evaluations arerelevant.
TotalReceipts = $160,900
DeductionsInclude, inventory expenses
Inventoryinsurance is calculated at a rate of $150 for monthly inventory,which is calculated as
Theother expense is tangible person insurance of 900
Rentis an acceptable expense = 3600
AdditionalEquipments at the Fair Market Value
CashRegister Initial Price Current FMV
Broaster $10,000 $ 8570
LoanPayment: Total Loan plus expenses = $3450
Monthlypayments at $200 = $2,400 per year
$400 payment to city controller for issuance of licenses
$1900on expense breakdown
Advertisementsand registration with Yellow pages =$4,000
Basedon the above expenses estimation, the total expenses amount to
Inaddition to the above expenses, other deductibles include Merchandisepurchase of $52,000, Wages and Related Payroll taxes of 20, 870 andfood license of $400 plus miscellaneous of $520, supplies of $1,300,telephone of $480, and taxes of $10,000
Thetotal expenses amount to $146420The minimum taxable amount iscalculated from the difference between gross receipts and grossdeductibles.
Theamount equals, .Some of the assumptions made during the calculation are that someexpenses vary according to the duration of loans, and insurancecosts.
IRS.(2014). DeductingBusiness Expenses. Retrievedfromhttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses
Departmentof the Treasury. (2014). Returnof Organization Exempt From Income Tax.Retrieved from http://www.irs.gov/pub/irs-pdf/f990.pdf