Gambling Tax Penalities and Interest

Tax penalties, interest on taxes, and interest on tax penalties directly related to the conduct of lawful gambling, including payroll taxes, may be reported as an allowable expense. They are not a lawful purpose expenditure.

EXAMPLE: An organization owes $187 to the IRS for January's 730 tax and owes interest and penalties on this amount totaling $58 as of September. The organization would pay and report:

• the original tax of $187 as a lawful purpose expenditure; and
  
• the interest and penalties of $58 as an allowable expense.