Taxes and Nonprofits

OK, here's a new one.

While working as a volunteer this morning, I was talking to a Mexican woman who was worried about volunteering because, she said, her son had done volunteer work teaching martial arts and had been hit with a 9000 peso income tax bill for the unpaid work.

She's got to be confused about something, right? But I thought I'd go right to the reliable source and see if Spencer can weigh in on this. Is there some kind of crazy tax penalty for volunteering? Did they maybe assume he actually made money doing this and made him report a reasonable amount (like waiter tips in the USA)?

I'm curious about nonprofit organizations in general down here. I'm involved in selling things made by the members (beneficiaries) of this organization, and part of the proceeds go back into the organization. I figure the money received by the individuals is their business as far as reporting it or paying taxes on it. But what about the money that goes back into the organization? Are non-profits here also non-taxable? Do they have to be registered in a particular way to make them so?

If I sell stuff that I made but donate the all the money I make back into the organization (haven't done this yet but was planning to), do I owe taxes on any of that income?

I don't want to open a can of worms but I also don't want to run into trouble down the line.

Is the organization an A.C. ? (asociación civil)

slainte39 wrote:Is the organization an A.C. ? (asociación civil)

Not sure. I'll check on this!

If a volunteer has a commercial operation and unexplained deposits in their bank acct then they could have trouble in an audit.

Thanks, Spencer. I figured it must be something like this. So there's nothing that directly targets volunteers, right?