Three New IRS EO-Related Compliance Initiatives

Last month the IRS issued a press release announcing eight new compliance initiatives for the Tax Exempt and Government Entities Division, which are now reflected on its Compliance Program and Priorities webpage. Of particular interest to exempt organizations are the following three new initiatives:

• Form 990-N Filers/Gross Receipts Model: The purpose of this strategy is to determine if an exempt organization was eligible to file Form 990-N where related filings indicate the $50,000 gross receipts threshold was not met.  The treatment stream for this strategy is examinations.

• Officers Treating EO as Schedule C Business: The purpose of this strategy is to determine if officers and insiders of exempt organizations are claiming expenses of exempt organizations as Schedule C business deductions. Issues of focus are potential private benefit and inurement related to the exempt organization and potential adjustments to Forms 1040. The treatment stream for this strategy is examinations.

• Small EOs that Sponsor Retirement Plans: The focus of this strategy is to review retirement plans of small exempt organizations to determine whether the plan investments are properly administered, whether there are any party-in-interest transactions in the plan trust and whether any participant loans violate Internal Revenue Code (IRC) Section 72(p). Improper transactions between the plan and its participants can result in prohibited transactions under IRC Section 4975, deeming distributions as taxable income, or result in IRC Section 72(t) early distribution penalties. The treatment stream for this strategy is examinations.

Hat tip: KPMG.

Lloyd Mayer