Recently, Lois Lerner, Director of Exempt Organizations for the Tax Exempt and Government Entities Division of the Internal Revenue Service, issued the 2011 Annual Report and 2012 Work Plan. Ms. Lerner announced the end of the three-year phase-in of the redesigned Form 990, Return of Organization Exempt from Income Tax. This means the gross assets and receipts thresholds are now set for those who must file a Form 990, 990-EZ or 990-N. The IRS will now use data from the forms to build risk models to help identify those organizations where there might be compliance problems.
The FY 2012 Work Plan will focus on the following areas: Legislative Implementation, Compliance: Using the Form 990, and Collaborative Efforts and General Work.
Legislative Implementation – The Pension Protection Act of 2006 required most exempt organizations to file with the IRS or face revocation of their exempt status. The IRS implemented Select Check to help donors determine an organization’s tax-exempt status and if it is eligible to receive a charitable contribution. Also, tax-exempt hospitals and health-care insurance issuers are now required to submit Community Benefit Activity reports with their Form 990.
Compliance: Using the Form 990 – The IRS will be looking closely at an organization’s unrelated business income activities, both from non-compliance and gross receipts purposes. Also, in this election year, the IRS will be monitoring for impermissible political activities. Governance will be a focus of the IRS. The IRS will use data gathered from the Form 990 to see if governance has led to improved tax compliance. Finally, 501(c)(4), 501(c)(5), and 501(c)(6) organizations can declare tax exemption without a determination letter from the IRS. However, the IRS may send out questionnaires to these organizations based on their Form 990 filings to ensure that tax-exempt status is appropriate.
Collaboration Efforts and General Work – The IRS will continue to monitor international activities of tax-exempt organizations. Approximately 500 employment tax returns will be selected to examine tax-payer compliance with reporting and payment of employment taxes. The IRS will summarize 400 questionnaire responses from colleges and universities and will issue a final report on the findings in May 2012.
The 2012 Work Plan is very comprehensive. A full copy of the report may be found on the IRS website. For more information and how the 2012 Work Plan may impact your organization, please contact your tax professional at Schneider Downs.
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