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IRS Zeroes In on Nonprofit Organizations

Do you operate or provide assistance to a nonprofit organization? For the most part, the IRS has paid scant attention to nonprofits in the past, especially as far as audits are concerned. But that's about to change. After a period of relative inactivity, the IRS is turning up the heat in the nonprofit sector. Result: It's now more important than ever for you to “toe the line.”

In fact, you should be aware of a two-pronged crackdown designed to track activities of nonprofit organizations: The IRS has (1) established a new division to scrutinize nonprofit returns and (2) imposed new filing requirements for many charities.

Details: Although charitable organizations generally do not have to pay any tax, they still must file annual information returns (Form 990 series) within 4½ months of the close of their fiscal year. Note: Certain organizations with limited assets or revenue, and churches and related organizations are exempt from this requirement. This is the main source of information that the IRS receives about nonprofits.

As part of the renewed investigation of nonprofits, the IRS first established the Exempt Organizations Compliance Unit (EOCU). This new unit was created to examine Form 990 for errors, inconsistencies, incomplete entries and other items of a suspicious nature. The EOCU will be using electronic records to ensure compliance. As a result of this focus, it is expected that audits for charitable organizations will begin to increase significantly.

Next, the IRS released new regulations requiring certain tax-exempt organizations to file annual returns electronically. The new regulations apply to the 2005 information returns that will be filed in 2006. For instance:

*For 2005 returns that are due in 2006, electronic filing is required by tax-exempt organizations with total assets of $100 million or more.

*For 2006 returns, this requirement will be expanded to include annual returns of organizations with $10 million or more in total assets.

In addition, beginning in 2007, private foundations and charitable trusts will be required to file Form 990-PF electronically, regardless of their asset size.

Note: The new electronic filing requirements apply to entities that file at least 250 returns (including income tax, excise tax, employment tax and information returns) during a calendar year.

Final words: There is no need to panic, but careful planning is essential. Make sure that your nonprofit complies with the new IRS filing requirements. Your professional tax advisers can provide the assistance you need to meet all the requirements.

[ return to list ]




	[ return to list ] IRS Zeroes In on Nonprofit Organizations Do you operate or provide assistance to a nonprofit organization? For the most part, the IRS has paid scant attention to nonprofits in the past, especially as far as audits are concerned. But that's about to change. After a period of relative inactivity, the IRS is turning up the heat in the nonprofit sector. Result: It's now more important than ever for you to “toe the line.” In fact, you should be aware of a two-pronged crackdown designed to track activities of nonprofit organizations: The IRS has (1) established a new division to scrutinize nonprofit returns and (2) imposed new filing requirements for many charities. Details: Although charitable organizations generally do not have to pay any tax, they still must file annual information returns (Form 990 series) within 4½ months of the close of their fiscal year. Note: Certain organizations with limited assets or revenue, and churches and related organizations are exempt from this requirement. This is the main source of information that the IRS receives about nonprofits. As part of the renewed investigation of nonprofits, the IRS first established the Exempt Organizations Compliance Unit (EOCU). This new unit was created to examine Form 990 for errors, inconsistencies, incomplete entries and other items of a suspicious nature. The EOCU will be using electronic records to ensure compliance. As a result of this focus, it is expected that audits for charitable organizations will begin to increase significantly. Next, the IRS released new regulations requiring certain tax-exempt organizations to file annual returns electronically. The new regulations apply to the 2005 information returns that will be filed in 2006. For instance: For 2005 returns that are due in 2006, electronic filing is required by tax-exempt organizations with total assets of $100 million or more. For 2006 returns, this requirement will be expanded to include annual returns of organizations with $10 million or more in total assets. In addition, beginning in 2007, private foundations and charitable trusts will be required to file Form 990-PF electronically, regardless of their asset size. Note: The new electronic filing requirements apply to entities that file at least 250 returns (including income tax, excise tax, employment tax and information returns) during a calendar year. Final words: There is no need to panic, but careful planning is essential. Make sure that your nonprofit complies with the new IRS filing requirements. Your professional tax advisers can provide the assistance you need to meet all the requirements. [ return to list ]
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