The latest report on the activities and plans for the Exempt Organizations (EO) section of the Tax Exempt and Government Entities Division of the IRS provides some insight into what's ahead for nonprofits—good to know if your organization is in a group targeted for scrutiny. EO director Lois Lerner outlines accomplishments in fiscal year (FY) 2011 and previews plans for FY 2012 in the 12-page report. It is worth reading to get an understanding of EO's priorities, but below are some highlights.
Monitoring level remained steady. The statistics show that IRS stepped up its efforts to check on charity compliance in FY 2009, but since then, the total number of returns reviewed dropped by about 10 percent from FY 2009 to FY 2010 and another 10 percent from FY 2010 to FY 2011. But a breakout by type of review reveals:
Originally, the IRS stated that it wished to use compliance checks more, as they were less resource intensive, but, in fact, over the past three years, the number of compliance checks has dropped dramatically while full examinations have increased some.
Decrease in EO Staff. Total staff levels have decreased for the past three years—910 in FY 2009, 900 in FY 2010, and 889 in FY 2011. The staff in the Examinations area, however, is up slightly from FY 2009 levels, rising from 525 in FY 2009 to 538 in FY 2010, then decreasing to 531 in FY 2011. Other areas (Rulings & Agreements, Customer Education & Outreach, and Director's Office) only increased by a total of 5 from FY 2008 to FY 2010.
Other Issues of Note
IRS EO resources will focus in certain areas in 2012, including the following:
Collaboration and General
The IRS will continue its efforts to ensure that the nonprofit sector complies with the requirements that come with being a tax-exempt organization. As outlined above, certain nonprofits have a higher likelihood of hearing from the IRS, even though its resources are limited. All nonprofits, however, can take some simple steps to lessen the likelihood of receiving an inquiry from the IRS in the coming year.
Linda M. Lampkin, ERI Economic Research Institute© 2012, ERI Economic Research Institute
Linda M. Lampkin is research director of ERI Economic Research Institute, a company that provides Form 990 compensation data for use by nonprofits, and former director of the National Center for Charitable Statistics at the Urban Institute. She can be reached at firstname.lastname@example.org or (877) 799-3428.
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