The Internal Revenue Service’s (IRS) Tax Exempt and Government Entities (TE/GE) Division announced its work plan for fiscal year (FY) 2018. In this work plan, there is an underscored focus on private benefit, private inurement, payroll tax, and similar compliance issues that will directly affect tax-exempt organizations.
The work plan for FY 2018 makes mention of the IRS’s accomplishments in the previous FY of 2017, while highlighting that the division will continue to examine employment tax compliance for exempt organizations in the year to come.
The following is an overview of the work plan and its parts:
The IRS will focus on examining:
- Supporting organizations that filed a Form 990-N stating they had gross earnings of $50,000 or less.
- Previous for-profit entities that are now classified as tax-exempt organizations.
- Organizations that may be providing private benefit or inurement to private groups or individuals.
- Organizations that offer cash or similar incentives as a means to encourage employees into early retirement.
- Organizations that filed Form 1099 but should have reported payments for services performed for their company as wages that are subject to FICA tax and income tax withholding.
- 501(c)(3) organizations that operate the payroll of social welfare organizations (501(c)(4) organizations) without paying the FUTA tax for the 501(c)(4) employees.
- Entities that failed to fulfill their backup withholding requirements because of mismatched/missing Taxpayer
- Identification Numbers on income reporting forms.
The IRS will continue to conduct compliance checks and will focus on payroll, Unrelated Business Income Tax (UBIT), and financial assistance policies. In particular they will look at the following:
- Discrepancies between W-2s and Form 941/944.
- Failure to file Form 940.
- 501(c)(7) organizations that reported net investment income on Form 990 but did not file Form 990-T.
- 501(c)(3) hospitals that did not comply with the financial assistance policy.
- The IRS continues to improve their data-driven approach to examining casework, claims, and referrals.
- The IRS will continue to improve the Form 990 and 990-PF compliance models.
- The IRS will examine tax-exempt organizations for possible irregularities on their forms.
- The division will still work to identify returns with the highest risk of tax noncompliance.
- The IRS will handle refund, credit, and adjustment requests, as well as track referrals that claim noncompliance; the IRS will also conduct post-determination compliance of entities that filed Form 1023-EZ.
Snapshots, which are resources created by TE/GE, cover a range of tax topics and are available online for reference. These snapshots also offer audit tips and other helpful tools. In addition, the division releases podcasts that discuss exempt organization practices and are also accessible online.
Employment tax compliance has been a major area of examination from the IRS in past years, and it continues to be an emphasis of the IRS’s audits, as evident in the work plan for FY 2018. A best practice is to familiarize yourself with areas of the FY 2018 work plan that apply to your organization. For advice from our subject-matter experts, contact Sikich today.