April 2009
Ensuring Compliance by Tax
Exempt Non-filers
The Treasury Department’s
Inspector General (IG) for Tax Administration recently
issued a memorandum to the IRS that suggests more must be
done to identify exempt organizations that have not complied
with their filing requirements. According to the
memorandum, the timely filing of returns by tax-exempt
organizations is critical to taxpayers who need operational
information so they can make informed contribution
decisions.
The IG suggests the
development of a comprehensive non-filer strategy. The
strategy could address several areas where efforts should be
improved, including:
· Creating
overall program goals and performance measures related to
all non-filer efforts. Such a program could set goals to
improve the voluntary compliance rate.
· Establishing
plans for conducting analyses of non-filer project results.
For example, trend analyses could be used to develop
educational materials to reduce noncompliance.
· Analyzing
collection services to assess how data and resources can
best be used to make the non-filing strategy more effective
and efficient. The memorandum indicated that 76 percent
(126,585) of tax-exempt organization cases were closed by
shelving or suspending further IRS action, which means the
returns may still not be filed.
The IG indicated that creating
a comprehensive non-filer strategy with goals and measures
would put the IRS in a better position to:
· Evaluate and
improve case selection criteria to ensure that cases with
the best potential for affecting the non-filer population
are selected;
· Allocate
sufficient resources to work non-filer cases;
· Develop
indicators specific to the non-filer inventory; and
· Measure the
effectiveness of the non-filer strategy and make changes as
needed.
In response to the
memorandum, the IRS plans to take action more or less in
line with the IG’s recommendations. Consequently, the
nonprofit community may experience additional enforcement
initiatives to ensure compliance with filing requirements.
However, the memorandum suggests that such initiatives may
not be in place until after 2009.
Questions about this matter
may be directed to Vincent Ruocco, LLC, CPA at 203.932.2931
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