Two IRS related things to look at as 2010 winds down and we look to a new year:
There is a more extensive write up on both issues on Massnonprofit.org
1. Nonprofits May Get More in 2011 from Foundations, New Tax Law: The IRA Charitable Rollover, a part of the Middle Class Tax Relief Act of 2010, would allow donors age 70½ to exclude from their taxable income any IRA funds up to $100,000 that have been withdrawn and transferred to a charity when filing a tax return. The extension of the IRA Charitable Rollover also includes a special provision that allows taxpayers who make any qualified donations between Dec. 31, 2010, and Feb. 1, 2011, to deem that those donations were made on Dec. 31, 2010, for tax filing purposes. -Sounds like this is something you should pass along to your donors!
2. Internal Revenue Service to Look More Closely at Nonprofits in 2011 Nonprofits in 2011 will face increased scrutiny from the Internal Revenue Service, which plans to use the revised Form 990 as a tool to ensure that organizations are complying with the law. (I heard from an accountant friend that the IRS has hired hundreds more agents, many for just this purpose. A few of the highlights:
Form 990 – The IRS will use the redesigned Form 990 to identify non-compliant and potentially non-compliant organizations for examination, to develop targeted compliance projects, and to inform and supplement educational efforts.
Charitable Spending Initiative – The IRS will continue to study the sources and uses of funds in the charitable sector and their relationship to the accomplishment of charitable purposes. In particular, the IRS will look at fundraising expenses, organizations reporting unrelated trade or business activity with relatively low levels of program service expenditures, organizations with high ratios of officer compensation in comparison to program service expenditures, and organizations with low levels of program service expenditures in comparison to total revenue.
Governance – Building on work it began last year on governance practices and related internal organizational controls, the IRS will analyze data over the long term to gain a better understanding of the intersection between governance practices and tax compliance.
Keeping up with what is expected (from the government) should help legitimate organizations become better, and keep the public’s trust.