According to 2019 data, the Internal Revenue Service recognized approximately 1.9 million tax-exempt organizations in the United States. Of this population, more than 263,000 of the organizations were identified as either churches or religious organizations. This likely accounts for why the Internal Revenue Service received nearly 1.6 million tax-exempt returns in 2019. Unfortunately, tax-exempt organizations, including charities and religious organizations, may perpetrate fraud and abuse federal tax laws. The Treasury Inspector General for Tax Administration (“TIGTA”) recently performed an audit to assess the effectiveness of the Internal Revenue Service’s efforts to ensure the compliance of tax-exempt organizations.
Section 501 and the EO Function Examinations Unit
Even though non-profit organizations can be tax-exempt, they are still required to file a return with the IRS. Many individuals, including those associated with non-profit organizations, do not understand the tax obligations of a non-profit organization.
I have compiled a top ten list of mistakes made in regard to taxes for these organizations.
• Not understanding the difference in non-profit and tax-exempt. An organization is a non-profit when it registers with the state as a non-profit organization. This state registration does not confer on it tax-exempt status. The organization must file a Form 1023 with the IRS to apply for, and receive tax-exempt status.
• Not filing a return. Because the organization is tax-exempt, some have a belief that the organization is not required to file a tax return. All tax exempt organizations, with the exception of churches, must file a Form 990 annually with the IRS. Read More