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Tag Archive for Treasury Inspector General for Tax Administration

TIGTA Recognizes Noncompliant Exempt Orgs May Be Flying Under The IRS’ Radar

TIGTA Recognizes Noncompliant Exempt Orgs May Be Flying Under The IRS’ Radar

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

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Expat Execution – TIGTA Audit Recommends IRS Increase Its Enforcement Efforts

Expat Execution - TIGTA Audit Recommends IRS Increase Its Enforcement Efforts

One might not expect it, but the United States has experienced an increasing trend in number of expatriates in the last decade. Each year, thousands of individual taxpayers relinquished either their U.S. citizenship or permanent resident status, peaking in 2016 with 5,405 total expatriates. Expatriates are required to comply with specific tax provisions. The Treasury Inspector General for Tax Administration (“TIGTA”) ultimately performed an audit to assess the reliability and effectiveness of the Internal Revenue Service’s efforts to ensure taxpayer (or former taxpayer) compliance.

Sections 877 and 877A, Generally

Sections 877 and 877A of the Internal Revenue Code govern the tax provisions related to expatriates. Under these provisions, certain taxpayers who relinquish their U.S. citizenship or long-term residents who terminate their U.S. residency may be subject to certain tax consequences. Specifically, such taxpayers must certify on Form 8854, Initial and Annual Expatriation Statement, their compliance with all U.S. federal tax laws for the five years prior to the date of expatriation and determine whether they are “covered expatriates.”

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Beware The “Federal Student Tax”

John Stancil

Scammers are currently targeting students and parents, posing as the IRS and calling to collect payment of the non-existent “Federal Student Tax.” Callers are demanding immediate payment and if refused, threaten to report the student to the police. As this is merely an attempt to separate you from your money, your best response is to hang up. There is no such tax, and the IRS does not utilize such collection methods.

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The Sec. 501(c)(4) Story: Program Notes – Part 5 – Controversy #4 & Resolution

iStock_nonprofitXSmallSocial welfare, inappropriateness, resignations, hearings, and complexity—the Sec. 501(c)(4) story has it all…

This blog post is written in five parts:

1.  The Sec. 501(c)(4) Story: Program Notes – Part 1
2.  The Sec. 501(c)(4) Story: Program Notes – Part 2-Plot & Controversy #1
3.  The Sec. 501(c)(4) Story: Program Notes – Part 3-Controversy #2
4.  The Sec. 501(c)(4) Story: Program Notes – Part 4-Controversy #3
5.  The Sec. 501(c)(4) Story: Program Notes – Part 5-Controversy #4 & Resolution

Controversy #4

Is reform needed for Sec. 501 on exempt organizations and Sec. 527 political organizations? The controversies noted above, along with the reality that Sec. 501(c) lists 29 types of nonprofit organizations, indicates the need for simplification and greater certainty. Concern about the political nature of some Sec. 501(c)(4) organizations raises the issue of whether they should be treated as Sec. 527 political organizations or required to publicly disclose donor names (as is required for Sec. 527 donations).

Resolution (Looking Forward)

Certainly, there is much work ahead for Congress and the IRS to complete this story. Likely, Congress will gain a Read more

The Sec. 501(c)(4) Story: Program Notes – Part 4 – Controversy #3

iStock_ExclusiveXSmallSocial welfare, inappropriateness, resignations, hearings, and complexity—the Sec. 501(c)(4) story has it all…

This blog post is written in five parts:

1.  The Sec. 501(c)(4) Story: Program Notes – Part 1
2.  The Sec. 501(c)(4) Story: Program Notes – Part 2-Plot and Controversy #1
3.  The Sec. 501(c)(4) Story: Program Notes – Part 3-Controversy #2
4.  The Sec. 501(c)(4) Story: Program Notes – Part 4-Controversy #3
5.  The Sec. 501(c)(4) Story: Program Notes – Part 5-Controversy #4 & Resolution

Controversy #3

What qualifies for Sec. 501(c)(4) status, and how do other rules interact with this provision?

As described earlier, there can easily be challenges in determining if social welfare is an organization’s primary purpose. Other issues also exist. It is still unresolved whether contributions to Sec. 501(c)(4) organizations should subject the donor to gift tax, even though in 2011 the IRS announced it was closing current examinations and suspending further action on that question, noting it was a “difficult area with significant legal, administrative, and policy implications” (IRS memo and website (7/7/11)). Read more

The Sec. 501(c)(4) Story: Program Notes – Part 3 – Controversy #2

This blog post is written in five parts:

1.  The Sec. 501(c)(4) Story: Program Notes – Part 1
2.  The Sec. 501(c)(4) Story: Program Notes – Part 2-Plot and Controversy #1
3.  The Sec. 501(c)(4) Story: Program Notes – Part 3-Controversy #2
4.  The Sec. 501(c)(4) Story: Program Notes – Part 4-Controversy #3
5.  The Sec. 501(c)(4) Story: Program Notes – Part 5-Controversy #4 & Resolution

Controversy #2

Who knew what, and were congressional inquiries in recent years answered correctly?

The website for the May 22, 2013, hearing by the House Committee on Oversight and Government Reform includes Lois Lerner’s answers to TIGTA’s questions. The first question was whether anyone outside of the IRS influenced the selection criteria. Her answer: “To the best of my knowledge, no individual or organization outside the IRS influenced the creation of these criteria.”
 
The House Ways and Means Committee has posted a timeline of when groups and individuals took actions or knew something. The House Committee on Oversight sent a letter to Lerner on May 14, 2013, suggesting that she “provided false or misleading information on four separate occasions last year in response to the Committee’s oversight of IRS’s treatment of conservative groups applying for tax exempt status.” The letter also requests numerous documents for continued investigation. On May 20, 2013, the Senate Finance Committee sent a letter to Acting Commissioner Miller with 41 questions.

The Sec. 501(c)(4) Story: Program Notes – Part 2 – Plot and Controversy #1

iStock_Q and AXSmallThis blog post is written in five parts:

1.  The Sec. 501(c)(4) Story: Program Notes – Part 1
2.  The Sec. 501(c)(4) Story: Program Notes – Part 2-Plot and Controversy #1
3.  The Sec. 501(c)(4) Story: Program Notes – Part 3-Controversy #2
4.  The Sec. 501(c)(4) Story: Program Notes – Part 4-Controversy #3
5.  The Sec. 501(c)(4) Story: Program Notes – Part 5-Controversy #4 & Resolution

The Plot

The plot of the Sec. 501(c)(4) story revolves around four controversial areas in need of resolution. According to timelines prepared by the House Ways and Means Committee and TIGTA (see TIGTA Rep’t No. 2013-10-053, Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review, pages 30–42), the actions that generated the title for the May 2013 TIGTA report began in March 2010. The plot’s climax was a Q&A at an ABA Tax Section meeting involving Lois G. Lerner, IRS director, Exempt Organizations, that preceded the May 14 release of the TIGTA report. Within days, congressional hearings and additional investigations began, two IRS officials resigned Read more

The Sec. 501(c)(4) Story: Program Notes – Part 1

Hands Raised HiResFor decades, a saga involving Sec. 501(c)(4) has been developing, and it likely reached its climax in the past month. These “program notes” serve to help those watching this drama unfold gain a better understanding of the story. The term “story” is not intended to make light of any of the events or players. A program notes approach is just one way to look at and describe a serious set of events involving a tax provision with inherent challenges for administration and compliance.

Theme

The key theme of the story is tax law complexity and the problems that complexity can generate for both the government agency trying to administer the system and the taxpayers trying to comply with it.

Setting

•  Offices in Cincinnati and Washington, within the IRS Tax Exempt and Government Entities Division.
•  Offices of the Treasury Inspector General for Tax Administration (TIGTA).
•  Various House and Senate committee hearing rooms.

Characters

•  IRS personnel in the Tax Exempt and Government Entities Division (see organizational chart at Exhibit 1), and the IRS deputy commissioner they report to.
•  J. Russell George, Treasury Inspector General for Tax Administration, and TIGTA auditors.
•  Organizations seeking Sec. 501(c)(4) status.
•  Sec. 501(c)(4)—while not a person, this Code provision plays a big role in the story. Read more

IRS Updates e-File System To Prevent Processing Delays

After performance issues to its electronic filing system caused delays in processing tax returns during the 2012 filing season, the Internal Revenue Service has made several enhancements to the system over the past year that are expected to improve the tax-filing process, according to a report released May 30, 2013 by the Treasury Inspector General for Tax Administration (TIGTA).

The electronic filing system, called Modernized e-File (MeF), enables real-time processing of tax returns while improving error detection, standardizing business rules, and expediting acknowledgments to taxpayers. However, during the 2012 filing season, the IRS had to suspend MeF system processing on at least two occasions to correct system performance issues.

“IRS management noted that the performance issues first experienced on January 17, 2012, might have been caused by the large volume of tax returns received by the MeF system during the first day of processing. According to the IRS, the volume of returns received by the MeF system on January 17, 2012, was one of the largest the IRS had ever received to date,” the TIGTA report states.

“The second incidence of MeF system performance issues started in late January 2012. These issues primarily included delays sending files to downstream systems and delivering of acknowledgments, which resulted in delays in processing individual tax returns.” Read more