On October 3, 2018, the IRS Tax Exempt and Government Entities (TE/GE) division issued their Fiscal 2019 Program Letter (updated link here). Note in particular the emphasis on data-driven approaches and the focus on private foundation self-dealing, nonprofits that had converted from for-profits, and proper worker (employee vs. contractor) classification. Here are some highlights:
Message from the IRS TE/GE Commissioners
This Program Letter shares with you where we are heading in the new fiscal year, including executing compliance strategies, building better processes, and providing useful information and guidance on the Tax Cuts and Jobs Act (TCJA). As we did last year, we will provide a full review of our FY 2018 accomplishments during the first quarter of FY 2019.
TE/GE has made tremendous progress in empowering our taxpayers with the launch of Tax Exempt Organizations Search (TEOS), more options to use Pay.gov, the introduction of secure messaging with taxpayers and practitioners in our Tax Exempt Bonds (TEB) program, and additional guidance – including a number of innovative short videos – to make it easier for Indian Tribal Government (ITG) taxpayers and their representatives to understand and comply with the law. In FY 2019, we expect to expand our use of Pay.gov and our use of secure messaging with taxpayers and practitioners into our Employee Plans (EP) program. We also will continue an ambitious schedule of additional informational videos, articles and outreach events.
For the first time this decade, TE/GE is onboarding a significant number of new hires.
TE/GE continually seeks to advance data and analytics to drive decisions about identifying and addressing existing and emerging high-risk areas of noncompliance to which it applies optimal resources.
As part of our compliance strategy process, we consider the most appropriate, cost-effective and least intrusive compliance treatments, including educational efforts, soft letter compliance reviews, compliance checks, and correspondence or field examinations. We will expand our capacity for highly efficient, low taxpayer-burden compliance checks with additional compliance units designed to be flexibly applied across TE/GE’s compliance strategies, regardless of program.
Fiscal Year 2019 Compliance Program – Compliance Strategies
- Internal Revenue Code (IRC) Section 501(c)(7) entities: focus on investment income, non-member income and non-filers of Form 990-T, Exempt Organization Business Tax Return, by tax-exempt social clubs.
- Previous for-profit: focus on organizations formerly operated as for-profit entities prior to their conversion to IRC Section 501(c)(3) organizations.
- Self-dealing by private foundations: focus on organizations with loans to disqualified persons.
- Forms W-2/1099 matches: compare payments reported on Form 1099-Misc., Miscellaneous Income, with wages reported on Form W-2, Wage and Tax Statement, and subject to Federal Insurance Contribution Act (FICA) tax and income tax withholding.
- Worker classification (misclassified workers): determine whether misclassified workers result in incorrectly treating employees as independent contractors.