2019 IRS Work Plan for Tax-Exempt Organizations

Each year, the IRS Tax Exempt and Government Entities (TE/GE) division releases a letter outlining their work plan for the upcoming year. This year’s Fiscal 2019 Program Letter was released on October 3, 2018.

According to the letter, the focus for 2019 includes data-driven oversight, nonprofits that have converted from for-profits, private foundation self-dealing, social club taxable income, and worker classification (employee vs. independent contractor). Here are some highlights:

  • 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.
  • IRC Section 4947(a)(1) Non-Exempt Charitable Trusts (NECTs): focus on organizations that under-report income or over-report charitable contributions.
  • 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.
  • Worker classification (misclassified workers): determine whether misclassified workers result in incorrectly treating employees as independent contractors.
  • 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.
  • Notice CP 2100 (backup withholding): determine whether mismatched and/or missing taxpayer identification numbers on Form 1099 indicate a failure to comply with backup withholding requirements.

The letter also states that the IRS expects a continued increase in determination applications and will hire approximately 40 new revenue agents to process determination applications to reduce case processing time.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, PC. To contact Ellis, call 602-456-0071 or email us at info@caritaslawgroup.com.

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