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. On October 3, 2018, the TE/GE issued their Fiscal 2019 Program Letter.

According to the letter, the focus for 2019 include 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.

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