Today, as part of its Fiscal Year 2019 Program Letter, the IRS Tax Exempt & Government Entities (TE/GE) Division released its compliance strategies. Compliance strategies are issues selected and approved by TE/GE’s Compliance Governance Board as priority work. The compliance strategies listed by TE/GE for exempt organizations include:

  • Self-dealing by private foundations: focus on organizations with loans to disqualified persons.
  • Section 501(c)(7) entities: focus on investment income, non-member income, and non-filers of Form 990-T by tax-exempt social clubs.
  • 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 section 501(c)(3) organizations.
  • 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 failure to comply with backup withholding requirements.
  • Early retirement incentive plans: determine whether federal, state, or local governmental entities that provide cash (and other) options to employees as an incentive for early retirement have applied proper tax treatment to these benefits.