Tax-exempt groups will face extra audit heat from IRS on several fronts: Organizations offering aid on mortgage foreclosures. Examiners will check whether these groups are helping people or just generating income for their owners.
A similar project involving credit counseling firms uncovered a lot of deceptive tricks, and the Service ended up revoking the income tax exemption of many of the firms. Groups with lots of unrelated business income in the previous three years will be checked if they didn’t pay any tax on Form 990-T.
Large and midsize charities with very high fund-raising levels will be probed if only a small part of gross receipts is spent on charitable endeavors. Large organizations that filed Form 990-N instead of the required Form 990 will be at higher risk.
With regard to charities with activities abroad, the IRS will keep an eye ones with big foreign grant costs. Lastly with regard to employment taxes,. this marks the end of a three-year Service-wide project to test compliance with the payroll tax rules through a series of random examinations.
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