IRS TE/GE division’s FY 2018 work plan | KPMG | GLOBAL

IRS TE/GE division’s FY 2018 work plan

IRS TE/GE division’s FY 2018 work plan

The Tax-Exempt and Government Entities (TE/GE) division of the IRS released a work plan for fiscal year (FY) 2018.

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The work plan describes and documents the results of FY 2017 activities and outlines projects and priorities for FY 2018 regarding exempt organizations, employee plans, Indian tribal governments, and tax-exempt bonds. Read the TE/GE work plan [PDF 238 KB] (dated September 28, 2017).

FY 2018 work plan

The following discussion briefly summarizes highlights of the work plan.

EO examinations

  • Compliance strategies. Exempt Organizations (EO) will examine: (1) supporting organizations that filed Form 990-N; (2) organizations that operated as for-profit entities prior to converting to section 501(c)(3) organizations; and (3) organizations that show indicators of potential private benefit or inurement.
  • Data-driven approaches. EO will continue to improve Form 990, 990-EZ, and 990-PF compliance models and test a new model for Form 5227 and examine private foundations based on potential anomalies found in Forms 990-PF. In addition, EO will use data-driven selection models to identify returns filed by exempt organizations and government entities with the highest risk of employment tax non-compliance (e.g., substantial credit balances with no returns, and zero to minimal Medicare and/or Social Security wages paid compared to Form 1099 distributions). 
  • Compliance checks. EO will continue to use compliance checks to determine whether an entity is adhering to recordkeeping and information reporting requirements (e.g., tax-exempt employers with discrepancies between Form W-2 and Form 941/944, failure to file Form 940, failure to file Form 990-T, tax-exempt hospital organizations that did not comply with financial assistance policy requirement of section 501(r)). 
  • Federal, state, and local / employment tax. In May 2017, TE/GE moved the Federal, State and Local Governments division into EO. In FY 2018, this group will focus on employment tax compliance by federal, state, and local government entities and assist the examination of tax-exempt entities with complex worker classification and fringe benefit issues. For example, EO will examine entities to determine that payments reported on Forms 1099 are not actually wages subject to FICA and income tax withholding and address situations when a section 501(c)(3) organization handles payroll for a related section 501(c)(4) organization but is not paying FUTA tax with respect to the section 501(c)(4) organization’s employees.
  • New Compliance, Planning & Classification unit. In FY 2017, TE/GE established a new Compliance, Planning & Classification unit that consolidates processes occurring in functions within TE/GE and that will identify, research, and monitor compliance risks using data analytics.

EO rulings and agreements

  • Proposed denials for incomplete responses. As of FY 2017, EO will issue proposed adverse determination letters to applicants for tax-exempt status that do not provide complete responses to requested information. 
  • Form 1023-EZ. EO intends to implement revisions to Form 1023-EZ in early 2018 that will require additional information from applicants, including a required activity description and additional questions on gross receipts, asset thresholds, and foundation classification. As a result of these changes, EO expects the average processing time for a Form 1023-EZ to increase. EO will continue to mitigate Form 1023-EZ applicant compliance risks by performing pre-determination application reviews.
  • Knowledge management. Planned topics for knowledge management products (e.g., issue snapshots) in FY 2018 include gaming issues, unrelated business income (and related exemption issues), section 501(r), organizational test requirements, and employment tax. Additionally, EO will continue to work on removing technical information, such as summaries of revenue rulings and court cases, from the Internal Revenue Manual and placing them on the Audit Technique Guides for Exempt Organizations webpage.

Other TE/GE groups

The FY 2018 work plan also includes objectives for other TE/GE groups, including employee plans and Indian tribal governments / tax-exempt bonds.  

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Greg Goller | +1 703 286 8391 | greggoller@kpmg.com

Alexandra Mitchell | +1 202 533 6078 | aomitchell@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Randall Thomas | +1 202 533 3786 | randallthomas@kpmg.com

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