The Internal Revenue Service plans to do more to ensure that tax-exempt political organizations fully report their contributions and expenditures to the IRS on time, according to a new government report.
The report, by the Treasury Inspector General for Tax Administration, noted that the IRSs Exempt Organizations function has already taken some steps to identify non-compliant Section 527 political organizations, but the report recommended that the IRS should focus on increased enforcement actions for any non-compliant tax-exempt political groups.
With additional focus, the EO function will promote the full and accurate disclosure of political organizations financial information, which will help the public gain an accurate understanding of political organizations activities (e.g., tracking the flow of funds related to legislative issues and political campaigns), said the report.
In a prior audit of tax-exempt political organizations compliance with IRS rules, TIGTA identified several areas where the IRS could improve the timeliness and completeness of Section 527 political organizations public disclosure of their financial information. TIGTA acknowledged that the IRS has taken significant steps to improve its ability to identify political organizations that do not notify the IRS on a timely basis of their existence or submit reports of their contributions and expenditures in time. However, the IRS has not fully addressed noncompliance among political organizations, TIGTA noted.
For example, one out of every four Forms 8872, Political Organization Report of Contributions and Expenditures, that TIGTA reviewed had incomplete or missing contributor or recipient information.
TIGTA determined the IRS is not reviewing the filings to determine if they are complete or if penalties should be assessed. In addition, the IRS is not always issuing notices at the appropriate time that include all the information needed by political organizations to become compliant. Lastly, the IRS is not following up on information it has requested from political organizations to verify their compliance.
After TIGTA completed a previous review of fiscal year 2005 compliance, the IRSs EO staff focused their efforts on completing actions that would better enable them to identify non-compliant political organizations. Those included establishing new electronic tax accounts to track the activity of political organizations filing Form 8871, Political Organization Notice of Section 527 Status, and Form 8872, issuing notices to inform political organizations of untimely and missing Forms 8871 and 8872, providing more detailed instructions to political organizations that improve the completeness of Form 8872 filings, and performing a compliance project focused on the filing compliance of qualified state or local political organizations.
In its new report, TIGTA recommended that IRS officials should conduct periodic reviews to determine whether political organizations are submitting complete filings, develop procedures for reviewing responses and following up on non-responses to notices, including assessing additional tax or penalties as appropriate, correct untimely and missing notices, and revise forms and instructions to improve compliance.
In response to the report, IRS officials stated that they generally agreed with TIGTAs recommendations and plan to take the appropriate corrective actions. TIGTA estimated that the IRS could collect an additional $5.3 million from groups that either filed their forms too late or filled them out incompletely. The IRS, however, suggested that the estimate was too high. However, the IRS said it would improve and develop new procedures to address the reports recommendations.
We are developing procedures for examination staff to periodically review a sample of submitted Forms 8872 for compliance, the IRS wrote in response to the report.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access