IRS INITIATIVE EYES TAX-EXEMPT GROUPS’ COMPENSATION:  The Internal Revenue Service has started a new enforcement effort to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders.

As part of the Tax Exempt Compensation Enforcement Project, the agency will contact nearly 2,000 charities and foundations to seek more information about their compensation practices and procedures. The IRS said that the enforcement project will consist of examinations as well as other contacts.

Because part of the project’s objective is to gather information regarding current practices, the agency noted that contact by the IRS shouldn’t necessarily imply improper activity by an organization.

IRS Commissioner Mark W. Everson said that the agency is concerned that some charities and private foundations are abusing their tax-exempt status “by paying exorbitant compensation to their officers and others.”

“Particular organizations that we contact may or may not have problems in the compensation area, but specific aspects of their operations have raised questions that must be answered,” Everson said.


IRS ISSUES NEW SOURCE-OF-COMPENSATION REGS: The Internal Revenue Service has issued new proposed regulations to determine the source of compensation for labor or personal services. The new rules apply to individuals who, as employees, perform labor or personal services partly within and partly outside the United States. Corresponding regulations that had been proposed in 2000 have been withdrawn.

“These new regulations provide clear and straightforward rules for determining the source of employee compensation income in the cross-border context. At the same time, they provide much-needed flexibility that will allow taxpayers and the IRS to take into account specific circumstances in order to reach the right result,” said Greg Jenner, acting assistant secretary for tax policy. “This approach will reduce disputes between taxpayers and the IRS and allow more efficient use of IRS resources.”

Current regulations provide that in cases where a person performs labor or personal services partly within and partly outside the United States, the amount that is treated as income from U.S. sources is determined under the facts and circumstances of the particular case. Regulations proposed in 2000 would have required that the source of compensation received by any individual for a specific time period be determined solely based on the portion of the time worked within and outside of the U.S. The new proposed regulations generally provide that, in the case of an individual who receives compensation as an employee, identified fringe benefits are sourced on a geographic basis and all other compensation is sourced on a time basis.

The proposed regulations also provide for the opportunity, in appropriate circumstances, to use a different approach to determine the source of compensation received by an individual as an employee. The new regulations would retain the current-law rule providing that the source of compensation for labor or personal services that is received by a corporation or an individual who is not an employee is determined under the facts and circumstances of the particular case.


IRS LAUNCHES E-MAIL SERVICE FOR TECHNICAL GUIDANCE: The Internal Revenue Service said that it plans to launch a new service to make technical guidance available via e-mail to tax professionals when documents are issued.

Through the IRS GuideWire list server, subscribers will receive notification of and links to IRS announcements, notices, revenue procedures and revenue rulings as they are issued.

“This is an easy way for tax professionals to get copies of important guidance quickly and directly,” said IRS chief counsel Don Korb. “This is a valuable resource tool for people who need time-sensitive guidance in advance of publication in the Internal Revenue Bulletin.”

To subscribe to the service, individuals should request to be added to the list server by going to www.irs.gov, clicking on “The Newsroom” and “e-News Subscriptions,” and then choosing “IRS GuideWire.”

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