The Internal Revenue Service plays a vital role in this nation's philanthropic community, providing the legal and regulatory framework that makes the system work. On occasion, however, nonprofits have expressed frustration with processes they feel unnecessarily divert time and energy away from the performance of their charitable missions.
Rather than getting upset, why not help the IRS improve itself?
In 1998, Congress passed the IRS Restructuring and Reform Act, and with it came the creation of the Office of the Taxpayer Advocate, an independent organization existing within the IRS and headed by the National Taxpayer Advocate (NTA). The NTA's role is to ensure that taxpayers are able to resolve any problems they have with the IRS and to recommend appropriate changes to prevent similar problems in the future.
Later that same year, the NTA and IRS collaborated to form what is now known as the Taxpayer Advocacy Panel (TAP). TAP is composed entirely of private citizens who volunteer approximately 300 hours of their time per year over a two year period to help ensure that taxpayers have a voice that is heard by the IRS. TAP's mission is to listen to taxpayers, identify taxpayers' issues, and make suggestions for improving IRS service and customer satisfaction. TAP is open to complaints, comments, and suggestions on any issue pertaining to the IRS, including those specific to nonprofit organizations.
Recently, TAP addressed some issues concerning Form 990 filing. After discussions with a number of groups and individuals, they came up with several recommendations, including:
- "The IRS should develop a plain language pamphlet to assist smaller and newer nonprofits in completing the Form 990, including advice on what kind of records to keep; what penalties can be assessed against nonprofits who fail to comply; and what recognized exceptions may exist."
- "The failure of an organization to file a Form 990 or the failure to file a complete Form 990 can trigger enforcement and penalty assessment actions against such an organization by the IRS compliance. We are quite concerned about such actions for a number of reasons. First, such actions can undermine the charitable efforts of well-intentioned and generous people who are donating their time, resources, and efforts for a good cause. It is not an overstatement that much of our society depends upon these unselfish and dedicated group efforts carrying out various charitable goals. In terms of a Daily Penalty, to some officials, a $1,000 penalty may not seem like much. To a small group dependent upon volunteers and upon Ten Dollar Donations who function on a month-to-month basis, such penalties can be devastating. We strongly urge that the IRS especially where no revenues have been lost to the IRS because of the failure to file or the failure to file a complete return, adopt a standard of 'good faith' compliance. We are also convinced that this 'good faith' criterion can be incorporated into the present standard of 'reasonable cause.' So long as a tax-exempt organization has made a good faith effort to comply and the organization moves reasonably to correct any oversights or failures, IRS should not impose daily penalties. Instead, the IRS compliance activities should stress educating the group on its filing requirements and directing the organization to where help is available."
The complete text of their recommendations as submitted to Steven T. Miller, the IRS director of Exempt Organizations, is posted at the TAP Web site.
The IRS is an agency that's open to change and actively seeking ways to improve its customer services. If you want your voice be heard, visit the TAP Web site.
The preceding is a guest post by Patrick Ferraro, a freelance writer in Seoul, Korea, and a former editor of the Newsletter.