Will new IRS policy encourage tax fraud?

Starting on July 1 a new policy went into effect for organizations seeking tax-exempt status as a charity. Previously, groups pursuing this designation had to complete a detailed 26-page form, provide reams of supporting documentation and describe their intended activities in narrative form.

To obtain tax-exempt status as a nonprofit now, many groups will simply have to certify on a three page form that they are in tax code compliance with the requirements of a charity. After applicants pay a $400 fee, these forms will essentially be rubber stamped.

To get an automatic designation as a charity under the new process, a group has to declare that it has a yearly income below $50,000 and holds total assets valued at less than $250,000. Assuming an organization meets these eligibility criteria and files all paperwork properly, it will qualify as a charity to which donors may make tax-deductible contributions.

This change will affect around 80 percent of the groups that seek tax-exempt status as a charity. Annually, it will mean 40,000 to 50,000 fewer applications for tax-exempt status will need to be reviewed.

The IRS says the move is not only being made in the name of efficiency, but that it will actually help counter tax fraud. Some other commentators have not been so optimistic, however, and fear that the change will open the door to fraud.

The review process in applications for tax-exempt status is being eliminated for many organizations, but that does not mean the IRS intends to ease up whatsoever on enforcement actions that are deemed necessary. Any tax controversy investigated by the IRS is a serious matter, and if you are being audited or investigated for a tax issue, it is important to get the right legal help.

Source: Time, "IRS to Rubber-Stamp Tax-Exempt Status for Most Charities After Scandal," Massimo Calabresi, July 13, 2014

No Comments

Leave a comment
Comment Information
  • ABA | American Bar Association
  • AV Preeminent | Peer Rated for Highest level of Professional Excellence | 2018
  • Virginia State Bar | 1938
  • Super lawyer | 2018
  • DC Bar
  • American Bar Academy of Attorney - CPAs | The power of the dual view
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1629 K Street NW, Suite 300
Washington, D.C. 20006

Phone: 202-618-1873
Fax: 888-235-8405
Map & Directions

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 410-497-5947
Fax: 888-235-8405
Map & Directions

Annapolis Office
888 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 410-497-5947
Fax: 888-235-8405
Map & Directions

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 703-621-7169
Fax: 888-235-8405
Map & Directions

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 240-599-5009
Fax: 888-235-8405
Map & Directions

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 443-743-3381
Fax: 888-235-8405
Map & Directions