Tax Cheats Beware
2009 IRS Targets Nonprofits
The IRS finished putting the final touches on its plan to catch tax cheats in 2009. Its latest target is non-profit entities. Taxes filed for 2008 in 2009 for all non profits will come under heavy scrutiny via additional tax forms geared towards exposing unsavory business practices. Myopic review of this sector is new for the IRS. Up until now the focus has been on corporations; unpaid payroll taxes and misclassified independent contractors. What's behind the change? The IRS states it has reason to believe auditing this sector will reveal illegal business practices that will pay huge dividends making the extra effort well worth it. How do they plan to catch them?
Tax exempt organizations will be required to use the revised Form 990, designed to expose:
1. Excessive executive compensation
2. Worker misclassification
The results of an IRS survey of more than 2000 tax exempt organizations including 400 private non-profit organizations revealed a variety of troubling practices according to Mark Everson, IRS Commissioner. "We have found organizations that pay the executives' personal expenses - their automobiles and family travel - and organizations that pay large salaries that cannot be supported by comparable salaries paid to similar executives..
At the end of the day the IRS will prevail. The government is pulling out all the stops on this one. The commissioner assures the tax payers the IRS will not miss the opportunity to shut down illegal business practices and catch those who don't pay their fair share.
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As rare as audits are, the dreaded knock on the door from the IRS agent is even rarer. Business Auditing
Thank you for your reply. I would agree IRS audits over the years have declined but the states have stepped up its auditing efforts. Fines and penalties the states hand out to tax cheats are reported to the IRS and if the return is big enough the IRS will pursue. As you may know the IRS has been a bit busy traipsing on the heels of the SEC. Backdating of stock options and the millions of dollars associated with it yields a bit more tax revenues for the IRS than a tax audit. However, I think 2009 will be the come back year for the IRS and the states certainly will increase its efforts as well. Presidential Elect Obama co-authored a bill to stop worker misclassifications and force the cheaters to pay their fair share. The support of Obama and a promise to the Unions who backed his campaign and you can count on the bill passing fairly quickly. The audit world is about to heat up for those who have been gaming the system for years.