Staffing and funding for the IRS division that oversees tax exempt organizations has fallen dramatically in the last six years or so.
According to a behind-the-paywall article at the Washington Post, the budget for the Exempt Organization division has dropped from $102M to $82M between 2011 and FY 2017. That is a $20M decline, or 19.6%.
For the same years, staffing has declined from 889 to 642, according to the article. That is a decline of 247 positions, or 27.8%.
The IRS has posted the standard mileage rates for 2018. New rate for transportation and reimbursements is 54.5 cents. That is up a penny from 53.5 cents in 2017.
According to IRS comments in Notice 2018-03:
Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their names nor organizations will be mentioned. The ideas mentioned can stand or fall on their own.
This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.
Tax update:
I don’t do politics on my blogs.
I do pay attention to issues affecting non-profits.
So when the president issues an Executive Order addressing religious freedom, it is worth discussing even though it is a politically loaded EO.
On May 4, the president issued an EO which reportedly pulls back on the ban against churches getting involved in political campaigns.
In a one sentence overstatement, under current law 501(c)(3) exempt organizations may not involve themselves in political campaigns and may only get involved in very limited ways in legislative efforts. Ok, I’ll add a second sentence – That means churches and other exempt organizations may not endorse or favor a political candidate but may exert some effort addressing matters before a legislative body.
Based only on initial reports, the EO appears to contain several major items. First, telling the IRS to use maximum discretion in applying the rules on the political ban. Second, telling the Attorney General to develop guidelines for federal agencies on how they apply their rules in terms of religious freedom. Third, asking federal agencies to make certain changes in health care requirements regarding contraceptive coverage.
Church Law & Tax, site for Richard Hammar’s writing on issues affecting churches, recently tweeted about their presentation of Five Common Payroll Issues Ministries Face Slideshow.
If you are in a church, or any parachurch ministry for that matter, it would be worth your time to read through the slide deck.
I’ll guess this is old news for most people. However, if you see something that you don’t understand or seems contrary to how you are doing things, you might want to take that as a warning you ought to do some research. I’ll mention just a few highlights.
Remember to report the following as income (see slides 8 and 9): (more…)
Ok, so you know it is a scam if you get a call from “the IRS” saying you have to pay your tax bill right this instant because the local cops are on the way to arrest you.
If you get one of those calls, hang up. Don’t even talk.
Here’s the newest phishing scam now starting to hit charities.
Kelly Phillips Erb explains the new scheme: IRS Issues Urgent Alert as W-2 Phishing Scam Spreads During Tax Season.
The most frequent scam in 2016 was the phone calls saying “This is the IRS and if you don’t pay your past due taxes this instant we will send someone to your house to arrest you right now.”
There are many things wrong with those calls.
As a starter, your first contact with the IRS will never be by phone. You will instead get a letter explaining what the IRS thinks you messed up.
The IRS announced the standard mileage rates for 2017 today. New rate for transportation and reimbursements is 53.5 cents. That is down from 54 cents in 2016.
According to IRS comments in Notice 2016-79:
The standard mileage rate for transportation or travel expenses is 53.5 cents per mile for all miles of business use (business standard mileage rate). See section 4 of Rev. Proc. 2010-51.
The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization under § 170. See section 5 of Rev. Proc. 2010-51.
The standard mileage rate is 17 cents per mile for use of an automobile (1) for medical care described in § 213, or (2) as part of a move for which the expenses are deductible under § 217.
Standard rates for the last few years:
The Evangelical Council for Financial Accountability has published a concise, free resource explaining many of the rules of overtime, especially in the context of the charity world.
You can find it here and get a copy merely by giving them your email address. Not to worry – I don’t think they are going to overload you with spam – I’ve signed up for several things from them and the only emails I get are for free resources and invitations to webinars that are actually of interest. Oh, and news that is of interest to those of us in the charity world.
Oh, did I say it was free?
The new overtime rules were set to go into effect tomorrow, December 1. The rules are on hold as a result of an injunction issued by a federal judge. What should charities do about changes that have been implemented, or announced, or on the drawing board?
Two articles have some suggestions:
11/29 – Baltimore Business Journal – Plenty of questions still surround blocked overtime pay law – It is very uncertain how the new overtime rules will be handled. Article cites the CEO of an outsourcing and payroll company. His advice is stay tuned to developments. The rules could be implemented, overturned, or modified.
…places a hold on the new rules regarding…
A federal judge in Texas issued an injunction putting on hold the new Department of Labor rule increasing the threshold for paying overtime. The judge concluded there was a reasonable likelihood (I don’t quite appreciate the technical description so will use casual wording) that the lawsuit by 21 states and a lot of businesses would succeed. He also concluded the rule could cause irreparable financial harm. Thus, he issued the injunction, which applies nationwide.
Congress requires W-2s and W-3s be filed with the IRS and Social Security administration by January 31 starting with reports filed in 2017. Previously, the deadline for sending reports to the government was February 28 by paper and March 31 for electronic filing.
The same, accelerated deadline applies for 1099s which have non-employee comp reported in box 7.
You can see more details in an 11/4 article at Forbes: Compressed Deadlines and Higher Penalties for Forms 1099 and W-2.
Penalties
In addition to the deadline for filing getting accelerated, the penalties for dropping the ball in 2017 are getting more severe.
Here are a few articles which will give you a different way of looking at the recent publicity surrounding Wounded Warrior Project. I’ve been swamped by several major projects so haven’t had much time to write recently. Those projects are still not done so I won’t be able to spend as much time on this post as I would like, yet I want to get some comments online for those who have been following the story.
The biggest article is The First Casualty: A report addressing the allegations made against the Wounded Warrior Project in January 2016 by Doug White, published September 6, 2016.
There is a lot of information about the entire story which has received minuscule coverage. Here is my quick recap of his major points:
Some of the recent news regarding WWP. Much more to say, not enough time today.
Wounded Warrior Project released their financial statements for fiscal year ending September 30, 2015. One sentence summary is they have continued the accounting practices in place for 2014, which have drawn lots of criticism. At first glance, looks to me like functional allocation of expense methodology is unchanged from 2014. Much more discussion is needed on the issue.
Tim Sandoval describes the issue on 8/17 at Chronicle of Philanthropy (behind paywall): Wounded Warrior Sticks With Accounting Rules That Drew Fire.
Layoffs and restructuring have begun:
8/30 – News 4 Jax – I-Team: Executives laid off, reassigned at Wounded Warrior Project – Article says several executive vice presidents have been let go or reassigned. More changes at the EVP level are expected.
A few articles to follow up on the accusations a World Vision manager allegedly routed aid money to a terrorist organization.
A number of public comments on twitter are claiming the total budget for the Gaza branch is only $2.2M a year.
Some people making this comment usually continue the discussion by calling into question the entire set of accusations from the Israeli government because the current claim is the manager diverted approximately $7 million a year.
This position implies that accusations of diverting $7M a year when the budget is only $2.2M means the accusations are untrue.
8/8 – AP, The Big Story – World Vision: Israeli charges based on “huge gap” in numbers – Article points out the intelligence agency accuses the program manager of diverting food, agricultural equipment, and medical supplies in addition to currency. That means there was in-kind material as well as heavy equipment.
The accounting argument appears towards the end of the article. A Foreign Ministry representative is guessing that the stated budget does not include in-in-kind donations.
A World Vision representative in Germany says the budget of $22.2M for the Gaza office over the last decade does include in-kind materials.
So, we may wind up with this being an accounting issue in addition to a loaded political issue on top of an alleged defalcation issue carrying over into alleged terrorism funding issue.
8/9 – Al Jazeera – Christian charity ‘top of Israel’s target list’ – It will help you filter news you hear about the manager of the Gaza office if you keep in mind the visible political agenda you will see in much reporting.