* This article was originally published in February 2012.
IRS Exempt Organizations has posted its FY 2011 Annual Report and 2012 Work Plan. The following are highlights from the IRS’s plans for 2012:
1. The new Form 990 has provided the IRS with a wealth of information. It plans to begin using the information to develop models which it will use to assess the likelihood of noncompliance in 990s.
2. Organizations that classify themselves as 501(c)(4),(5) and (6) organizations are not required to get determination letters from the IRS. The IRS plans to review many organizations classified under these 3 categories to determine if they are properly classified and in compliance with the rules associated with these types of entities. Organizations that fall in these categories are social welfare organizations, labor unions, chambers of commerce and trade associations.
3. The IRS also plans to look at political activity for areas of noncompliance. It will use information it has gathered from other projects and the Form 990 to determine if there is improper political activity or improper reporting associated with such activity.
4. The area of unrelated business activity will also be considered. The IRS will investigate 990T returns where there are large gross receipts, and an overall loss from unrelated activities. The Report also indicated that it would look at organizations that are currently not filing 990T returns, but where the IRS believes there may be unrelated activities.
5. In addition to the above items, the IRS is also making connections between governance policies reported on the 990 and tax compliance. The Report did not go into detail about this, but responses of no to certain questions on the governance section of the 990 may be considered indicators of noncompliance in other areas.