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Tax-exempt groups face reduced reporting requirements

On Behalf of | Jul 19, 2018 | IRS Issues

Some tax-exempt organizations in Georgia and across the country may no longer need to comply with some reporting requirements under guidance released by the IRS and the Treasury Department in July. Every year, charitable organizations that have a tax exemption under section 501(c)(3) must give the IRS the names and addresses of their large donors. Other types of organizations, like 501(c)(4) membership groups, also have to provide this information to the tax agency. While the information is expected to remain private, it has been exposed to the public on previous occasions.

With the new guidance, charitable groups, political organizations and social welfare groups will no longer be required to turn over the names and addresses of donors. The groups will need to keep these records, however, as they must make them available to the IRS in the case of an audit or investigation. An announcement noted that the information about donors’ identities is not necessary in order to properly administer the tax laws related to nonprofit organizations. In general, tax-exempt groups file an annual form that is publicly accessible. The names and addresses are currently deleted before the main form is made public; the statement said that the forms would remain public in future filing.

There has been some controversy in past years about the methods used by the IRS to determine which groups were properly classified as 501(c)(3) or 501(c)(4) tax-exempt organizations. Following the revelation that some groups received extra scrutiny, the IRS conducted reviews and the current guidance is one result.

When a group is looking to get started as a charitable or educational organization, obtaining the right tax-exempt status might make all the difference. A tax lawyer may prepare the necessary documents to seek approval for tax-exempt status and work with organizations in the case of an IRS audit or other difficulties.