IRS Exempt Organization’s Activity

  1. IRS Exempt Organization’s Activity

    Representatives from the IRS’s Exempt Organizations (EO) group expect that approximately 70% of all 501(c)(3) applications seeking tax-exempt status currently open will qualify for the streamlined process that will be available by filing the new Form 1023-EZ (currently available only in draft form). The IRS has noted that the goal of the new application is to provide more efficient approval procedures without introducing major risk into the system. Instead of extensively reviewing applications in which applicants tell the IRS what they plan to do, the IRS believes it makes more sense to review the activities once they are operating. Organizations can expect a robust compliance process at the back end through compliance checks and full examinations.

  2. Frivolous Tax Arguments

    The IRS released the 2014 version of its discussion of and responses to some of the common frivolous arguments made by individuals and groups that oppose compliance with the tax laws. Examples of frivolous arguments include beliefs that taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment; that the only “employees” subject to federal income tax are employees of the federal government; and that only foreign-source income is taxable. The penalty for filing a frivolous tax return is $5,000, and those who promote or adopt frivolous position are subject to civil penalties and may also incur criminal penalties. News Release IR-2014-51 .

  3. IRS Intensifying Identity Theft Investigations

    The IRS has announced that the Criminal Investigation (CI) division began 295 new investigations since January into identity theft and tax refund fraud schemes. CI is focusing on fraudulently acquired Electronic Filing Identification Numbers (EFINS) involved in these schemes. In the past six months, the IRS has revoked or suspended 395 EFINS based on CI investigations. IRS Commissioner Koskinen stated, “Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS.” News Release IR-2014-50.

  4. Real Estate Agent Subject to PAL Limitations

    The IRS disallowed losses in excess of the passive loss limitations claimed by the taxpayers on their 2006 and 2007 tax returns from two rental properties. The wife claimed that as a full-time real estate professional, she shouldn’t be required to show material participation in her rental real estate activities before deducting losses from those activities. The District Court for the Northern District of California disagreed, concluding that the taxpayer’s work as a real estate agent and her ownership of rental real estate were separate and distinct activities that can’t be grouped together. Adding insult to injury, the Court held that the two rental properties should have been treated as separate activities because the taxpayers didn’t elect to treat all interests in rental real estate as one activity under IRC Sec. 469(c)(7)(A)(ii) . Gragg v. U.S., 113 AFTR 2d 2014-XXXX (N.D. Cal.).

  5. IRS Smartphone App Downloads

    The IRS announced that more than 2.3 million users have downloaded or updated IRS’s smartphone application IRS2Go 4.0 so far this year. The app’s latest version was launched earlier this year for the 2014 filing season and can be used on both Apple and Android devices. The IRS2Go 4.0 app is available in both English and Spanish and provides features to help taxpayers check on the status of their tax refunds, obtain tax records, find free tax preparation providers, and stay connected with the IRS through social media channels such as YouTube and Twitter. iPhone and iTouch users can update or download the free IRS2Go application by visiting the iTunes App Store. Android users can visit Google Play to download the free IRS2Go app. For more information on IRS2Go, products and services through social media channels and other media products, visit News Release IR-2014-40 .