January 7, 2016; Taxpayer Advocate Service
The Taxpayer Advocate Service, an absolute appointment aural the Internal Revenue Service, issues an anniversary address to Congress about what it sees as the key issues adverse the IRS. The 2016 address includes a acerbic allegation of the IRS’s “absurd” administration of applications for tax exemption, abnormally the afresh alien 1023-EZ “short form” advised for use by baby new charities.
The anatomy 1023-EZ was advised to abetment the IRS and charities in allowance up a excess of applications for tax absolution that, by 2013, had accomplished 66,000. Charities were cat-and-mouse months or years for determinations from the IRS, with “applications acute review” demography 18 months or added to be assigned to a reviewer. (It’s noteworthy that an appellant for tax-exemption as a alms has the appropriate to sue the IRS if their appliance hasn’t been acted on aural 270 days.)
As NPQ appear in 2014, the key affection of the 1023-EZ is assurance on assurances from applicants rather than appointment absolute abstracts like accessories of assimilation and by-laws. Apropos aloft by critics of the anatomy and its accomplishing were allegedly justified in their apropos that the automated action would advance to amateur applicants actuality accustomed and that the 1023-EZ could account added assignment afterwards the actuality for both the IRS and accompaniment alms regulators.
According to the IRS’s own research, it accustomed 1023-EZ applications alone 77 percent of the time back it absolutely requested abstracts or basal advice from applicants, as against to a 99 percent approval amount back relying alone on assurances and attestations on the form. The IRS estimates that 20 percent of applicants appliance Anatomy 1023-EZ abort the “organizational test,” acceptation that their organizations don’t authorize as charities. A abstracted abstraction of organizations already accustomed as tax-exempt charities showed that 37 percent did not accommodated the authoritative test. Many of these charities could be brought into acquiescence by simple measures such as accepting the IRS analysis their administering abstracts and admonish on issues such as a bigger account of their absolved (charitable) purpose.
In a bitter animadversion for a accessible government document, the address says the “IRS intends to analysis its way out of the abeyant contravention it helped create.” Audits accept added ninefold from 2014 to 2015, agreement a accountability on IRS agents and charities alike. An IRS analysis is a actual demanding way to bright up paperwork problems for baby new charities.
Where the Taxpayer Advocate Service comes up abbreviate is in its recommendations. It recommends acute 1023-EZ applicants to abide administering abstracts and analyze accomplished and estimated approaching banking activities rather than artlessly blockage boxes on the form. However, it’s cryptic how these changes will still aftereffect in a automated action and abstain a acknowledgment to appliance backlogs. It additionally sounds a lot like the requirements of the Anatomy 1023—requirements that the 1023-EZ was declared to alleviate. If a revised 1023-EZ ends up attractive like the accepted Anatomy 1023, it will additionally be adamantine to absolve advancement the lower appliance fee currently accessible to 1023-EZ filers.—Michael Wyland
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