Accounting and IRS Considerations for Charity Groups Considered

Why just the other day I was discussing with a retired CPA the challenges with all the new accounting rules. He hinted to me that he was rather happy to be retired at this point, due to all the latest new regulations and changes in the already insanely complicated tax codes. Indeed, I can't blame him and have had discussions with several CFOs and CPAs recently, many of which are going into combat mode as tax time cometh. No envy there, they will be working mega-long hours, and pulling their hair out - that I have no doubt.

It's not just business accounting either, there are also challenges with nonprofit charity groups. And the IRS unfortunately has identified them as problematic, and often avoiding or even evading taxes. That's rather unfortunate if you happen to be a nonprofit group that is trying to do everything correctly. But any time there are tax breaks for certain types of organizations, there is bound to be abuse in the system.

A couple of weeks ago, there was an interesting article the New York Times titled " I.R.S. Takes on Tax Abuse by Charity Support Groups" by Stephanie Strom published on February 14, 2011, which states in the first paragraph; "In the last five years, the IRS has revoked the tax exemption of 72 groups, known as supporting organizations, that obscure philanthropies created to support specific charities." And the article goes on to say;

"The revocations, made during an investigation of supporting organizations begun by the I.R.S. in 2004, were disclosed this month at a meeting in Baltimore of tax advisers to nonprofit groups. In 2005, Mark Everson, its commissioner from 2003 to 2007, put such entities on the agency's Dirty Dozen list of the worst tax swindles."

Now then, with errors and omission insurance going skyward, and fewer CPAs wishing to do audits, the cost to do tax preparation, and financial statements which are required by the government for nonprofit groups is running into a little bit of a traffic jam. That is to say not only is the cost becoming prohibitive, and making it difficult for a nonprofit group to stay in business, but it is also hard to find a CPA firm which is willing to touch it with a 10 foot pole.

After all, if you run a nonprofit group and you become a target of the IRS, then why would a CPA firm, especially a local small one want to get caught up in the middle of that? The reality is they wouldn't, and that means there will be fewer nonprofit groups due to this over regulation. Therefore, I wonder who's going to fill the gap?

Obviously the government can afford to give money to nonprofit groups or provide any more social services, so does that mean all those individuals that are in need of help, may not get it, because of the IRS's aggressive behavior towards not for profit groups? Indeed I hope you will please consider all this, and the ramifications and unintended consequences which are involved with such unnecessary targeting. Think on it.