IRS Announces 2020 Tax Scams

• Published date: 01 September 2020
• Date: 01 September 2020
• DOI: http://doi.org/10.1002/npc.30768

Bruce R. Hopkins’ NONPROFIT COUNSEL

6 September 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

The IRS further contends that the advocate’s stud-

ies contain “factual inaccuracies” and are “statistically

unrepresentative.” It notes that a research firm assessed

the 1023-EZ process, finding that forcing use of Form

1023 instead would not improve the outcome and that

the advocate’s claims are “unsubstantiated.” Overall,

the IRS stated that the report’s recommendations would

“increase taxpayer burden without a proportionate ben-

efit to Federal tax compliance.” [26.1(g)] ◆

IRS ANNOUNCES 2020 TAX

SCAMS

The IRS, on July 16, announced its “Dirty Dozen” list of

tax scams for 2020 (IR-2020-160). Not surprisingly, on the

list are schemes playing on the fear and unknown of the

pandemic and the dissemination of stimulus payments.

Unfortunately, also on the tax scam list are “fake char-

ities.” The IRS stated that “[c]riminals frequently exploit

natural disasters and other situations such as the current

COVID-19 pandemic by setting up fake charities to steal

from well-intentioned people trying to help in times of

need.” The agency added that these “fraudulent schemes”

normally start with “unsolicited contact by telephone, text,

social media, e-mail or in-person using a variety of tactics.”

“Bogus websites” are using names “similar to legitimate

charities to trick people to send money or provide per-

sonal financial information.” These criminals “may even

claim to be working for or on behalf of the IRS to help

victims file casualty loss claims and get tax refunds.” ◆

CHARITABLE GIVING SOARED

LAST YEAR

The Giving USA 2020 report on US charitable giving

startled nearly everyone when it announced that the

total in contributions for 2019 was nearly $450 billion

($449.64 billion, to be precise).

Giving by individuals amounted to $309.66 billion

last year (69 percent of the total). Private foundations

granted $75.69 billion (17 percent). Bequests totaled

$43.21 billion (10 percent). Corporations contributed

$21.09 billion (5 percent).

The breakdown as to recipients has religion topping

the list (as usual) at $128.17 billion (29 percent of the

total), followed by education at $64.11 billion (14 percent);

human services at $55.99 billion (12 percent); foundations

at $53.51 billion (12 percent); health at $41.46 billion (9

percent); public/society benefit at $37.16 billion (8 percent);

international affairs at $28.99 billion (6 percent); arts,

culture, and humanities at $21.64 billion (5 percent); and

environment/animals at $14.16 billion (3 percent). [2.1] ◆

IRS DATA BOOK FOR 2019

PUBLISHED

The IRS Data Book, 2019 (Pub. 55B), was made public

on June 29. The number of conventional tax-exempt

organizations (IRC § 501(c) entities) during FY 2019 is

1,682,091. During this period, there were 115,778 non-

exempt charitable trusts and split-interest trusts, 37,449

political organizations (IRC § 527 entities), and 216 ap-

ostolic organizations (IRC § 501(d) entities).

Charitable, educational, and like organizations on

this list number 1,327,714. This number does not

include various religious entities that are not required to

apply for recognition of exemption and organizations

that are part of group exemptions. Other categories

of exempt entities include social welfare organizations

(80,197), business leagues (62,884), social and recrea-

tion clubs (49,096), labor and agricultural organizations

(46,094), fraternal beneficiary societies (42,522), and

veterans’ organizations (28,537).

Tax-exempt organizations filed 1,603,499 returns in

FY 2019. This includes the Form 990 series of returns,

and Forms 4720, 5227, and 8872. California remains the

tax-exempt organizations hotbed (with 170,834 returns),

followed by Florida (132,339), New York (97,401), and

Texas (96,371). Within the continental United States, the

smallest is Wyoming (4,527).

From an examination standpoint, 2,004 Forms 990,

990-EZ, and 990-N were examined during the fiscal year.

Private foundation returns (Form 990-PF) were combined

for this analysis with Forms 1041-A, 1120-POL, and

5227, for a total of 263. Also examined were 549 Forms

990-T and 486 Forms 4720.

Associate Chief Counsel, in the exempt organiza-

tions area, received 828 guidance and assistance cases

and closed 763 of them; 472 were pending at the close

of the fiscal year. The comparable numbers for tax law

enforcement and litigation cases were 260, 278, and

114. [2.1] ◆

GAO REPORT PROVIDES

INSIGHT AS TO IRS EO

EXAMINATIONS PROCESSES

As noted (see the article beginning on p. 2), the

Government Accountability Office issued a report titled

“Tax Exempt Organizations: IRS Increasingly Uses Data

in Examination Selection, but Could Further Improve

Selection Processes.”

As the GAO describes, within the Tax Exempt & Gov-

ernment Entities Division, Examinations, the Compliance

Planning and Classification function provides a centralized

approach to compliance planning, examination selection