Friday, August 28, 2009

IRS Rejects Proposed Redesign of 990-PF (for now)

The Tax Payer Advocacy Panel (TAP) has released its 2008 Annual Report. The TAP is a national citizen advisory panel to the IRS. The panel makes recommendations to the IRS for improvements, and the IRS has the opportunity to explain why it agrees or disagrees with it. One of the 2008 TAP proposals asked the IRS to “Simplify Filing Requirements for Small Private Foundations.” Currently, all private foundations are required to file Form 990-PF, Return of Private Foundation, to report their exempt activities for the year. (A private foundation is a 501(c)(3) entity that receives all or most of its funding from one or a few sources, as opposed to a public charity which normally receives broad public support. ) Apparently the complexity of this form results in a 32% error rate, in addition to requiring professional tax support to meet the reporting requirements. The IRS, responding to the TAP proposal, indicated they were unable to implement the recommendation at this time, citing a lack of resources due to competing form re-design projects and a lack of authority regarding the filing of an electronic statement. The Service also indicated that since Form 990 was recently re-designed, they wanted to gauge the success of that project before re-designing similar, related forms. While the Service appears to have put the redesign of Form 990-PF on hold for now, given the external and internal pressure to update the form, it appears to only be a matter of time before the IRS gives it a major overhaul, like the Form 990.

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