Senate Leader Considers Tougher Penalties for Mistakes on Tax Form

April 25, 2008

Senate Leader Considers Tougher Penalties for Mistakes on Tax Form

Could nonprofit groups face steep fines if they skip lines or misreport information on informational tax forms?

Sen. Charles Grassley, the senior Republican on the powerful Finance Committee, says tougher penalties are possible if charities do not take steps to improve their reporting on the Form 990 informational tax return.

Mr. Grassley and his staff will be paying attention to what degree charities comply with upcoming changes to the Form 990. Many nonprofit groups will have to fill out an updated version of the form beginning in 2009.

Mr. Grassley said the new form — as well as the Pension Protection Act of 2006 — will make it easier for the public and the government to monitor the financial effectiveness of charities.

But, he said, more needs to be done.

“Time and again, problems at nonprofits come back to boards that aren’t independent or hands-on enough,” Mr. Grassley said. “Another challenge is making sure nonprofits are accurately reporting the amount of money going to their charitable purpose.”

As a next step, lawmakers might consider tougher penalties for groups that fail to fill out key lines of the Form 990 and for groups that fail to accurately report information on the form.

Congress could also revisit plans to calculate ratios that show how much of a charity’s revenue is used to fulfill its mission versus how much pays for executive salaries and fund-raising costs.

Steven T. Miller, commissioner of the IRS’s tax-exempt and government-entities division, said this week at a conference on tax-exempt organizations held by the Georgetown University Law Center Continuing Legal Education Department, that the IRS is still considering similar plans.

Dean Zerbe, a tax lawyer in Washington and a former top aide to Mr. Grassley, says such measures might be necessary, even in light of the tougher reporting requirements.

“Let’s face the reality. The 990s hit the trifecta in that they are often late, incomplete, and inaccurate,” Mr. Zerbe said. “We’ve got to make certain folks are filling them out, filling them out correctly, and filling them out accurately. That might require penalties that are substantial enough to get everybody to wake up.”

— Peter Panepento

Comments

Its not always the charity who fails to report correctly. More blame should be placed with the tax preparer or account who doesn’t take the time to make sure the information is correct. Perhaps penalties should be assessed for failing to correctly complete the form.

— Stewart Apr 29, 12:47 PM #
this is complete insanity. imagine if the government tried to regulate the for-profit sector the same way? That wouldn’t fly for a second. Imagine if IBM had to report it travel policies? It is absurd that small community based nonprofits have to face this level of red tape in the future. This may be doable for large ($50 million+) nonprofits with administrative resources but to burden the entire sector is crazy. They are also only giving penalities. WHere is the funding needed to do all the extra work the new 990 demands. The old 990 was poorly prepared not because nonprofits are evil but because THEY HAVE NO MONEY IN THE FIRST PLACE FOR THIS KIND OF STUFF! This kind of red tape will only take people away from program and have them spend all their time complying with the new 990. Crazy!

— Paul Apr 29, 12:55 PM #

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Senate Leader Considers Tougher Penalties for Mistakes on Tax Form

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