IRS Needs to Help Small Charities Comply With Tax Laws

The Internal Revenue Service is not doing enough to help small nonprofit groups understand its rules, the national taxpayer advocate told Congress this week.

Nina E. Olson, the taxpayer advocate, said in her annual report to Congress said the IRS needs to develop a plan to step up its outreach to small charities.

By doing so, Ms. Olson said the agency would help more groups comply with an increasingly complex tax code.

“The IRS has increased enforcement actions against [tax-exempt organizations] and the resources dedicated thereto,” Ms. Olson said in the report. “However, resources devoted to EO [exempt organization] education and outreach, which were never adequate, have continued to decline.”

Ms. Olson, who operates independently of other IRS offices and reports to Congress, also called on the IRS to relax the reporting requirements for small organizations — particularly for small public and operating foundations. Such foundations that have less than $25,000 in gross receipts should be allowed to file a shorter version of the Form 990 rather than the long form, she said.

She had previously made a similar recommendation for nonprofit groups with less than $50,000 in annual revenue.

The IRS now plans to raise the threshold for filing the Form 990, beginning with the 2010 tax year.