IRS Rejects a Redesign of Foundation Tax Return

The Internal Revenue Service has turned down suggestions that it redesign the informational tax return filed by private foundations and simplify the filing rules for small private foundations.

The tax agency rebuffed the ideas of the federal Taxpayer Advocacy Panel, made up of 99 “citizen volunteers” from across the country, to update the return, known as the Form 990-PF.

“The complexity of this form results in a 32-percent error rate,” the committee said. “In addition, small foundations require professional tax support to meet the reporting requirements.”

The committee suggested that the IRS redesign the Form 990-PF in the same way the tax agency revamped the form for charities for the 2008 tax year, with a basic form and accompanying schedules that are “a menu of attachments as needed, depending upon the activities of the organization.”

But the IRS said it was “unable to implement the recommendations” at this time.

“Having just finished redesigning [the] Form 990, we are keenly aware of the costs involved, to the agency and third parties, of major form redesigns,” the IRS said. “We have not observed sufficient support from the sector that would facilitate implementation of a redesigned Form 990-PF in the near term. Further, it would have to compete with other redesign projects, some of which are more pressing.”

The committee’s recommendations are available at http://improveirs.org/annualreports/ reports.shtml.