An IRS official recently announced that personnel from its Exempt
Organizations (EO) Division will participate in the IRS Employment Tax National
Research Project (NRP). The previously announced NRP will span three filing
years, 2008 through 2010. It covers taxpayers under the jurisdiction of the IRS
Large and Mid-Size Business (LMSB), Small Business/Self Employed (SBSE), and
Tax-Exempt and Government Entities (TEGE) Divisions. See
Launches Employment Tax NRP (Forms 941).
The EO unit’s participation in the NRP is expected to result in the
examination of 500 charities and other tax-exempt organizations. The NRP will
focus on employment tax issues, with a specific emphasis on worker
classification, officer compensation, fringe benefits, and employee expense
reimbursement. The NRP will also examine issues related to nonfilers. According
to the IRS, some of the examinations of exempt organizations have already begun.
The NRP is another example of the government’s redirected focus on employers’
compliance with their employment tax obligations. As noted previously, several
legislators have also introduced legislation over the last year attempting to
address issues with worker misclassification. See
Federal Legislation Seeks to Remedy and Penalize Worker Misclassification
Proposed Legislation Likely to Classify More Workers as Employees.
In fact, the Senate Health, Education, Labor, and Pensions Committee recently
held hearings regarding the proposed Employee Misclassification Protection Act,
one such bill that received favorable testimony before the committee.
The foregoing developments further reflect that all employers, not just
for-profit businesses, should ensure they are properly classifying their workers
as employees or independent contractors, and that they are otherwise complying
with their employment tax obligations.
McGuireWoods Nonprofit &
Nonprofit and Tax-Exempt Organizations Group
provides advice and guidance that enables
charities and other nonprofits to operate
successfully in the increasingly
complicated, regulated, and competitive
environment facing nonprofits today.