Nonprofit Blog

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Friday, October 21, 2011

Are your exempt organization’s payroll practices in compliance? (Part 1)

Posted by Armanino Nonprofit Team

Employment Tax National Research Program

In September 2009 the IRS announced the launching of its Employment Tax National Research Program and planned to audit 6,000 companies (including tax- exempt organizations) over three years focusing on payroll reporting practices, fringe benefit reporting and executive compensation. This data will be used to identify compliance issues in these areas. The exempt organization (EO) arm of the IRS supports this initiative and is scrutinizing tax-exempt organizations for compliance.

Your organization should conduct a thorough review of its current payroll tax practices including worker classification and fringe benefit policies. Fringe benefits include education assistance, employee discounts, personal use of automobiles, etc. Fringe benefits that do not meet the applicable rules and documentation requirements can result in income to an employee as well as employment tax obligations on the employer. In addition, executive and non-executive fringe benefit policies and expense reimbursement procedures should be reviewed.

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