Some tax-exempt organizations are seriously delinquent in remitting payroll taxes, but the IRS doesn’t appear too eager to go after them, according to a recent report.
Tax-exempt organizations are generally not required to pay income taxes, but they are required to pay other taxes, such as payroll taxes.
Not doing so results in millions of dollars in lost tax revenue.
In a study released last week, the Treasury Inspector General for Tax Administration (TIGTA) determined that some 64,200 tax-exempt organizations — 3.8% of them — owed nearly $875 million of federal tax as of June 16, 2012.
Some organizations had small tax debts, but approximately 1,200 tax-exempt organizations owed more than $100,000 each.
Unpaid taxes were often associated with multiple tax periods. TIGTA identified nine organizations that each had federal tax debt spanning a decade or more, collectively totaling more than $5.5 million.
“Tax-exempt organizations have a responsibility to remit to the IRS taxes that have been withheld from employees as well as other applicable Federal taxes,” J. Russell George, treasury inspector general, said in a statement. “Failure to remit these taxes is a very serious matter.”
TIGTA was established in 1998 to provide independent oversight of IRS activities. It said its review aimed to determine whether, and to what extent, tax-exempt organizations had federal tax debt, and to identify actions the IRS’ exempt organizations function had taken to address known noncompliance.
The inspector general reviewed 25 tax-exempt organizations that appeared to be among the worst examples involving unpaid federal tax. These, it said, were not representative of the population of all tax-exempt organizations with unpaid tax.
Tigta determined that the 25 organizations — all falling under Internal Revenue Code 501(c)(3) — generally had received $148 million in government payments over a three-year period, including Medicare, Medicaid and government grants; had annual revenue of some $167 million; and owned assets of more than $97 million.