10/10/2019

GAO Concerned About Tax-exempt Schemes

IRS internal control weaknesses are hindering current investigations

Internal control weaknesses are keeping the Internal Revenue Service (IRS) from investigating abusive tax schemes involving tax-exempt entities, according to a report this week from the Government Accountability Office (GAO).

The GAO found that audits of potentially abusive schemes involving charities and other tax-exempt organizations declined by nearly 99 percent in the 10-year period between fiscal 2008 and 2017. In 2008, the IRS’s Tax Exempt & Government Entities division assessed taxes of $45.3 million as a result of audits of tax-exempt groups, but that amount fell to $1.2 million in 2016 and 2017 combined.

“IRS’s different offices may find evidence of abusive schemes involving charities and other tax-exempt organizations in their audits,” the report said. “Yet, IRS doesn’t consistently analyze data from its offices to help identify these types of schemes – even though information about them may be available in existing databases.”

The IRS agreed with GAO’s assessments and will work to strengthen its internal controls, including linking data across operating divisions and testing a database to facilitate analysis of audit data.

This article was provided to OSAE by the Power of A and ASAE's Inroads.