IRS: Well Isn’t That Just “Special”

Fighting the good fight, keeping the employees happy, dealing with the Internal Revenue Service (IRS), is all in a day’s work at a nonprofit.

The IRS’s efforts to keep the sector and everyone in it honest have meant that even the good guys are required to deal with a daunting array of arcane regulations and categories.

Elaine Leichter, Tax Law Specialist in the Exempt Organizations division, Rulings and Agreements branch of the IRS, explained some of the service’s “special” categories as an aid to nonprofit managers who might not intuitively know them during the AICPA Not-For-Profit Industry Conference. Those special categories include:

  •  Disregarded entities: These are not “related” entities. Directors and officers of the disregarded entity are not counted as directors and officers of the filing organization. Directors and officers of a disregarded entity should be considered for inclusion as Key Employee or Highest Compensated Employee of the filing organization.
  •  Management companies: If it equals a “related entity” compensation is reported in Section A of Part VII (if at all). If it does not equal a related entity it is reported in Section B. Also consider a need to report on Schedule L.
  •  Leased employees: These include payments to a leasing company reported in Section B. If common law employees, consider for inclusion in Section A.
  •  Unrelated organizations: This covers compensation paid by an unrelated organization for services rendered as employees of a filing organization.
  •  Common Paymaster/Payroll Reporting Agent. Treat all of these as paid by the filing organization.