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The IRS has a language all its own

Keeping the Internal Revenue Service (IRS) happy is no easy chore, one that is sometimes made more difficult by terminology that IRS examiners understand but that a normal human can’t comprehend.

Speaking during the AICPA Not-For-Profit Industry Conference, Elaine Leichter of the IRS offered clarification of a few terms that might be of help to nonprofit organizations when dealing with the IRS and trying to speak the same language that its employees do. For example:

Compensation: All forms of cash and noncash payments or benefits provided in exchange for services. Amounts are based upon the employee’s calendar tax year ending with or within the filing organization’s taxable year.

Reportable Compensation: Earnings reported on a Form W-2, Box 1 or Box 5 (whichever is larger), and amounts reported on Form 1099, Box 7.

Other Compensation: Anything with a monetary value received in exchange for services exclusive of Reportable Compensation, exclusions from gross income under §132, and some (but not all) items subject to a $10,000 threshold.

Related Organization: Parent — Controls the filing organization; Subsidiary — Controlled by the filing organization; Brother/Sister — filing and related organizations controlled by the same entity; and, Supporting Organizations — Relationship runs both directions

VEBA: The filing organization

VEBA Sponsor: The related organization

As we celebrate our 36th year, NPT remains dedicated to supplying breaking news, in-depth reporting, and special issue coverage to help nonprofit executives run their organizations more effectively.