EO Update January 14, 2011
Issue Number: 2011-1
Inside This Issue
- IRS Reminds Small Charities to Review Their Filing Requirements; More Organizations May File Form 990-N
- Updated Procedures for Issuance of Rulings and Information Letters, Technical Advice
- 2011 User Fees for Exempt Organizations Matters
- Procedures for Issuance of Determinations and Rulings on Exempt Status, Foundation Status
- U.S. Supreme Court Upholds Regulation Denying FICA Exception to Medical Residents
- Register Now for Free Webinar on Small Business Health Care Tax Credit
- IRS Issues Guidance on Rules Governing Tax Preparers
- Payroll Tax Cut and 2011 Withholding Information
1. IRS Reminds Small Charities to Review Their Filing Requirements; More Organizations May File Form 990-N
The Internal Revenue Service today announced that small tax-exempt organizations may be able to shift to the simpler Form 990-N (e-Postcard) for their 2010 annual information reporting. The IRS today issued guidance ( Revenue Procedure 2011-15) that will allow more tax-exempt organizations to file the e-Postcard rather than the Form 990-EZ or the standard Form 990.
For tax years beginning on or after January 1, 2010, most tax-exempt organizations whose gross annual receipts are normally $50,000 or less can file the e-Postcard. The threshold was previously set at $25,000 or less. (However, supporting organizations of any size must file the standard Form 990 or, if eligible, Form 990-EZ).
A tax-exempt organization’s annual gross receipts or total assets are used to determine which of the three versions of Form 990 it is required to file. Go to IRS.gov for more information about which form to file.
2. Updated Procedures for Issuance of Ruling and Information Letters, Technical Advice
The IRS has issued annual updates to many of the procedures that apply to tax-exempt organizations.
- Revenue Procedure 2011-4 updates procedures for the issuance of Exempt Organizations and Employee Plans letter ruling requests.
- Revenue Procedure 2011-5 explains when and how Exempt Organizations Technical provides technical advice to area managers and appeals offices regarding exempt organizations matters.
3. 2011 User Fees for Exempt Organization Matters
Revenue Procedure 2011-8 provides guidance for complying with the user fee program of the Internal Revenue Service as it pertains to requests for letter rulings, determination letters, etc., on matters under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division.
See IRS.gov for general information on the TE/GE user fee program and a listing of the exempt organizations user fees for 2011.
The new exempt organizations user fees are effective as of January 3, 2011.
4. Procedures for Issuance of Determinations and Rulings on Exempt Status; Foundation Status
The IRS has issued procedures for the issuance of determinations and rulings on exempt status as well as foundation status.
Revenue Procedure 2011-9 sets forth procedures for issuing determination letters and rulings on the exempt status of organizations under sections 501 and 521 of the Internal Revenue Code other than those subject to Rev. Proc. 2011-6, 2011-1 I.R.B. 195 (relating to pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans). Generally, the Service issues these determination letters and rulings in response to applications for recognition of exemption from Federal income tax. These procedures also apply to revocation or modification of determination letters or rulings.
The Revenue Procedure also provides guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under section 7428 of the Code.
Revenue Procedure 2011-10 provides updated procedures regarding the issuance of rulings and determination letters on the private foundation status, operating foundation status, and exempt operating foundation status of 501(c)(3) organizations.
The Revenue Procedure also applies to the issuance of determination letters on the foundation status under section 509(a)(3) of nonexempt charitable trusts described in section 4947(a)(1).
5. U.S. Supreme Court Upholds Regulation Denying FICA Exemption to Medical Residents
In a unanimous opinion in Mayo Foundation for Medical Education and Research v. United States, Sup. Ct. Dkt. No. 09-837 (January 11, 2011) , the Supreme Court upheld a Treasury regulation that makes medical residents ineligible for the student FICA tax exemption. Since 1951, the regulation exempted from FICA taxation amounts received by students for performing work that is incident to and for the purpose of pursuing a course of study. The regulation was amended in 2004 to clarify that the services of a full-time employee normally scheduled to work 40 or more hours a week are not incident to or for the purpose of pursuing a course of study. The Supreme Court upheld the regulation, thus making residents, who typically spend between 50 and 80 hours a week caring for patients, ineligible for the exemption.
In March of 2010 the IRS announced that it had made an administrative determination to accept the position that medical residents are excepted from FICA taxes based on the student exception for tax periods ending before April 1, 2005, when new regulations went into effect. The decision in this case will not adversely affect properly filed FICA refund claims for tax periods ending before April 1, 2005.
6. Register Now for Free Webinar on Small Business Health Care Tax Credit
The IRS Small Business/Self-Employed & Tax Exempt and Government Entities Divisions will co-sponsor a free webinar for the Small Business Health Care Tax Credit on February 2, 2011.
The Small Business Health Care Tax Credit, created as part of the Affordable Care Act, was designed to encourage eligible small employers, including tax-exempt organizations, to provide health insurance coverage to their employees.
Get more information and register for this informative webinar for small businesses, exempt organizations, attorneys and other tax and payroll professionals.
- How to determine whether your small business or exempt organization may be eligible to claim the Small Business Health Care Tax Credit
- What special rules and limitations apply
- How to calculate and claim the credit
- Where to find out more about the credit
7. IRS Issues Guidance on Rules Governing Tax Preparers
Beginning January 1, 2011, all tax return preparers who prepare all, or substantially all, of a tax return or claim for refund for compensation must have a Preparer Tax Identification Number (PTIN) before preparing returns.
The IRS recently issued Notice 2011-6 to provide guidance regarding the implementation of new Treasury regulations governing tax return preparers. As discussed in section 1 of this notice, all tax returns, claims for refund, or other documents submitted to the IRS unless otherwise provided for in section 1 of this notice or other guidance are tax returns for purposes of the PTIN regulations. Section 2 provides interim rules applicable to certain PTIN holders during the implementation phase of the new regulations governing tax return preparers.
For more information on the PTIN requirements, including Frequently Asked Questions on these requirements, please visit to IRS.gov.
8. Payroll Tax Cut and 2011 Withholding Information
The Internal Revenue Service has released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011. Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011, but not later than Jan. 31, 2011.