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Many Taxpayers Are Still Not Complying With Noncash Charitable Contribution Reporting Requirements

Many Taxpayers Are Still Not Complying With Noncash Charitable Contribution Reporting Requirements

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Published by Cara Matthews
Audit from the TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Audit from the TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

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Published by: Cara Matthews on Jan 15, 2013
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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 
Many Taxpayers Are Still Not Complying With Noncash Charitable Contribution Reporting Requirements 
December 20, 2012Reference Number: 2013-40-009
This report has cleared the Treasury Inspector General for Tax Administration disclosure review processand information determined to be restricted from public release has been redacted from this document.
Redaction Legend:
2(f) = Risk Circumvention of Agency Regulation or Statute
Phone Number | 202-622-6500 E-mail Address TIGTACommunications@tigta.treas.gov  Website | http://www.treasury.gov/tigt
 
HIGHLIGHTS 
 MANY TAXPAYERS ARE STILL NOT
Taxpayers who donate motor vehicles must
COMPLYING WITH NONCASH
attach a Form 1098-C,
Contributions of Motor 
CHARITABLE CONTRIBUTION
Vehicles, Boats, and Airplanes 
, to their tax
REPORTING REQUIREMENTS
 
returns. However, the IRS is still not effectivelyidentifying taxpayers who are not complying with
Highlights
 
reporting requirements for donations of motorvehicles.A match of the Forms 1098-C submitted with tax
Final Report issued on
returns processed as of December 31, 2011, to
December 20, 2012
those submitted by charities identified35,846 tax returns with motor vehicle claimsHighlights of Reference Number: 2013-40-009totaling approximately $77 million where noto the Internal Revenue Service CommissionerForm 1098-C was filed by the charity. Infor the Wage and Investment Division.addition, 1,708 taxpayers reported fair marketvalues of the vehicles that exceeded sale
IMPACT ON TAXPAYERS
proceeds by a combined total of $2.2 million.Taxpayers can generally deduct on their Federal
WHAT TIGTA RECOMMENDED
tax return noncash charitable contributionsmade to qualifying organizations during the taxTIGTA recommended that the IRS expandyear. However, taxpayers who do not complyprocedures to identify tax returns claimingwith the noncash contributions reportingnoncash charitable contributions that do notrequirements could be incorrectly reducing theirhave a Form 8283,
Noncash Charitable 
tax liabilities and receiving tax refunds to which
Contributions,
or qualified appraisal attachedthey are not entitled. TIGTA estimates morewhen required and develop processes tothan 273,000 taxpayers claimed approximatelysystemically verify the accuracy of noncash$3.8 billion in potentially erroneous noncashcharitable contributions. In addition, the IRScharitable contributions in Tax Year 2010, whichshould revise the Form 8283 and relatedresulted in an estimated $1.1 billion reduction ininstructions and develop procedures to matchtax. Forms 1098-C submitted with individual taxreturns to those filed by charitable organizations.
WHY TIGTA DID THE AUDIT
IRS management agreed with three of the sixThis audit was initiated as a follow-up to priorrecommendations and partially agreed with one.TIGTA audit recommendations. The objective ofIRS management did not agree with TIGTA’sthis review was to assess the IRS’s actions toconclusion that information contained in theensure taxpayers are complying with reportingIndividual Return Transaction File is incorrect.requirements for claiming noncash charitableIn addition, IRS management did not agree tocontributions.
 
develop procedures to match Forms 1098-Csubmitted with individual tax returns to those
WHAT TIGTA FOUND
filed by charitable organizations.IRS controls are not sufficient to ensure********************2(f)*****************************taxpayers are complying with noncash charitable********************2(f)*****************************contribution reporting requirements. Statistical********************2(f)******************************samples of Tax Year 2010 tax returns that***2(f)***. However, in response to ourclaimed more than $5,000 in noncash charitablerecommendation to capture additionalcontributions showed that approximatelyinformation from the Form 8283, IRS60 percent of the taxpayers did not comply withmanagement agreed to capture the informationthe noncash charitable contribution reportingnecessary to identify taxpayers who donaterequirements. These taxpayers claimedmotor vehicles, which will enable the IRS tononcash contributions totaling approximatelymatch Forms 1098-C.$201.6 million.
 
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
 
TREASURY INSPECTOR GENERALFOR TAX ADMINISTRATION
December 20, 2012
MEMORANDUM FOR
 
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM:
 
Michael E. McKenneyActing Deputy Inspector General for Audit
SUBJECT:
 
Final Audit Report – Many Taxpayers Are Still Not Complying WithNoncash Charitable Contribution Reporting Requirements(Audit # 201140035)This report presents the results of our review of the Internal Revenue Service’s actions to ensuretaxpayers are complying with the reporting requirements for claiming noncash charitablecontributions. This audit was a follow-up to prior Treasury Inspector General for TaxAdministration audit recommendations and was included in our Fiscal Year 2012 Annual AuditPlan. This audit addresses the major management challenge of Erroneous and ImproperPayments and Credits.Management’s complete response to the draft report is included as Appendix VIII.Copies of this report are also being sent to the Internal Revenue Service managers affected by thereport recommendations. If you have any questions, please contact me or Augusta R. Cook,Acting Assistant Inspector General for Audit (Returns Processing and Account Services).

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