Victim Firefighters’ Families Kept from Receiving Donated Funds: Tax Lessons Learned

Last Christmas Eve, the Rochester suburb of Webster, N.Y. was shaken by news that two of the community’s beloved firefighters had been shot and killed by a man who apparently set fire to a blaze that eventually destroyed seven homes. 

In a massive outpouring of care and concern, supporters donated about $900,000 for their families through the West Webster Volunteer Fireman’s Association, a section 501(c)(3) public charity.  Now nearly seven months later something almost equally stunning is happening:  neither family has received any of that money.  Why not?

Limited Resources Leads to Limited Enforcement: Locating the Source of Recent IRS Struggles

According to the Treasury inspector general for tax administration, the IRS’ Exempt Organizations Division received 199,689 applications for tax-exempt status between 2010 and 2012. In 2012 alone, the agency received 73,319.  How many IRS agents does it take to carefully review and process these applications?

While the exact number may be difficult to identify, we can be sure it is not 150 -- the number of agents the IRS currently allocates to handle and process tax-exempt applications.  This number falls far short of the number adequate to the task.  To make matters worse, processing of tax-exempt applications is not the only responsibility of these agents.  The same IRS agents are also required to process various other requests filed with the IRS’ Exempt Organization Division, including requests for reclassifications of public charity status, private foundation determinations, and other ancillary issues.

Important Details: Church's Error in Documentation Costs Taxpayer $7,552 Dollars

When it comes to the tax laws governing charities, the details matter. 

As reported on our firm’s newsfeed, in a recent United States Tax Court case, the tax judge disallowed deductions for over $22,000 in charitable giving due to noncompliant documentation from the recipient church.  Because the contributions were disallowed as deductions, the donor’s IRS-determined deficiency of $7,552 was upheld.