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Business and Policy Areas
Business and Policy Areas

IRS to Scrutinize EO Compensation and Benefits Practices

August 25, 2004

The Internal Revenue Service recently announced a new enforcement initiative aimed at identifying and stopping perceived abuses by exempt organizations related to excessive compensation and benefits paid to officers and insiders. In the coming months, IRS plans to contact approximately 2,000 tax-exempt organizations to gather information about their salary levels and practices. It is not clear how many colleges and universities, if any, will be included in this new effort. 

According to an August 11 IRS press release, the purposes of the enforcement project , which will involve in-person examinations as well as other contacts, are to:

  • address the compensation of specific individuals or instances of questionable compensation practices,
  • increase awareness of tax issues as organizations set compensation in the future, and
  • learn more about the practices organizations are following as they set compensation and report it to the IRS and the public on their annual Form 990 returns.

The project began in late July and will continue into 2005.