NonProfit Tax Fraud, Explained

Report Tax Fraud NonProfit Tax Fraud, Explained

Learn How To Report To The IRS For Non-Profit Fraud

Although several non-profit organizations -  including charities, foundations, social advocacy groups, religious groups, and trade organizations - are rightfully entitled to tax-exempt status, sometimes systemic abuse occurs.

Non-profit fraud can occur if a non-profit organization engages in any type of illegal or unethical conduct involving its operations and finances.  

How Do Non-Profits Commit Tax Fraud?

The IRS reveals that these organizations are increasingly straying from the charitable work that grants them tax-exempt status, with many using their exempt status to avoid tax on business profits or cover the identities of campaign donors financing anonymous politically motivated ads.

What Is Tax-Exempt Status in Non-Profit Organizations?

Tax-exempt status means an organization is exempted from paying federal income tax on the revenues they generate from activities that relate to the purposes of their charitable goals. However, the law requires organizations to pay federal corporate tax on any income resulting from unrelated activities to their tax-exempt purpose. These incomes are often referred to as unrelated business income (UBI). 

If you suspect a non-government organization you are working with is engaging in masked forms of fraud or is operating inconsistently with its tax-exempt status, it is crucial to know how to effectively report to the IRS for non-profit fraud.  

Unfortunately for most people, reporting a tax fraud is a challenging, frightening, and complicated process prone to inherent risks of being found. DoNotPay provides a faster, more convenient, automated, and less frustrating solution to report to the IRS for non-profit fraud anonymously and curb the rising problem of tax evasion.

What Activities Amount to an Abuse of Tax-Exempt Status by Non-Profit Organizations?

The IRS regulations prohibit 501(c)(3) non-profit organizations from some particular activities and require an established level of reporting and public disclosure. Any organization that doesn't follow these rules risks being placed under sanctions or having its tax-exempt status revoked by the IRS. Some of the activities that can jeopardize a non-profit organization's tax-exempt status include:

  1. Failure to pay taxes on unrelated business income (UBI): An organization can lose its exempt status if it makes irregular income from activities unrelated to its exempt purpose and fail to pay taxes. There are times when non-profits make income in ways unrelated to their non-profit purposes. Although non-profits can earn unrelated business income without impacting their non-profit status, they are required to pay corporate taxes on the UBI as per the state and federal corporate tax rules. Usually, the first $1,000 of unrelated income is exempted from tax, with the remainder being taxed. Some organizations take advantage of the complexities in reporting systems to avoid paying taxes on unrelated income.
  2. Failure to report or give false annual tax reporting: The law makes it mandatory for all other 501(c)(3) public charities apart from churches and some subordinate organizations to file a version of Form 990 with the IRS each year. Although smaller organizations with gross incomes of $50,000 were previously exempted from this law, these organizations are now required to File form 990-n (e-postcard) annually to stay compliant.
  3. Private benefit/inurement: The law outlaws an insider or a person with a personal or private interest in a non-profit organization from benefiting financially or otherwise from the entity's activities.
  4. Lobbying: Although 501(c)(3) organizations are allowed to undertake some lobbying, the number of lobbying activities should be regulated to avoid it becoming the main activity of an organization.
  5. Political campaigns: Organizations and their representatives acting in official capacities are not allowed to use the organization's resources and networks to campaign for or against any candidates for elected office.
  6. Failure to operate as per the stated exempt purpose: An exempt organization is required to operate strictly as per the charitable purposes indicated in the applications for recognition of tax-exempt status.

If you suspect a non-government organization you are working with is engaging in masked forms of fraud or is operating inconsistently with its tax-exempt status, it is crucial to know how to effectively report to the IRS for non-profit fraud.  

Unfortunately for most people, reporting a tax fraud is a challenging, frightening, and complicated process prone to inherent risks of being found. DoNotPay provides a faster, more convenient, automated, and less frustrating solution to report to the IRS for non-profit fraud anonymously and curb the rising problem of tax evasion.

Why Report Non-Profit Organization's Tax-Exempt Abuse

Essentially, nonprofits and charities are exempted from taxes because they serve a public purpose for the benefit of our communities.

However, the IRS reveals that tax evasion and abuse among these organizations has been on the rise. If nothing is done to curb this practice, the government will not only lose a lot of money in terms of tax revenues, but the entire non-profit industry will lose the faith and support that the public has always given to the sector.

Besides, reporting tax fraud can be lucrative for the reporter, as they may get compensation from the IRS. You can play an integral role in stopping tax fraud in this sector by reporting your suspicions to the IRS as soon as possible.

How to Report to the IRS for Non-Profit Fraud by Yourself/on Your Own

The IRS gives serious consideration to the complaints alleging abuse of tax-exempt status granted to some specific organizations. If you suspect a non-profit organization is not complying with the tax laws, take the following steps:

  1. Decide to take action to stop the vice rather than being a passive spectator.
  2. Use form 13909, Tax-Exempt Organization Complaint (Referral) Form, to report the fraud. Alternatively, you can send information to the IRS using a complaint letter. Ensure you attach all the supporting documentation for this purpose.
  3. Mail the letter to Take Referrals group, 1100 Commerce Street, Mc 4910 dal, Dallas, Tx 75242. You can also send the letter via email or fax using the following address: eoclass@irs.gov/Fax to 214-413-5415

Next Steps for Reporting to the IRS a Non-Profit Fraud If You Can't Do It Yourself 

If you are not comfortable reporting suspicions yourself......send a copy of the referral to the relevant state tax agency
OR......leverage DoNotPay to make quick and efficient complaints

How to Report the IRS for Non-Profit Fraud with the Help of DoNotPay

If you are facing frustrations reporting tax fraud, DoNotPay has you covered. DoNotPay is a top-notch tool designed to help patriotic citizens report incidences of tax fraud conveniently, quickly, and unanimously and earn cash rewards. 

All it takes is to answer a few questions regarding your suspicions, and the tool will automatically file an official IRS report on your behalf, so you earn up to 30% of the money the IRS collects.

How to Use DoNotPay to Report Non-Profit Organizations Committing Tax Fraud to The IRS

DoNotPay makes it easy! Just follow five simple steps:

  1. Open the DoNotPay Report Tax Fraud product. 
  2. Enter the business you would like to report for tax fraud. 
  3. Provide the details of suspicious activity and as much evidence as you can provide. 
  4. Confirm your contact information. 
  5. DoNotPay will automatically generate the official report and send it on your behalf. The IRS will contact you regarding cash rewards once the case is investigated.

Leverage DoNotPay Today to Report to the IRS for Non-Profit Fraud

The IRS reveals that tax evasion in the US has increased substantially to reach over $1 trillion a year. These forms of financial crime include the use of:

  • Cryptocurrencies
  • Use of offshore tax evasion
  • Underreporting
  • Illegal income that goes undetected by the IRS from businesses and organizations, including non-profit entities

Tax evasion and corruption can have a massive impact on the country's economic growth, ultimately resulting in reduced public services provided by the government. 

DoNotPay believes tax evasion by large organizations is not only illegal but highly unfair to the average hardworking American who pays their taxes diligently. As such, we are introducing a new tax fraud tool that allows you to quickly and conveniently report any business or company for suspicious tax activity and earn cash rewards. Leverage DoNotPay today to report to the IRS for non-profit fraud quickly and safely.

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