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IRS to Filers: Watch Your Language

Keeping the Internal Revenue Service (IRS) happy is no easy chore, one that is sometimes made more difficult by terminology that IRS examiners understand but that a normal human can’t comprehend.

IRS offered clarification of a few terms that might be of help to nonprofit financial managers when dealing with the regulator and trying to speak the same language that its employees do. For example:

  • Compensation: All forms of cash and noncash payments or benefits provided in exchange for services. Amounts are based upon the employee’s calendar tax year ending with or within the filing organization’s taxable year.
  • Reportable Compensation: Earnings reported on a Form W-2, Box 1 or Box 5 (whichever is larger), and amounts reported on Form 1099, Box 7.
  • Other Compensation: Anything with a monetary value received in exchange for services exclusive of Reportable Compensation, exclusions from gross income under §132, and some (but not all) items subject to a $10,000 threshold.
  • Related Organization: Parent — Controls the filing organization; Subsidiary — Controlled by the filing organization; Brother/Sister — filing and related organizations controlled by the same entity; and, Supporting Organizations — Relationship runs both directions
  • VEBA: Voluntary Employee Beneficiary Association is the filing organization
  • VEBA Sponsor: The related organization

This article was originally published by The NonProfit Times. It is reprinted with permission.

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The NonProfit Times

Our flagship publication, celebrating 31 years, reaches more than 36,000 executives of the nonprofit community in print and digital format, ranging from C-Suite executives to directors of fundraising, marketing, social media, and human resources departments to accounting and other financial management decision-makers. Nonprofit sector influencers on all levels turn to The NPT for news, information, and insight that consistently helps them achieve their professional goals.