Nonprofits need to be aware that the IRS is targeting organizations with unrelated business income. Concerned about unrelated business activity, the IRS will be watching closely for organizations that report unrelated business income on the Form 990 but then do not file a Form 990-T. Form 990-T is the tax return required from exempt organizations that have gross unrelated business income of $1,000 or more.
In addition, the IRS will be scrutinizing organizations that consistently file Forms 990-T reporting significant gross receipts from unrelated business activity but declaring no tax due. The IRS has already identified several well-known nonprofits that regularly report a loss on significant unrelated business income.
If you are concerned about unrelated business activity or how to report it to the IRS, contact us.