News Article

Nonprofit colleges and universities may need to invest in better nonprofit accounting software, as the Internal Revenue Service has found possible discrepancies in the income they have been reporting.

From a survey sent to 400 schools in October 2008, the IRS has found that approximately a third are failing to report their full taxable income, even though many of the schools operate businesses outside of teaching and research, Bloomberg reports.

The results have led to audits at more than 30 schools, including Harvard University. According to Bloomberg, those schools that do file never pay taxes based on claims that losses cancel out any profits.

The survey also found that size does matter - nearly half of small institutions that responded and about a third of medium sized schools had never filed a form reporting their income. Only 4 percent of large institutions failed to report income from outside business activities, the source writes.

The IRS recently announced that it would be extending the filing deadline for nonprofits to retain tax-exempt status for nonprofits until October 15. The new procedure, in which even small nonprofits must file an "e-postcard" reporting their income, was the source of widespread confusion for many organizations. In Colorado alone, at least 5,523 groups did not file returns.