“The hardest thing in the world to understand is the income tax” – Albert Einstein.
Taxes. Rarely a month goes by that – after telling someone what I do here at IU – I don’t get a puzzled or surprised look, usually followed by the comment, “We have a tax department at IU? I thought we were tax-exempt?”
The juxtaposition of “tax” and “not-for-profits” is confusing, I admit. With this article, I hope to address that confusion and answer some of those burning questions I know everyone has when it comes to taxes at IU.
Why does IU have a tax department?
In a single sentence, IU has a tax department because it disburses payments and receives payments. Payments received or disbursed are potentially subject to IRS reporting requirements. If tax reporting requirements apply, then typically the IRS and state agencies want information about our receipts and disbursements.
IU remits tax to federal, state and local tax authorities, including payroll withholding, Social Security, Medicare, sales, unrelated business income and other taxes. Yes, there is even a tax for our underground storage tanks, various excise taxes and even fuel taxes – because we have our own gas station!
What does University Tax Services do?
University Tax Services is a full-service staff, dedicated to managing compliance with tax laws and acting as a tax resource for all IU campuses. Our office processes all the tax payments for the university, manages external audits (IRS, states, etc.) and files all the applicable tax returns (712 returns/payments in calendar year 2016).
Our office also processes all applicable tax forms – such as Forms W-2 and Forms 1098-T – used for your tax return. IU prepared a total of 166,622 tax forms in 2016, using IU’s enterprise systems (Human Resources Management System, Kuali Financial System and Student Information System) during an intense six-week period in January and February.
As soon as these forms are released, we then switch to customer service mode to answer all of your questions. In 2016, we answered nearly 17,500 emails and provided close to 100 hours of tax training to IU departments.
Lastly, in addition to making payments, filing returns and creating forms, our office monitors changes in the tax law and works with units to ensure compliance for the university.
What is the outlook for tax in higher education?
In 2010, the IRS implemented a major audit initiative focusing on colleges and universities, with a total of 40 large research institutions audited after more than 400 targeted IRS questionnaires were reviewed. In 2013, the IRS published findings of colleges and universities nationwide, which resulted in nearly $200 million of tax findings related to employment tax, unrelated business income and employment retirement plans. IU’s University Tax Services works closely with both administrative and operating departments at the university to research and analyze these important tax issues and their effect on the institution.
Cassandra Franks is the director of University Tax Services at IU.