IRS Form 8654 Guide: TCE Annual Program Report & Rules

Introduction: What is IRS Form 8654?

IRS Form 8654, titled Tax Counseling for the Elderly Semi-Annual / Annual Program Report, is an official federal grant reporting and closeout schedule administered by the Internal Revenue Service (IRS). It is managed by the Stakeholder Partnerships, Education, and Communication (SPEC) division under Section 163 of the Revenue Act of 1978 and federal Uniform Guidance regulations.

This form is used by non-profit organizations, community groups, and local government agencies that have been awarded a Tax Counseling for the Elderly (TCE) federal grant. Form 8654 serves as the official accounting and performance report that sponsors submit to account for their actual grant expenditures, volunteer reimbursements, administrative overhead, and total tax returns prepared for seniors aged 60 and older.

Purpose of the Form: Why Form 8654 Exists

At the beginning of each grant cycle, sponsoring organizations submit an estimated operational budget and service projection on Form 8653 (Tax Counseling for the Elderly Program Application Plan). However, federal grant guidelines require strict post-season financial accounting to ensure taxpayer funds were spent appropriately.

Form 8654 solves this accountability requirement. It serves as the official year-end reconciliation return where grantees compare their initial budget against actual operational results. It verifies that administrative costs did not exceed statutory caps, tracks the return of unexpended grant funds, and confirms that the organization met its performance milestones for assisting elderly taxpayers.

How Form 8653 and Form 8654 Work Together

Managing an IRS TCE grant requires coordinating two core forms across the program lifecycle:

• Form 8653 (The Budget & Plan): Submitted prior to the tax season to outline your projected volunteer numbers, administrative budget, and estimated return counts to secure grant funding.
• Form 8654 (The Actuals & Reconciliation): Submitted after the tax season to report your actual dollars spent, actual volunteer counts, and verified tax returns filed for seniors aged 60+.

Who Needs to File This Form?

Form 8654 must be completed and submitted by any organization that received an active federal grant under the Tax Counseling for the Elderly program, including:

• 501(c)(3) Non-Profit Grantees: Charitable organizations, community action agencies, and legal aid societies operating volunteer senior tax clinics.
• Area Agencies on Aging (AAAs): Regional and municipal agencies managing senior assistance programs.
• Senior Centers & Civic Organizations: Community organizations hosting free tax preparation sites for elderly residents.
• Colleges & Universities: Academic institutions operating senior tax assistance clinics under a TCE cooperative agreement.

Who Is Exempt / Not Required to File?

Form 8654 is strictly an institutional grant reconciliation return. The following entities and individuals do not file this form:

• Individual Senior Citizens: Elderly taxpayers who had their returns prepared for free at a TCE clinic.
• Individual Volunteer Preparers: Volunteers who donate their time at senior tax clinics.
• Volunteer Income Tax Assistance (VITA) Grantees: Organizations operating under separate VITA grants use distinct VITA semi-annual and annual reporting forms.
• Volunteer Programs Operating Without Federal Grants: Community groups that provide free senior tax counseling using strictly local private funds without receiving an IRS TCE grant.

When to File: Reporting Deadlines and Frequency

Form 8654 is filed up to twice during each grant cycle depending on the specific terms of your IRS cooperative agreement:

• Semi-Annual Report (Mid-Season): If required by your grant agreement, a mid-year Form 8654 is submitted during the spring (typically by April 30) to report mid-season expenditures and return volume.
• Annual / Final Closeout Report: A final, cumulative Form 8654 must be submitted at the end of the program year, generally within 90 days following the close of the grant period (typically by July 31 or August 31).

Where and How to File Form 8654

Form 8654 is submitted electronically to the IRS Grant Program Office:

• Electronic Transmission: The completed Form 8654, along with the required project narrative and financial ledgers, is submitted via secure email directly to your assigned IRS Grant Analyst or uploaded through the official federal grant reporting portal.
• Payment Management System (PMS) Reconciliation: The financial totals on Form 8654 must match the grant drawdowns reported on the federal Payment Management System (PMS) and Standard Form 425 (Federal Financial Report).
• Mailing Address (if authorized): In rare cases where paper filing is approved, the signed report is mailed directly to the IRS address as per instructions for the SPEC Grant Program Office in Washington, D.C.

Step-by-Step Instructions to Fill Out Form 8654

Form 8654 is divided into five operational sections that reconcile actual financial spending and service achievements. Complete each section using the guidelines below:

Section / Part	Field Description	Instructions
Header Details	Grantee Identification	Enter the organization’s legal name, Employer Identification Number (EIN), Unique Entity Identifier (UEI), Grant Agreement Number, and check whether this is a Semi-Annual or Annual/Final report.
Part I	Actual Volunteer Expenses	Enter the actual number of active volunteer tax assistors, instructors, and coordinators, and report total actual out-of-pocket reimbursements paid for travel, meals, lodging, and orientation meetings.
Part II	Actual Administrative Expenses	Itemize actual administrative spending: clerical salaries, office supplies, building rent, auditing fees, local monitoring travel, publicity, phone lines, and postage.
Part III	Financial Reconciliation	Compare total actual expenses against your approved budget on Form 8653, enter total grant funds drawn down from PMS, and calculate any unexpended funds to be de-obligated.
Part IV	Program Accomplishments	Enter the actual number of federal tax returns prepared for seniors aged 60+ (electronic vs. paper), other individuals assisted, and the total number of operational sites managed.
Part V	Signatures	The Authorized Organization Representative (AOR) signs and dates the form under penalties of perjury, certifying all reported figures are accurate.

Verifying the 30% Administrative Expense Cap in Part II

Under federal TCE grant regulations, administrative overhead is strictly controlled:

• Total administrative expenses reported in Part II cannot exceed 30% of total allowable program costs reported in Part III.
• If your actual administrative spending exceeds 30%, the excess amount cannot be paid using federal grant funds and must be covered by your organization’s general operational funds.

Required Documents and Information Needed Before Filling

Before completing Form 8654, the organization’s finance director and program coordinator should assemble:

• Approved Form 8653 Budget: Your original or revised baseline application plan to compare projected numbers against actual results.
• General Ledger Accounting Reports: Detailed financial transaction ledgers itemizing every check, direct deposit, and vendor invoice paid with grant funds.
• Volunteer Expense Logs & Receipts: Signed volunteer mileage logs, meal receipts, and lodging invoices substantiating every reimbursement reported in Part I.
• Tax Software Production Reports: Year-end reports generated from your tax software (such as TaxSlayer) verifying the exact number of federal returns prepared for taxpayers aged 60 and older.
• Payment Management System (PMS) Statements: Drawdown history reports from the HHS Payment Management System confirming total grant cash received.

Common Mistakes to Avoid

• Mismatched Return Counts: Reporting return counts in Part IV that contradict the electronic transmission logs in the IRS database. The IRS automatically audits reported return counts against electronic filing records.
• Exceeding the 30% Administrative Cap: Allowing clerical salaries and office supplies in Part II to exceed 30% of total allowable program costs.
• Failing to Reconcile Drawdowns: Submitting Form 8654 with financial totals that do not match your Standard Form 425 (FFR) and PMS cash drawdowns.
• Missing the 90-Day Closeout Window: Submitting your final report after the statutory closeout deadline, which delays the formal release of grant liabilities.
• Missing Volunteer Documentation: Reimbursing volunteers without retaining signed mileage logs or receipts in your audit files.

Penalties and Audit Consequences for Non-Compliance

Failing to submit a timely Form 8654 or mismanaging federal grant funds carries severe administrative consequences:

• Grant Funding Freezes: The IRS Grant Program Office will place a hold on all future grant disbursements across all federal programs if Form 8654 is delinquent.
• Demand for Repayment (Grant Clawback): If a federal audit reveals that expenses reported on Form 8654 were unallowable, exceeded the 30% administrative cap, or lacked supporting receipts, the IRS will issue a formal demand letter requiring the grantee to repay the funds.
• De-obligation of Unspent Funds: Any grant funds drawn down but not spent on allowable TCE expenses must be promptly returned to the U.S. Treasury.
• Loss of Future Grant Eligibility: Chronic reporting failures or audit noncompliance will disqualify the organization from receiving multi-year grant renewals or future federal awards.

Related Forms or Schedules

• Form 8653: Tax Counseling for the Elderly Program Application Plan (the initial budget plan that Form 8654 reconciles).
• Standard Form 425 (SF-425): Federal Financial Report (submitted alongside Form 8654 to report cumulative grant cash flows).
• Form 9661: Cooperative Agreement (the binding contract governing the TCE grant).
• IRS Publication 1101: Application Package and Guidelines for Managing a TCE Program.
• Form 13614-C: Intake/Interview & Quality Review Sheet (completed for every taxpayer assisted at a TCE clinic).
• Form 13615: Volunteer Standards of Conduct Agreement – VITA/TCE Programs.

Frequently Asked Questions

1. What should our organization do if we have unspent grant money at the end of the year?

If your actual expenses in Part III are less than the total grant funds drawn down, the unspent balance must be returned to the U.S. Department of Health and Human Services Payment Management System (PMS) during the closeout process.

2. Can our organization carry forward unspent TCE grant funds into the next tax year?

No. TCE grant funds are annual appropriations and cannot be rolled over into the next program year. Unexpended funds must be formally de-obligated or refunded during the closeout of Form 8654.

3. What if our organization prepared fewer returns for seniors than projected on Form 8653?

Failing to meet initial projections does not automatically trigger financial penalties, provided all grant funds were spent on allowable activities. However, you must attach a detailed written project narrative explaining why the shortfall occurred (such as severe winter storms or volunteer shortages).

4. How long must our organization keep records related to Form 8654?

Under federal Uniform Guidance (2 CFR 200.334), grantees must retain all financial ledgers, volunteer reimbursement receipts, bank records, and copies of Form 8654 for at least 3 full years from the date the final closeout report is submitted.

5. Who must sign Part V of Form 8654?

Form 8654 must be signed by the organization’s Authorized Organization Representative (AOR), such as the Executive Director, President, Chief Financial Officer, or authorized grant administrator.

6. Can an organization submit Form 8654 without an attached narrative?

No. Sponsoring organizations must submit a comprehensive final project narrative alongside Form 8654 detailing site operations, volunteer training outcomes, community publicity efforts, and explanations of any budget variances.

Conclusion: Key Takeaways

IRS Form 8654 is the vital financial closeout and performance document for organizations operating under a Tax Counseling for the Elderly grant. By reconciling actual volunteer reimbursements and administrative expenses against your initial Form 8653 budget, it ensures that federal grant funds were utilized effectively to deliver free tax assistance to senior citizens.

To ensure a seamless grant closeout, verify that administrative costs remain under the mandatory 30% cap, reconcile your return counts with electronic software logs, match financial figures with the Payment Management System, and submit the complete Form 8654 package to your IRS Grant Analyst by the designated deadline.