Fall 2010 issue of Horizons

Not-For-Profit

IRS Poised To Increase Examination Activity Of Not-For-Profits Beware…all signs indicate that the IRS is intending to increase examination activity in the not-for-profit sector.

Compliance Check The IRS monitors tax exempt entities several ways. Often the monitoring is accomplished by a compliance check. If your organization is selected for a compliance check, you will receive a letter or telephone call to clarify an item on your Form 990, determine whether the entity’s activities are consistent with its exempt purposes or determine whether specific reporting requirements are being met. A not-for-profit entity can refuse to respond to a compliance check but doing so increases the possibility that a full examination will be initiated.

In a recent report on its Colleges and Universities Compliance Project, the IRS noted that as a result of responses they received on questionnaires, it had initiated 30 new examinations (For more information on this, refer to the e-focus article on RubinBrown’s website at www.rubinbrown.com.) The IRS has also announced that the Tax Exempt/ Governmental Entities (TE/GE) Division has hired approximately 100 additional auditors. Finally, they have developed a new checklist to be used by revenue agents when auditing tax exempt entities. This gives the IRS additional resources to monitor the activities of not-for-profit entities.

Raise Your Expectations

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