IRS Exempt Organization Focus for 2013

This post from Nonprofit Quarterly discussed what areas the IRS has targeted for 2013 with regards to nonprofit organizations.   A few notable areas:

1-Nonprofits that report unrelated business income, but don't file the form 990-T for unrelated business income
2-Nonprofits that report significant unrelated business income but don't show any profit for the income
3-Regulations and guidance for supporting organizations
4-Regulations for church tax inquiries and examinations

The article also noted the reduction in IRS audits of exempt organizations, the reduction of staff in this area, and the tasks mandated by the health care act that further reduce their available time for audits.   Over a period of 30 years, only one of our nonprofit clients was audited by the IRS and it turned out to be a random selection of a small nonprofit client to train the IRS agent. 

Regardless of whether or not you are likely to be audited by the IRS, your 990 needs to be accurate, transparent, and compliant.  More and more donors are accessing nonprofit 990's on Guidestar.  This comes up in our conversations with businesses and individuals when they are making donor decisions or if they are deciding to serve on a Board.  It is also coming up in conversations with estate attorneys who advise their clients to research the organizaitons they note in their wills.  If you are following the 990 instructions and providing clear information on your 990, it can increase your favor in your donors' eyes.