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Blue
& Co., LLC
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IRS Checks For Exempt
Organizations
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The IRS has numerous
resources available to ensure Exempt Organizations are entitled to receive
certain tax exemptions they claim. These resources fall in to two
separate categories: examinations and compliance checks. Compliance
checks are less in scope than examinations and only review an organization’s
adherence to record keeping requirements, information reporting requirements,
and exempt-status requirements. IRS examinations are
commonly known as audits and typically include reviewing taxpayer books and
records, determining appropriateness of tax exempt status for organizations,
and under certain circumstances questioning of third parties.
Examinations imposed by the IRS fall into two types: correspondence
examinations and field examinations. Correspondence
examinations are less in scope than field examinations and focus on just a
few items from a filed return. Examiners conduct correspondence
investigations via letters and phone calls with organization
representatives. However, examiners may request organizations to
deliver books and records to an IRS office if organizations do not cooperate
or the issues become complex. Examiners may also convert correspondence
examinations into field examinations. Field examinations
are the most comprehensive audits performed by the IRS and include two
different types: general program and team examination program. General program
field examinations are typically performed by individual revenue agents,
while team examination programs are performed on large, complex organizations
most often with a team of specialized agents and coordination with other
governmental agencies. A field examination
begins with the organization being notified by a revenue agent that its
return has been selected for examination. This notification can occur
by telephone or written correspondence, in which the agent may request the
following documents: 1.
Governing
instruments (articles of incorporation, bylaws, etc.) 2.
Pamphlets
and brochures describing the organization’s activities 3.
Copies
of the organization’s filed Forms 990 4.
Organization
Board of Director minutes 5.
Books
and records: audited financial statements, other federal tax returns filed,
unemployment tax returns filed, etc. The revenue agent
will conduct an opening conference with the organization’s representatives to
explain the audit plan and reason for the organization’s selection for
examination. The examination itself may last from a few days to a year
or more. At the conclusion of the examination, the agent will conduct a
closing conference with the organization’s representatives to discuss
findings and/or proposed adjustments to the organization’s tax returns or
exempt status. An appeal process is available for unsettled differences
between the revenue agent and the organization. To review the IRS’s
proposed examination and compliance check activities for the year, you may
visit the following website: www.irs.gov/eo
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