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By Nancy Kirchner, CPA Tax Manager

In a letter from Lois Lerner, Director of Exempt Organizations (EO), the IRS spelled out its workplan for FY 2013. The following are a few of the areas that will be the focus of the EO (the IRS division responsible for oversight of nonprofit organizations) in the coming year:

  1. In an attempt to eliminate the diversion of charitable assets to foreign, non-charitable, organizations, the EO will focus on examinations of organizations with large foreign grant expenses.
  2. The EO will continue to focus on conducting compliance checks on 990-N filers to determine (a) who either did not meet the criteria to file a 990-N or (b) who filed both a 990-N and another form of the 990 for the same year. If an organization incorrectly files a 990-N it will be treated as an invalid filing and may cause the organization to lose its exempt status.
  3. After gathering compliance information since the new Form 990 was released in 2008, the EO will be focusing on areas of potential non-compliance gleaned from analyzing the return data.
    1. There will be a focus on medium to large organizations that are reporting substantial income from fundraising but who have had little or no fundraising expenses reported on their returns.
    2. As compensation reporting continues to be an issue for the EO, it will focus on organizations that report high annual gross receipts but also report very low total compensation. Their goal is to determine whether the organizations are hiding compensation to avoid transparency.
    3. The EO will examine a statistically valid sample of organizations that reported substantial unrelated business income for three consecutive tax years, but reported no income tax due in any of those years. The concern is that the organizations may not be allocating their income and/or their expenses correctly to the unrelated activity.

To read the full letter, please see the following source:



If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at or call us at 800-717-BLUE


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CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.


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