Honesty and accuracy go a long way, especially when you are dealing with the IRS.

Recently, a tax-exempt charity known as the Foundation for Moral Law was audited by the IRS.  According to the Washington Post, the IRS audit found discrepancies between the organization’s Form 990 filings and its internal books.  In a letter to the organization, the IRS stated that these issues “could jeopardize your exempt status.”  The charity had been presided by former Alabama Judge Roy Moore, who is now a candidate for U.S. Senate. Moore said he never took a salary when he was president, but the IRS found out that he was actually getting paid annually for 12 years. This compensation added up to $1 million that the charity could not afford.

You’re probably wondering, “how does something like that happen?”

At Tate & Tryon, we have worked with over 600 national and international nonprofit organizations, meaning we have prepared thousands and thousands of 990s. After hearing a story like this, we put together a few takeaways for the tax-exempt community to keep in mind:

  • Always be prepared for an audit.   It’s unlikely that this audit of the Foundation for Moral Law was a random IRS selection.  It is more likely it was the result of a prompt by a whistleblower.
  • Expect IRS enforcement, no matter who’s in charge. The 990 is a public document and as such enhances IRS enforcement. The more visible an organization or its key people, the more scrutiny it will be under.
  • The IRS can take immediate action. You have worked hard to maintain your tax-exempt status. Don’t let a careless mistake, cutting corners, or the idea that you’re “safe” and probably won’t be audited put you at risk of losing your tax-exempt status or intermediate sanctions (the excise tax) which the IRS may impose in lieu of revoking tax exemption.
  • Hire a qualified professional. Have a professional prepare your 990 and make sure your board of directors has enough time to review it before filing with the IRS. Learn more about maximizing the effectiveness of your board here.

The bottom line? When it comes to IRS audits, follow the old adage from the boy scouts and “always be prepared.”

INSIGHTS & RESOURCES

Tax-Exempt Organizations and 2017 Tax Reform

Posted on , updated on

Uncategorized11/23/2017

Dear Friends in the Tax-Exempt Community:
Below is a brief overview of the key tax reform proposals relating to tax-exempt organizations. As you know, Congress is currently putting together legislation to effect significant tax reform with a timeline of having it enacted this year. Although Congress is still negotiating, the following reform proposals may impact your […]

Royalty Income of Nonprofits is Being Targeted for Taxation!

Posted on , updated on

Uncategorized11/20/2017

The Senate Finance Committee’s version of the Tax Cuts and Jobs Act includes a number of items that would impact nonprofits.
Perhaps the most immediately significant is the provision that would call for taxing the revenue generated from royalties related to licensing a nonprofit’s name and/or logo. Royalty revenue has traditionally been exempt from income taxes. […]

How Could Federal Tax Reform Impact Nonprofits?

Posted on , updated on

Exempt Organization Tax11/17/2017

Uncategorized11/17/2017

By:  Doug Boedeker, CPA, Partner
It has been a challenge staying current on the twists and turns involved with the proposals for Federal Tax Reform. Many of the ideas within the tax reform package have a direct impact on nonprofit organizations.
Charitable deductions, executive compensation, employee fringe benefits, and intermediate sanctions are just some of the “hot […]

Resources Center

The Right Size, Right Fit